The Financial Services Agency (FSA) — Japan’s principal financial regulator — has clarified its position on peer-to-peer (P2P) crypto transactions following its latest recommendations to local banks.
In its letter on Feb. 14, the FSA encouraged banks to “further strengthen their user’s protection” by “stopping transfers to crypto-asset exchange service providers if the sender’s name is different from the account name.” As Cointelegraph reported, this might compromise P2P transfers in the country since they usually feature two different users on the sender and the receiver ends.
Responding to a Cointelegraph inquiry, the FSA specified that its recommendation doesn’t envisage “any transactions from one individual to another:”
“We issued the request with the aim of asking banks and other financial institutions to strengthen measures against unlawful money transfers in cases where an individual deposits cash from the individual’s bank account to an account of a crypto asset exchange service provider.”
Fraudster X needs victim Y to send them a deposit from their bank account to the fraudster’s newly created crypto account. Since the crypto platform wouldn’t accept the first deposit on one account from another person, the fraudster would persuade the victim Y to change their name to X so the platform would accept it. But at this stage, according to the new recommendations, the bank will block the suspicious transaction where the sender requests to change his name from Y to X to deposit to the crypto platform.
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According to the FSA, these measures have already been taken by multiple financial institutions, but the agency hasn’t received any reports on concrete cases that would generate “concerns over crypto asset markets.”
The FSA’s recommendations “are not uniformly required” for all financial institutions. Banks are expected to consider and decide concrete measures depending on their circumstances.
Japan’s neighbor, South Korea, is also taking proactive steps to combat crypto fraud. Its Financial Intelligence Unit will introduce a preemptive trading suspension system for suspicious transactions on platforms already operating in the country. This will freeze transactions even during the pre-investigation phase.
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