Japan’s Financial Service Agency (FSA) is reportedly pushing cryptocurrency trading platforms in the country to stop transacting certain cryptocurrencies which have strong privacy features. An unnamed source close to the FSA confirmed to Forbes that the agency was doing everything within its power to discourage the use of these coins.
Transactions involving cryptocurrencies like Monero (XMR), Zcash (ZEC), and Dash (DASH) are difficult to track the coins the choice for criminals who seek to launder money or undertake other illicit activities. The Japanese regulators acknowledging the difficulty in tracking the recipient of these cryptocurrencies is moving to discourage operators in the country from trading them altogether.
Indicative of this move, Coincheck when it resumed operations after the hack immediately stopped trading altcoins like Monero (XMR), Zcash (ZEC), and Dash (DASH) which had risky levels of anonymity. It was suggested at the time that the presence of anonymous altcoins was one reason Coincheck, which had not yet been granted a full operational license.
The FSA, responsible for the regulation of cryptocurrency exchanges requires all exchanges to fulfill Know-Your-Customer (KYC) and Anti Money Laundering (AML) requirements for their customers. The agency has also warned global exchanges like Binance about anonymous transactions.
The Problem of Anonymity in Cryptocurrency
One of the obstacles to wide mainstream adoption of cryptocurrency, experts say, is the issue of anonymity. While bitcoin and most have some level of privacy and anonymity, some other coins are seen as almost impossible to track. In its cybercrime threat report last year, Europol said that cryptocurrencies like Ethereum, Moreno and Zcash were gaining popularity in the dark world stating that criminals were now using less traceable altcoins instead of bitcoin for their illegal activities.
It is still legal to transact these cryptocurrencies in Japan though this may change if the FSA decides they are too risky to be managed. Last month, a group of crypto experts working with the FSA singled out Moreno and Dash as coins which posed a serious risk of money laundering raising questions if they should be allowed in the country.