The Japanese government plans to have the crytpocurrency SWIFT network operational in the next few years, a source informed Reuters. A Financial Action Taskforce (FATF) intergovernmental team will supervise the development of the SWIFT-like network for cryptocurrency. Japan intends to cooperate with other nations to develop the cryptocurrency  SWIFT-like payments network.

The idea of establishing the SWIFT-like network for cryptocurrency transfer was mooted by Japan’s Ministry of Finance and the Japanese financial services regulator. FATF is said to have approved the plan to initiate work on the network last month.

Japan aims to leverage fintech innovation to drive growth in a stagnant economy. The Asian nation has also initiated steps to ensure the security of virtual currencies and was the first country in the world to regulate cryptocurrency nationally in 2017.

While global regulators try to bring cryptocurrencies and cryptocurrency exchanges, the major attraction for cryptocurrency users is the fact that cryptocurrencies are unregulated.

SWIFT itself has tried to take the wind out of the sails of global instantaneous international payments offerings.  In 2017, it almost brought such an offering by Ripple to an end by coming out with its Global Payments Initiative. Because SWIFT counts most of the top banks of the world among its members, within a year of GPI’s launch, 160 global banks had adopted it. SWIFT’s target is to make GPI the standard for global payments by 2020.

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According to The Independent, the move comes as bitcoin’s value has been slashed down from US$19,000 in December to US$10,900 today. The value was only US$1290 a year ago.

Mr Carney addressed cryptocurrencies as a ‘failure’ during the Inaugural Scottish Economics Conference in Edinburgh.

In his point of view, there are great benefits and responsibilities that accumulate with the financial system. The EU and the US expect the exchanges to be on a par with ‘anti-money laundering and counter the financing of terrorism standards’ met by other financial institutions.

Senior financial crime lawyer at Ropes & Gray, Jo Torode, said, “As cryptocurrencies become increasingly interlinked with the mainstream financial services industry it is inevitable that certain wrongdoers will seek to use them as a means to hide illicit proceeds in the monetary system. Indeed Europol have estimated that four percent of all criminal proceeds in Europe are currently being laundered through cryptocurrencies—or put it another way US$5.5bn in illegal money.

“Regulation particularly for money laundering purposes will therefore likely make cryptocurrencies more attractive to certain mainstream and regulated investors looking to fit a new and potentially profitable means of trading within their existing regulatory framework.”

The rise of new financial systems such as cryptocurrency involves higher risk. In order to curb the system’s downside necessitates continuous improvement in regulation. Torode points out that it is important to ensure the regulation does not stifle innovation.  

Appropriate regulation as she describes would provide legal and regulatory protection to those seeking benefits from cryptocurrencies, and the blockchain technology. “This is the next stage in bringing cryptocurrencies and blockchain within the regulatory framework, speeding up the march towards legitimisation of an asset class that, until a few years ago, many law many enforcement agencies, believed had limited legitimate reasons for people to use.”

However, the drawback of this is mainly heavy time consumption and efforts to distinguish transactions from lawful to illegal activity, she added.

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