Japan is reportedly looking to create an international payment infrastructure for cryptocurrency transactions similar to SWIFT. The project appears to be part of the country’s push toward regularizing the crypto industry but this time, beyond its borders.
While details still remain unclear, there are indications that the Financial Action Task Force (FATF) is collaborating with Japanese authorities on the project.
The proposed plan also comes amid Facebook’s entry into the digital payment scene with its Libra project which commentators say could upset the balance of global finance.
FSA and FATF Working on Cross-Border Crypto Payments Network
According to Reuters, an anonymous says Japanese authorities are looking to create a cross-border network for cryptocurrency payments similar to SWIFT — the ones used by banks. While Japan appears to be front and center on the project, reports suggest the FATF is monitoring the development with a possible plan to get other major economies involved.
The FATF approved the plans for the international crypto payments network after Japan’s finance ministry proposed the project. The anonymous source also revealed that the project could be up and running in a couple of years.
Japan isn’t the only country looking to develop a blockchain-based payments infrastructure. Iran is also reportedly developing a new baking system that would run on the blockchain.
The country’s central bank is working with a local tech startup on a project called Borna. According to reports, Borna is being built using the Hyperledger Fabric implementation created by the Linux Foundation.
Combating Money Laundering Via Cryptocurrency Transactions
Combating money laundering stands at the forefront of Japan’s decision to create an international cryptocurrency payments network. The proposed platform will certainly include anti-money laundering (AML) and know your customer (KYC) protocols.
The Financial Services Agency (FSA) — the country’s regulatory watchdog, has consistently taken steps to sanitize the local cryptocurrency scene. Japan became the first nation in 2017 to create regulations for cryptocurrency exchanges.
Inside sources with knowledge of the project told Reuters that both the FATF and the FSA are working closely on the project. Given Japan’s history with money laundering crimes, there have been concerted efforts to gain the approval of the intergovernmental FATF with regard to more robust AML procedures.
The FSA has even taken exchange platforms to task over adherence to AML rules as a way of getting a positive rating from the FATF. Bitcoin exchanges in Japan have been at the receiving end of numerous high profile cyberattacks.
The FATF is also championing the regularization of AML laws to govern cryptocurrencies globally. Many critics of virtual currencies say they provide an easy conduit for illicit financial activities despite the fact that commercial banks and physical cash continue to be the most widely used vehicle for funneling dirty money.
A Likely Response to Facebook’s Libra Project
The creation of an international cryptocurrency payment platform might also be in response to Facebook’s Libra project. Since the announcement of the Libra project, regulators around the world have expressed concerns over the dangers posed by Facebook’ entry into the digital payments scene.
Conversely, JPMorgan’s Jamie Dimon says Libra and cryptos in general still do not pose a threat to the mainstream financial establishment. In the U.S., there have been a couple of Congressional hearings involving the project with lawmakers scrambling to make sense of the industry in general.
Innovations in fintech are likely to drive the future of the international payment scene. Cryptocurrency projects like Ripple hope to revolutionize the sector with the use of XRP as a bridge currency.
Mainstream players like Visa and banking consortiums across Asia, Europe, and North America have also announced plans to develop their own cross-border remittance platforms.