Japanese regulator clarifies stance on P2P crypto transfers.

The Financial Services Agency (FSA) – Japan's main financial regulator – has clarified its stance on peer-to-peer (P2P) crypto transactions following recent recommendations to domestic banks.

In a February 14 letter, the FSA encouraged banks to “further strengthen user protection by stopping transfers to crypto-asset exchange service providers if the sender's name is different from the account.” As Cointelegraph reports, this can disrupt domestic P2P transfers because they often present two separate users on the sender and receiver side.

In response to Cointelegraph's query, the FSA clarified that the recommendation does not cover “any transaction from one individual to another”.

“We have put forward the request to ask banks and other financial institutions to strengthen measures against illegal transfers of funds when an individual transfers money from an individual's bank account to an account of a crypto asset exchange service provider.”

Fraudster X needs victim Y to send a deposit from their bank account to the fraudster's newly created crypto account. Since the crypto platform does not accept the first deposit into an account from another person, the fraudster would convince the victim Y to change their name to X so that the platform would accept it. But at this stage, according to the new recommendations, the bank will block suspicious transactions in which the sender asks to enter the crypto platform to change his name from Y to X.

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According to the FSA, these measures have been taken by several financial institutions, but the agency has not received any reports of concrete issues that pose a “risk to the crypto asset markets”.

The FSA's recommendations are not “consistently required” for all financial institutions. Banks are required to think and decide on concrete measures according to their situation.

Japan's neighbor South Korea is also taking proactive steps to combat crypto fraud. The Financial Intelligence Unit will introduce a pre-emptive trade ban system for suspicious transactions on platforms already operating in the country. This also stops transactions during the pre-trial phase.

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