This year has seen a number of seemingly positive developments for the cryptocurrency ecosystem, according to an update from Chainalysis.
Chainalysis noted in a blog post that in many ways, crypto has continued to gain mainstream acceptance, following the approval of spot Bitcoin and Ethereum exchange-traded products (ETPs) in the US along with revisions to the U.S. Financial Accounting Standards Board (FASB)’s fair accounting rules.
Chainalysis also mentioned that inflows to “legitimate” services YTD are the “highest” they’ve been since 2021, the previous bull market peak.
The blockchain security firm pointed out that aggregate illicit activity YTD fell by “19.6%, dropping from $20.9B to $16.7B, demonstrating that legitimate activity is growing more quickly than illicit activity on-chain.”
As mentioned in the report from Chainalysis, this encouraging sign points to the continued “adoption of crypto globally.”
According to the report from Chainalysis, these global trends are reflected in Japan’s crypto ecosystem.
The blockchain security company added that in general, the exposure of Japanese services to global illicit entities “such as sanctioned entities, darknet markets (DNMs), and ransomware services is generally low, as most Japanese services cater primarily to Japanese users.”
But the report clarified that this doesn’t imply that Japan is “totally immune from crypto-related crime.”
Public reports, including those from JAFIC, Japan’s financial intelligence unit (FIU), emphasize that crypto poses “a significant money laundering risk.”
Chainalysis further noted that although Japanese exposure to international illicit entities may be limited, the country is “not devoid of its own local challenges. Off-chain criminal entities that leverage crypto are prevalent, yet often fly under the radar.”
As explained in the research report, money laundering in the crypto context is often associated with “concealing proceeds from on-chain crimes, such as DNMs and ransomware.”
The report pointed out that as the world continues to embrace crypto, so, too, do illicit actors “eager to exploit powerful new technologies. ”
Chainalysis added that with the right tools and knowledge, investigators can leverage the transparency of blockchain “to uncover and dismantle illicit activity on-chain and beyond.”
As stated in the report, the process of laundering funds acquired on-chain is often sophisticated, as cybercriminals use “various services to obscure fund origins and movements.”
Crypto-native money laundering presents “a persistent challenge for crypto services and law enforcement agencies alike,” the Chainalysis report noted.
As their Crypto Crime Reports describe, scams are among the top illicit categories in crypto.
They have previously identified “prominent crypto scam clusters with touchpoints in Japan, but today, Japanese law enforcement agencies are also keeping an eye on a new trend of scams — social media-based investment scams and romance scams.”
JNPA’s statistical data on these types of scams shows the following figures between January and August this year, which are “significantly greater” than those in the previous year:
- Investment scams: 6,868 cases reported, totalling ¥64.14 billion ($424.97M) – 9.9% were crypto
- Romance scams: 4,639 cases reported, totalling ¥23.65 billion ($156.7 M) – 17.7% were crypto
Once the Japanese Government recognized this as a prominent threat to Japanese citizens, the cabinet held a meeting to “discuss countermeasures and policies, including enhancing investigative capabilities on crypto, preventing illicit bank withdrawals and establishing a legal framework to fully support asset seizure and recovery.”