Japanese police uncover stablecoin money laundering case: scam funds exchanged for crypto assets, experts warn of regulatory challenges

Odaily Planet Daily News: As a new type of electronic payment tool gaining attention from governments and financial institutions, stablecoins are being used by some criminal groups for money laundering activities. Because stablecoins are pegged to fiat currencies, have relatively small price fluctuations, and facilitate fast transfers, scam groups have begun converting illicit funds into stablecoins to hide the source of their money.

In March this year, the Osaka Prefectural Police in Japan arrested three men on suspicion of violating the "Organized Crime Punishment Law," accusing them of assisting investment scam groups in laundering funds. The police stated that the three converted approximately 14 million yen from victims in six prefectures in Japan into crypto assets, including stablecoins, attempting to conceal the flow of funds.

According to investigations, the three engaged in "over-the-counter" (OTC) transactions—crypto asset trades completed directly between individuals without exchange involvement. Authorities believe these activities may involve money laundering operations worth billions of yen.

The report pointed out that stablecoins operate on blockchain technology, featuring tamper-proof transaction records, but their ability for rapid cross-border transfers and peer-to-peer transactions also increases the difficulty of tracking them.

Kyoto University Professor Emeritus Naoyuki Iwashita stated that once digital assets are exploited by criminals, subsequent investigations and fund tracing will face greater challenges. As stablecoins expand their application in the Japanese market, industry insiders believe that strengthening anti-money laundering (AML) measures and transaction regulation will become necessary conditions for their development. (Kyodo News)