US Asks Japan To Pressure Crypto Miners And Exchanges Working With Russia

IGI Markets

According to reports, US diplomats have reached out to authorities in Tokyo to put pressure on crypto exchanges and miners in the country to severe their ties with Russia. The purpose of this request was to further deepen the financial isolation of Moscow due to its military invasion of Ukraine.

Washington reaches out to Japan

Japanese crypto mining companies and exchanges are still working with the Russians, prompting the United States to reach out to Japan. Washington wants these Japanese organizations to put an end to their business relations with Russia, thereby putting it in greater financial isolation than it already is.

American diplomats made the request because there are more than 30 licensed Japanese crypto trading platforms that are still operating in Russia. According to sources with knowledge of the matter, the US representatives asked Tokyo to ensure that Japanese crypto mining operations are halted in the Siberian Irkutsk Oblast. As this region offers a cool climate and cheap hydroelectricity, it has become known as the crypto mining capital in the Russian Federation.

Japanese response

In response to the request put forward by the United States, the Financial Services Agency (FSA) in Japan renewed demands for crypto trading platforms to cut off their operations in Russia. However, the FSA did not say anything publicly about the matter. Back in March, the Japanese regulatory authority had ordered the exchanges under its jurisdiction to monitor transactions or accounts that were used for transferring assets of any entity or individual that was sanctioned.

Even though explicit instructions were not issued by the Japanese agency to exchanges to shut down operations linked to Russia, a number of them had chosen to halt their services in the country. For instance, after the FSA issued its notice, crypto exchange Decurret announced that it was suspending its activities in Russia.

Exchanges’ response

According to a former executive of a Japanese crypto exchange, the companies are facing intense pressure from the authorities to move their back-office or mining operations out of the Russian Federation. However, an individual who wanted to remain anonymous disclosed that there was at least one platform that had set up a shell company in Singapore for rerouting payments in order to continue its Russian operations.

The request from the United States comes after changes were made to the Foreign Exchange and Foreign Trade Act in Japan in order to integrate cryptocurrencies as well as other digital assets. The purpose of these amendments is to give greater power to Tokyo when it comes to restricting the outflow and inflow of digital currencies in Japan.

The United States, along with other European nations, imposed sanctions against Russia after the country sent its military troops into Ukraine on February 24th. The Russian Federation has been cut off from the global financial system and is also considered to have defaulted on its bond payments. Now, the goal is to ensure that the country cannot use cryptocurrencies for evading sanctions.