Japan’s Financial Services Agency (FSA) and the National Police Agency on Aug. 6 jointly asked the Japan Virtual and Crypto assets Exchange Association (JVCEA) to step up efforts against cryptocurrency fraud, according to Japanese crypto media outlet CoinPost.
11 anti-fraud requirements issued to the industry association
The FSA and the police agency submitted a joint request to JVCEA that laid out 11 new requirements. The measures focus on areas including a pre-registration system for withdrawal addresses and tighter transaction monitoring. Exchanges of every size fall within the scope of the requested compliance work.
CoinPost said the push comes as investment scams carried out through social media and romance scams commonly described as “pig-butchering” have continued to increase in recent years. Although financial institutions have already taken countermeasures, fraud methods have become more deceptive and complex, with some scam proceeds ending up directly in exchange accounts.
Stricter identity checks and withdrawal curbs
Under the new requirements, exchanges must build stricter processes to verify whether identity documents submitted during account opening are genuine. They must also clearly inform users that the buying and selling of accounts is illegal.
Users will face withdrawal restrictions for a certain period after completing fiat deposits or purchasing virtual currencies.
For withdrawal addresses, the FSA has asked exchanges to introduce a prior registration system. Newly registered withdrawal addresses must first be checked for links to fraud cases, followed by a restriction period. Exchanges are also required to set withdrawal caps based on each user’s risk assessment results and the stated purpose of transactions. Any increase in those limits is to be handled with extra caution.
Heavier transaction monitoring and faster police coordination
On transaction surveillance, the new rules tell exchanges to promptly update their detection strategies in response to fraud patterns that have recently become common. They are expected to improve their ability to identify suspicious transactions that do not match the stated purpose of an account. Once a suspicious transaction is found, exchanges must immediately take steps such as restricting trading or freezing the account.
Other requirements include mandatory multi-factor identity verification when impersonation is suspected, and checks to confirm whether the remitter’s name matches the real-name account holder.
The FSA also asked exchanges to establish fast information-sharing and cooperation frameworks with local police departments. For items that require system changes and cannot be implemented quickly, the agency said a phased rollout based on a plan would be acceptable.