Japan's Financial Services Agency and Police Require Cryptocurrency Exchanges to Strengthen Withdrawal Restrictions

On August 6, Japan's Financial Services Agency and the National Police Agency jointly issued a request to the Japan Virtual and Crypto Assets Exchange Association (JVCEA), urging cryptocurrency exchanges of all sizes to enhance measures against cryptocurrency fraud. The requirements include: restricting external withdrawals within a certain period after fiat currency deposits or cryptocurrency purchases; implementing a pre-registration system for withdrawal addresses, with new registered addresses being restricted for a certain period; verifying the transaction purposes and backgrounds of customers making large or frequent withdrawals shortly after restrictions are lifted, and setting withdrawal limits based on customer attributes, held assets, and transaction purposes. Suspicious transactions will be classified by degree of suspicion, with immediate suspension or freezing of deposits and withdrawals confirmed to be fraudulent, while transactions that cannot be verified will be delayed for customer verification. Additionally, a mechanism for quickly restricting transactions during nighttime and holidays is required. This request comes in response to an increase in social media investment fraud and pig-butchering scams, with cases of victims transferring cryptocurrency to scammers already identified. If immediate implementation is not possible due to system integration issues, a phased plan is required to be developed.