Japanese Authorities to Implement Software to Track Cryptocurrency Transactions

Japan’s National Police Agency (NPA) has unveiled plans to implement a new software designed to track cryptocurrency transactions. Created by a secret private company, the tracking program is part of an increased national effort to prevent fraud and other criminal activity taking place in digital money markets. Russia’s Federal Financial Monitoring Service is currently in the late stages of developing a similar crypto tracking software to reportedly fight against money laundering and terrorist financing.

Japan’s Fight Against Cryptocurrency Crime

Scheduled to go into effect in 2019, Japan’s National Police Agency will begin using special software capable of tracking the history of virtual currency transactions within the country, local news outlet NHK reports. The software is said to have been developed by an anonymous third-party private company. The NPA is currently seeking approval to increase its annual budget by 35 million yen (~$315,000) in order to finance the new software.

NHK reports that the crypto tracking efforts of the NPA are in response to increased levels of cryptocurrency theft and fraud taking place within the region. Japan has experienced some of the largest crypto exchange hacks in history, most notably in January, when Tokyo-based Coincheck Inc was hacked for $530 million in cryptocurrencies.

More recently, in early August, Trend Micro, a Tokyo-based security software company discovered that Bitcoin ATM malware was being sold on Internet black markets for $25,000. The malware reportedly comes with a ready-to-use card with EMV and near-field communications capabilities, which would allow its user to steal up to $6,750 in Bitcoin from any Bitcoin ATM. The seller’s website had received over 100 reviews of his various malware products.

“As long as there is money to be made — and there is quite a bit of money in cryptocurrencies — cybercriminals will continue to devise tools and to expand to lucrative new markets,” said Trend Micro. “As the number of Bitcoin ATMs grows, we can expect to see more forms of  malware targeting cryptocurrency ATMs in the future.”

Japanese Sentiment Towards Cryptocurrency Remains Positive

Although increased government regulation may come as a concern to crypto traders, Japan has consistently been one of the most crypto-friendly countries in the world. In 2017, Japan became the first country to regulate cryptocurrency exchanges in an effort to encourage technological innovation while supporting investor protection. Toshihide Endo, commissioner of the Financial Services Agency (FSA), told Reuters on August 22nd, “We have no intention to curb (the crypto industry) excessively. We would like to see it grow under appropriate regulation.”

Russia Developing a Similar Cryptocurrency Tracking Software

Meanwhile, Russia’s Financial Monitoring Service (Rosfinmonitoring) is reported to be developing a similar crypto-tracking software, scheduled to be ready by the end of 2018. Intended as a measure to detect cases of financial fraud and terrorist financing, the software will act as a central network connecting a wide range of criminal and financial databases. After being entered into the system, Russian authorities will reportedly be capable of retrieving a suspect’s bank accounts, cell phone information, and specific data pertaining to electronic wallets and cryptocurrency transactions. The entire program is said to have cost nearly 200 million ruble ($2,937,202). There is no indication that Russia’s crypto tracking program has any connection to the software being implemented in Japan.

Unlike Japan, the Russian government remains an outspoken opponent to free market cryptocurrency trading.

At present, a draft for regulations ‘On Digital Financial Assets’ is being read by the Russian State Duma. While the law doesn’t strictly ban cryptocurrency, it states that digital money transactions would only be legal if done within highly monitored exchanges, selected and backed by governing bodies. First Deputy of the Bank of Russia Olga Skorobogatova has stated that the Central Bank does not consider it necessary to allow the free exchange of cryptocurrency.