Japan asks crypto exchanges to add withdrawal delays

On Thursday the Financial Services Agency and the National Police Agency submitted a request to the Japan Virtual and Crypto Assets Exchange Association asking the industry to adopt measures to slow or block transfers of funds linked to fraud.

Regulators asked platforms to restrict crypto withdrawals for a specified period after customers deposit fiat currency or purchase digital assets. Exchanges were also asked to require users to pre-register withdrawal addresses and to block transfers to newly added addresses for a defined interval.

The agencies proposed additional safeguards including customer-specific withdrawal limits, stronger monitoring of transactions and of the user access environment, multifactor authentication designed to resist phishing, and checks to confirm that the name on a bank remittance matches the crypto account holder.

The FSA asked each exchange to assess and implement the measures based on its services, technical setup and exposure to misuse. The request is not a binding rule and the agencies did not set specific timeframes or technical standards.

The association that received the request is expected to discuss possible industry responses with member exchanges and may recommend standards or best practices. Individual platforms will decide how and when to introduce new controls and how to integrate safeguards with existing compliance and security systems.

Regulators said the guidance is intended to create friction that makes it harder for fraudsters to move stolen funds quickly, noting reports of rising losses among exchange users and cases where money obtained through fraud has been routed through exchange accounts.