Japanese Gov’t Green-lights Travel Rule Adoption – Are Crypto Exchanges Struggling to Comply?

The Japanese government has approved the adoption of the Travel Rule, with a new law set to come into force next month.

But domestic exchanges are experiencing difficulty with adoption, leading to crypto withdrawal difficulties.

Per Sankei News, the cabinet of ministers has signed off on an amendment to the Act on Prevention of Transfer of Criminal Proceeds, which will “come into effect on June 1.”

The Travel Rule is a regulatory requirement designed by the Financial Action Task Force (FATF).

The FATF is an international money laundering and terrorist financing watchdog.

The rule requires crypto service providers to share “originator and beneficiary information alongside virtual asset transactions.”

The FATF claims that this measure helps “prevent criminal and terrorist misuse.”

But in many nations, exchanges have been left to develop their own compliance solutions.

And this factor has often led to confusion when it comes to sharing the required data.

Lawmakers have been working on revisions to the act after the FATF claimed that Japan’s measures on this front were “inadequate.”

Non-compliant Japanese crypto firms will be issued with “corrective orders,” under the new law.

And those who do not comply “will be subject to criminal penalties,” the media outlet noted.

“G7 countries should lead by example and regulate the crypto sector so that no safe havens exist for illicit crypto transactions”#FATF President T. Raja Kumar´s message to #G7 leaders ahead of the summit in Japan
Read article: https://t.co/l1OTdjGgLY
📑: https://t.co/GqHhVwoqY9 pic.twitter.com/uDurg1QSDu

— FATF (@FATFNews) May 18, 2023

Japan and the Travel Rule – Can Crypto Exchanges Comply in Time?

Most Japanese exchanges have been attempting to adopt Travel Rule-complaint policies ahead of June, in anticipation of the legal change.

But the process has proven far from bug-free.

Earlier this month, the Japanese media outlet CoinPost reported that several of the nation’s top exchanges were experiencing serious problems with their Travel Rule compliance solutions.

The chaos means some Japanese crypto exchange customers are currently unable to withdraw their funds to other domestic platforms.

Bitbank announced on May 18 that its users will “not be able to send cryptoassets” directly to “some” rival platforms, including Coincheck and bitFlyer “in the near future.”

The media outlet wrote:

“This is due to the fact that each company has a different information notification system for Travel Rule compliance.”