Japan’s FSA and National Police Agency demand stronger fraud controls from crypto exchanges

Japan’s two most powerful financial watchdogs are done asking nicely. The Financial Services Agency and the National Police Agency issued a joint directive to the country’s licensed crypto exchanges, demanding tighter withdrawal restrictions and more robust monitoring of suspicious fund flows. The numbers that prompted the crackdown In 2023, Japan recorded 19,038 fraud cases with total damages reaching ¥45.26 billion. Suspicious transaction reports tied to crypto assets climbed to 19,344 cases in the same period, a sharp increase from prior years. Nearly half of all proceeds stolen through online bank fraud, approximately ¥8.73 billion in a single reported period, were ultimately routed into crypto exchange accounts. Scammers steal from bank accounts, then funnel the money through crypto to obscure the trail. What the FSA and NPA are actually asking for The joint directive focuses on two main areas: withdrawal restrictions and illicit fund monitoring. Exchanges are being told to tighten the conditions under which users can withdraw funds, particularly for accounts that show behavioral patterns consistent with receiving stolen money. The FSA had already flagged this issue in Februar...