The United States is urging Japan to increase pressure on crypto-miners with links to Russia

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

The request from US diplomats was addressed to several of Japan’s 31 officially licensed crypto exchanges still operating in Russia, according to people close to the situation.

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

The area is preferred for crypto mining because its relatively low temperatures require less cooling and due to the availability of cheap hydropower.

In response, representatives of the Japanese Financial Services Agency renewed demands that the Japanese stock exchanges they monitor should cut any survivors, according to people close to three stock exchanges.

When asked about the request, the FSA and the US Embassy in Tokyo declined to comment. The US State Department said Washington and its allies were “united in our determination to hold Russia accountable” for the war against Ukraine. “We will continue to evaluate the impact of our measures and are prepared to take further action,” a State Department spokesman said.

Since Russia’s invasion of Ukraine, Prime Minister Fumio Kishida’s administration has struggled to remain locked in with the United States and its allies over sanctions against President Vladimir Putin’s regime and attempts to minimize Japanese activity in Russia.

Washington’s decision to provide information on possible Japanese crypto mining in Russia was part of an attempt to maintain pressure on Putin as the war in Ukraine continues, people said.

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

On March 14, the FSA formally asked the stock exchanges to monitor any accounts or transactions involving the movement of assets of any person or entity under sanctions.

The request followed an emergency amendment to Japan’s Foreign Exchange and Foreign Trade Act, which brought cryptocurrencies and other digital assets under its umbrella and strengthened the government’s forces to stop their flow in and out of Japan.

The FSA’s warning did not directly ask the stock exchanges to close Russia operations, but some companies interpreted it that way, and several stopped running in the country that month, according to people close to the situation.

DeCurret, a cryptocurrency exchange, said that after the invasion and the FSA’s warning, it had decided to stop operations in Russia.

Many of the stock exchanges contacted by the Financial Times said that they currently have no business in Russia. A top executive at a stock exchange said they knew of at least one mining company that had cut ties with Russia in June at the request of the United States.

However, some stock exchanges and crypto-mining companies have developed a complex network of subsidiaries to continue working on their Russian operations, a claim also raised by US diplomats, people close to the situation said.

The former head of one stock exchange, who spoke on condition of anonymity, confirmed that Japanese crypto exchanges have recently faced an intensification of pressure to move mining or back office operations out of Russia.

But the person added that they knew of at least one stock exchange that had decided to maintain its business there, and bypassed the regulation by setting up a shell company in Singapore and directing payments through that company.

Additional reporting by Felicia Schwartz in Washington