Japanese police crack down on stablecoin money laundering cases: Fraudulent funds converted into crypto assets, experts warn of regulatory challenges

Odaily Odaily Planet Daily News Stablecoins, which are being promoted as a new type of electronic payment tool by governments and financial institutions, are increasingly being used by criminal groups for money laundering. Due to their peg to fiat currencies, relatively low price volatility, and fast transfer speeds, fraud groups are beginning to convert funds obtained from special scams into stablecoins in an attempt to hide the source of their funds.

In March this year, the Osaka Prefectural Police arrested three men on suspicion of violating the Organized Crime Punishment Law, accusing them of assisting an investment fraud group in money laundering. Police stated that the three men converted approximately 14 million yen from 10 victims across six prefectures in Japan into crypto assets, including stablecoins, in an effort to conceal the flow of funds.

According to the investigation, the three men were engaged in "over-the-counter" (OTC) trading, which involves direct crypto asset transactions between individuals without the involvement of an exchange. Police believe this could be linked to money laundering activities amounting to billions of yen.

The report pointed out that while stablecoins operate on blockchain technology, which makes transaction records difficult to tamper with, their quick cross-border transfer and peer-to-peer transaction models also increase the difficulty of tracking them.

Naoyuki Iwashita, Professor Emeritus at Kyoto University, stated that once digital assets are exploited by criminals, follow-up investigations and fund tracing will face greater challenges. As the application of stablecoins expands in the Japanese market, industry insiders believe that strengthening Anti-Money Laundering (AML) measures and transaction regulation will be necessary conditions for their further development. (Kyodo News)