Illicit Crypto Inflows from Japanese Exchanges Drop Significantly in 2024

Data from blockchain analytics firm Chainalysis reveals that crypto fraud and scam activity linked to Japanese crypto exchanges has seen a substantial decline in the first half of 2024. Specifically, inflows to clusters identified as scams have decreased by 69% for Ethereum (ETH) and nearly 50% for Bitcoin (BTC) compared to 2023 figures.

Decline in Scam-Related Inflows

In 2023, Japanese exchanges were responsible for $44.6 million in ETH and $11 million in BTC tied to scams. However, the first six months of 2024 saw ETH-related scam inflows drop to $13.7 million, while BTC inflows fell to $5.7 million.

Reduction in Non-Crypto-Native Fraud

Chainalysis also noted a decline in fraudulent activity unrelated to crypto-native scams. ETH inflows in this category fell to a nominal $1,171, and BTC fraud-related inflows halved to $18.8 million.

Evolving Laundering Techniques

The report highlighted evolving laundering techniques, including the use of consolidation wallets and decentralized exchanges to convert ETH into stablecoins like Tether (USDT).

“Considering the rapid pace at which money launderers use new wallet addresses, it’s not easy to track them all individually in real-time, but we can still identify common consolidation points from clusters we’ve identified to estimate the magnitude of these illicit activities.”

Sophisticated actors are continuously adapting to evade detection, leveraging new wallet addresses and cross-chain tools. Chainalysis emphasized the importance of proactive measures to counter these strategies.

Concerns Over Digital Payment Systems

The drop in crypto scams comes amid increasing concerns over vulnerabilities in digital payment systems beyond cryptocurrencies. Recent fraud cases involving municipal digital currencies in Japan have drawn significant attention.

In one instance, Osaka police arrested seven individuals for exploiting Toyonaka City’s regional currency, “machikane points,” using stolen credit card information to obtain fraudulent premium rewards.

Nationwide, multiple municipalities have reported fraud linked to digital currencies, highlighting the risks associated with their rapid adoption. Over 219 municipalities issued regional digital currencies in 2023, up from 32 in 2019, but experts warn that such systems are increasingly targeted by phishing groups.

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