TLDR
- Japan’s FSA and National Police Agency issued an 11-point anti-fraud plan for crypto exchanges.
- The plan calls for stronger withdrawal controls, including possible delays after deposits or crypto purchases.
- Exchanges may require customers to register destination wallet addresses before making transfers.
- Authorities want faster monitoring and information sharing to trace suspicious crypto transactions.
- The guidance targets rising losses from online investment, social media and romance-based scams.
Japan’s Financial Services Agency and National Police Agency have directed crypto exchanges to strengthen controls against fraud and suspicious fund movements.
The joint directive targets withdrawal restrictions, destination wallet checks and transaction monitoring as authorities respond to rising losses from online scams. The measures were issued through the Japan Virtual and Crypto Assets Exchange Association.
Japan Tightens Crypto Exchange Withdrawal Rules
The 11-point plan calls on crypto exchanges to introduce stronger controls when customers move funds after fiat deposits or cryptocurrency purchases. Exchanges may use holding periods or cooling-off measures before allowing certain withdrawals.
The guidance also calls for destination wallet addresses to be registered before transfers in some cases. Risk-based withdrawal limits are another measure listed in the plan, with restrictions adjusted based on customer activity and transaction details.
The directive is aimed at cases where stolen funds move from bank accounts into crypto exchange accounts. Authorities are seeking faster identification of suspicious transactions before funds can be transferred to other wallets or platforms.
Authorities Seek Stronger Transaction Monitoring
The FSA and NPA are also calling for improved monitoring of crypto transactions and faster information sharing with local police. Exchanges are expected to strengthen systems that identify activity linked to suspected fraud.
Japan recorded 19,038 fraud cases in 2023, with reported losses reaching ¥45.26 billion. Suspicious transaction reports involving crypto assets reached 19,344 cases during the same period.
Authorities have also linked crypto exchanges to the movement of funds obtained through online bank fraud. About ¥8.73 billion in stolen funds were reportedly transferred into crypto exchange accounts during the period cited in the supplied data.
The measures focus on social media investment scams and romance-based fraud schemes, including so-called pig-butchering scams. These schemes can involve victims being persuaded to transfer money after extended online contact with fraudsters.
New Rules Add to Japan’s Crypto Oversight
Japanese crypto exchanges already operate under requirements covering customer asset protection, cybersecurity and anti-money laundering controls. The latest guidance adds further expectations around withdrawals and transaction monitoring.
Japan has between 27 and 30 registered Crypto-Asset Exchange Service Providers, based on the figures provided. The country introduced its crypto exchange licensing framework after major incidents involving platforms such as Mt. Gox and Coincheck.
The FSA has also established a dedicated Crypto Assets and Stablecoins Division as part of changes to its regulatory structure. The division is intended to centralize oversight of digital assets and stablecoins.
The latest directive is guidance rather than a new statutory law. Exchanges can therefore determine how to apply the measures while working toward stronger fraud controls across their platforms.
Exchanges Face More Checks on Customer Transfers
The new requirements could lead exchanges to introduce additional verification before customers can withdraw funds. Destination address registration, temporary withdrawal delays and transaction-based limits are among the measures included in the plan.
The FSA and NPA are also seeking closer cooperation between exchanges and police departments. Faster sharing of transaction information could help authorities trace suspicious transfers and identify accounts connected to reported fraud.
The directive comes as Japanese regulators continue adjusting their framework for digital assets. The latest measures place greater focus on preventing stolen money from moving through crypto platforms before it can be transferred elsewhere.
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