The United States calls on Japan to reduce cryptocurrency operations in Russia

The United States has called on Japan to increase pressure on the country’s cryptocurrency exchanges and miners, urging them to cut ties with Russia in an attempt to further isolate the country economically from the outside world.

The request from US diplomats was directed at several of Japan’s 31 officially licensed crypto exchanges still operating in Russia, according to people familiar with the matter.

Diplomats have asked Tokyo to focus on stopping cryptocurrency mining based in Siberia’s Irkutsk region, said two people familiar with the matter.

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The region is favored for mining because of its relatively low temperatures, which require less cooling, and because of the availability of cheap hydropower.

In response, representatives of Japan’s Financial Services Agency have renewed their demand that the Japanese exchanges they oversee should suspend any survivors, according to people familiar with three exchanges.

Asked about the request, the FSA and the US Embassy in Tokyo declined to comment. The U.S. State Department has said that Washington and its allies are “united in our determination to hold Russia accountable” for the war against Ukraine. “We will continue to assess the impact of our actions and are ready to take further steps,” a State Department spokesman said.

Since Russia’s invasion of Ukraine, Prime Minister Fumio Kishida’s administration has struggled to keep pace with the United States and its allies over sanctions against Vladimir Putin’s regime and efforts to minimize Japanese business in Russia.

Washington’s decision to provide information on possible Japanese crypto-mining in Russia was part of an attempt to keep the pressure on Putin while the war continues, people who were briefed on the matter said.

Japan’s FSA, which regulates the country’s licensed cryptocurrency exchanges, reacted quickly to the Russian invasion of Ukraine.

On March 14, the FSA formally instructed exchanges to monitor any accounts or transactions involving the transfer of assets from any sanctioned person or entity.

The request follows an emergency amendment to Japan’s foreign exchange and foreign trade law, which brought cryptocurrencies and other digital assets under its umbrella and strengthened government powers to stem their flow in and out of the country. Japan.

The FSA announcement did not directly ask stock exchanges to shut down operations in Russia, but some companies interpreted it that way, and several stopped operating in the country that month, according to people familiar with the situation. .

Decurret, a cryptocurrency exchange, said that after the invasion and advice from the FSA, it decided to suspend its operations in Russia.

Many exchanges contacted by FT said they currently have no operations in Russia. A senior official said he knows of at least one mining company that severed ties with Russia in June at US request.

But some exchanges and crypto-mining companies have developed a complex network of subsidiaries to continue working on their Russian operations, a claim also raised by U.S. diplomats, people with knowledge of the case said.

The former head of an exchange confirmed on condition of anonymity that Japanese crypto exchanges have recently come under increased pressure to move any mining or back-office operations out of Russia.

But the person added that he knew of at least one stock exchange that had decided to maintain operations there, circumvent the rules by setting up a front company in Singapore and directing payments through it.

Further reporting by Felicia Schwartz in Washington

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