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Reuters: Japanese Regulators to Introduce New Rules Regarding Exchanges’ Cold Wallets

Japan’s Financial Services Agency will reportedly introduce new rules regarding cold wallets for storing cryptocurrencies.

Japan’s Financial Services Agency (FSA) will reportedly introduce new rules regarding cold wallets for storing cryptocurrencies at crypto exchanges, Reuters reported on April 17.

Citing a source familiar with the matter, Reuters reports that the country’s financial regulator will reportedly require cryptocurrency exchanges to strengthen internal supervision of cold wallets — devices for storing digital currency which are not connected to the Internet.

By implementing the new regulation, the FSA purportedly addresses the difficulties of ensuring the security of digital currencies and other risks for the country since it intends to boost the fintech industry to stimulate economic growth.

Although cold wallets are not connected to the Internet and, therefore, provide better security to digital assets, the FSA suggests there could be risks of internal theft. According to the source, a number of exchanges do not have a policy where the person responsible for the storage would be regularly rotated out.

Earlier this month, the FSA heard arguments for no longer classifying bitcoin (BTC) as a currency. During a plenary session at the 41st General Assembly of the Financial Council and the 29th Financial Division Meeting, Professor Iwashita Goto of Kyoto University argued that bitcoin had become something beyond a means of transacting due to its borderless qualities, which have led it to appear throughout the world in its ten-year history.

In March, the FSA approved the second cryptocurrency exchange to begin operations under new regulations. The FSA began issuing licenses to new cryptocurrency exchanges looking to serve the Japanese market. The licensing scheme, which has a long waiting list, was in part a reaction to the events of the past two years, notably local exchange Coincheck’s half-billion-dollar hack in January 2018.

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Japanese Bank Abandons Work With SBI Ripple’s ‘Money Tap’ App

Resona, one of the three Japanese banks working with SBI Holdings and Ripple on their cash transfer app Money Tap, is pulling out of the project.

The bank – Japan’s fifth largest – announced the decision on Thursday, saying that it would cancel the remittance service provided through the app on May 13. It did not provide any reason for the decision, however.

Money Tap was launched last October with participation from three banks: SBI Sumishin Net Bank, Suruga Bank and Resona. The product provides bank-to-bank money transfers in “real time” using Ripple’s xCurrent payments product.

Money tap is built with distributed ledger technology, according to SBI. It enables users send funds to others at no cost using just recipients’ telephone numbers or a QR code, and utilizes devices’ biometric features, such as fingerprint scanning, for security.

Just last month, Money Tap received investment from 13 banks, which joined the project as shareholders but do not appear to be using its technology as yet.

Exactly a year ago today, CoinDesk reported that banking giant Santander was also launching a money app based on Ripple’s DLT tech. Known as Santander One Pay FX, the app allows customers to complete international transfers generally within one day.

SBI Group has gone full crypto over the last two years, launching an exchange, taking to mining cryptos, investing in hardware wallet makers and, most recently, starting to manufacture mining processors.

Resona Bank branch image via Shutterstock

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Japanese Court Acquits Man Accused of Cryptojacking

A Japanese court has acquitted a man who was allegedly illicitly mining cryptocurrency after embedding a dedicated program in his website.

A Japanese court has acquitted a man who was accused of illicitly mining cryptocurrency by using the computing power of visitors to his website, Japan Today reported on March 27.

The Yokohama District Court reportedly ordered to acquit a 31-year-old website designer, who allegedly ran Coinhive on his website to mine digital currency. The program allows the user to take advantage of website visitors’ spare computing power to mine cryptocurrencies — a practice known as cryptojacking. The accused reportedly stated that the program could not be considered a virus.

Presiding Judge Toshihiro Homma reportedly said that the man’s actions “[do] not constitute a crime as we cannot say embedding the program was socially unacceptable.”

At the same, prosecutors pursued a fine of 100,000 yen ($904), arguing that the man was running the program without asking permission from visitors. They also argued that the program increased visitors’ electricity consumption. However, the court did not recognize that the program was intended to cause damage to people’s personal data.

As reported last December, a report by cyber security firm McAfee Labs revealed that  cryptojacking malware activity rose by over 4,000 percent in 2018. The McAfee statistic specifically refers to total instances of a cryptojacking malware, referred to in the study as “coin miner.”

Earlier this year, the Coinhive crypto mining service shut down, as it had become economically unviable. While operations halted on March 8, users’ dashboards will be accessible until April 30, 2019. Among the reasons behind the closure, the developers noted an over 50 percent drop in hash rate following the last Monero (XMR) hard fork.

Today, Cointelegraph reported that Ukraine’s Cyber Police arrested a 32-year-old man from the Bukovina region who had allegedly placed cryptojacking software on a number of educational websites that he created and administered. The police  stated that the installed malware on the websites was deploying visitors’ devices’ CPU and GPU power to illegally mine cryptocurrencies.

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Japan Police: 98.3% of Money Laundering Cases Don’t Involve Cryptocurrency

Japan’s National Police Agency (NPA) say cases of suspected money laundering reportedly linked to cryptocurrency increased by 900 percent in 2018 when compared to the previous year. However, this still comprises only 1.7 percent of all money laundering investigations.


Cryptocurrency Money Laundering Up Tenfold in Japan

According to The Japan Times, the NPA reports that it recorded 7,096 cases of suspected cryptocurrency money laundering. This figure represents a tenfold increase from the 669 cases reported between April and December 2017.

Back in early December 2018, the NPA released a report stating that alleged cases of cryptocurrency money laundering for the year stood at almost 6,000. At the time, the period accounted for was between January 2018 and October 2018.

Since Q2 2017, regulators have required cryptocurrency exchanges in Japan to report instances of suspected illegal virtual currency transactions. This move was part of a whole host of reforms targeted at combating illicit activities carried out via digital currencies.

The NPA says many of the suspicious transactions involved multiple accounts with different bio-data information but using the same photo ID. Other cases involved accounts using foreign IPs even though details of the accounts show listing addresses based in Japan.

According to the NPA’s figures, the increase in crypto-related money laundering is indicative of a general rise in illegal financial transactions across the board in 2018. The NPA says it recorded more than 417,000 cases of alleged money laundering, an increase of over 17,000 from 2017.

Also, the percentage of crypto-related money laundering in the general reckoning has also increased. In 2018, 1.70 percent of money laundering was from cryptocurrency transactions compared to 0.16 percent in 2017.

Robust KYC/AML/CFT Rules to the Rescue

In August 2018, reports emerged that the NPA was set to commit more than $300,000 to develop a tracking software for cryptocurrency transaction. The NPA plans to implement this tool as a way of combating the rise of cryptocurrency theft and other illegal transactions.

FSA Japan

As reported by Bitcoinist in January 2019, the Financial Action Task Force (FATF) regulations on cryptocurrency will come into effect by Q3 2019. These regulations which center around KYC/AML protocols will apply to the G20, of which Japan is a member.

Experts believe such international standards will hinder the ability for criminals to launder money via cryptocurrencies. Meanwhile, the country’s Financial Services Agency (FSA) continues to implement stricter regulatory standards for cryptocurrency exchanges based in Japan.

Do you think the introduction and enforcement of KYC/AML regulations will curb money laundering? Let us know your thoughts below!


Images courtesy of Shutterstock

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Wall Street Blockchain Alliance Joins Enterprise Blockchain Consortium R3

The Wall Street Blockchain Alliance will partner with R3 to develop solutions on their Corda blockchain platform.

The Wall Street Blockchain Alliance (WSBA) has joined blockchain consortium R3 to develop applications and solutions on their Corda platform, a Feb. 5 press release reports.

According to a statement made by the CEO of R3, David E. Rutter, the WSBA and R3 will collaborate in order to “advocate a strategic approach to collaborating with regulatory bodies so that financial markets, and beyond can gain the full benefits of blockchain’s capabilities.”

The WSBA is a non-profit trade association that promotes the general adoption of blockchain technology and crypto assets across international markets.

R3, an enterprise blockchain software firm with over 300 partners, has developed Corda, an open-source blockchain platform for both the private and public sectors across multiple industries. Corda is a blockchain platform that allows for institutions to transact directly with the usage of smart contracts while ensuring their user’s privacy and security.

In mid-January, R3 announced the launch of its Corda Network, with non-for-profit organization the Corda Network Foundation responsible for its operations.

On Jan. 30, Cointelegraph reported that Japanese financial company SBI Holdings would also partner with R3 as they aim to help them develop the local use of Corda blockchain on their platform.

Also at the end of January, major global banking payments network SWIFT revealed its plans to develop a Proof-of-Concept gateway that would allow R3 to link to the SWIFT Global Payments Innovation payments from their platform.