Japan's regulator clarifies its position on peer-to-peer cryptocurrency transfers

The FSA states that its recommendations do not involve “any transactions occurring between individual parties.”

The Financial Services Agency (FSA), Japan’s primary financial regulator, has recently clarified its stance on peer-to-peer (P2P) crypto transactions in light of its latest directives to local banks. In a letter dated Feb. 14, the FSA urged banks to “further enhance user protection” by ceasing transfers to crypto-asset exchange service providers if the sender’s name differs from the account name. This move, as reported by Cointelegraph, could potentially impact P2P transfers in Japan, where such transactions commonly involve distinct users at both the sender and receiver ends.

In response to an inquiry from Cointelegraph, the FSA specified that its recommendation does not encompass “any transactions from one individual to another.”

Fraudster X intends to have victim Y deposit funds from their bank account into the fraudster’s newly created cryptocurrency account. However, the cryptocurrency platform rejects deposits from accounts not under the same name. To bypass this, the fraudster persuades victim Y to change their name to X so that the platform accepts the deposit. Yet, under new guidelines, banks will now block suspicious transactions where the sender requests a name change from Y to X for depositing funds into a cryptocurrency platform.

Several financial institutions have implemented measures as advised by the FSA, although the agency hasn’t been informed of any specific cases that might raise red flags regarding cryptocurrency markets. The recommendations from the FSA are not obligatory for all financial institutions; banks are urged to evaluate and implement appropriate measures based on their individual situations.

South Korea, neighboring Japan, is also actively addressing crypto fraud. Its Financial Intelligence Unit plans to introduce a preemptive trading suspension mechanism for suspicious transactions occurring on platforms operating within the country. This system will halt transactions even before investigations begin.

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