Japan’s financial regulator and the country’s industry body for cryptocurrencies have begun discussions to assess how sanctions can be effectively enforced against Russia, a regulatory official said.

The Financial Services Agency and the Japan Virtual and Crypto Assets Exchange Association are examining ways that could effectively block the transfer of crypto assets involving people and entities on the nation’s sanctions list, said the official, who asked not to be identified. The discussions do not currently involve any proposal to shut off access for all Russian clients, the official said.

A key concern for Japan’s regulator is how to ensure that digital assets don’t become a convenient loophole to bypass restrictions using traditional finance.

"We are closely watching the situations of settlements such as crypto assets and SPFS in order to secure effectiveness of sanctions against Russia,” Finance Minister Shunichi Suzuki told parliament on Friday, referring to the Russian financial messaging system.

JVCEA officials were not immediately able to comment.

Japan, along with the United States and other Group of Seven nations, has imposed sanctions targeting Russians, including freezing the assets of Russian President Vladimir Putin and certain other officials following Russia’s invasion of Ukraine.

The Nikkei newspaper reported Friday that the JVCEA has started considering measures including suspending transactions with Russia.

Unlike fiat currencies, which need to move through third-party institutions that have the ability to track, freeze or block them, cryptocurrencies can potentially be sent from one person directly to another regardless of any government sanctions or other restrictions. People can use decentralized-finance exchanges, which don’t verify the identity of customers, to conduct transactions even if they are in sanctioned countries.