Japan Police Arrest Three Men in Osaka Over Alleged Stablecoin-Linked Money Laundering

Japanese police in Osaka arrested three men in March on suspicion of violating the Act on Punishment of Organized Crimes, alleging they helped an investment fraud group launder money by converting victim funds into crypto assets, including stablecoins. According to Odaily, investigators said stablecoins are being used by some criminal groups because they are pegged to fiat currency, have relatively low price volatility, and can be transferred quickly, which can help conceal the origin of illicit proceeds.

Police said the suspects converted about 14 million yen collected from 10 victims across six prefectures in Japan into crypto assets, in an attempt to obscure the flow of funds.

Authorities said the three men were involved in over-the-counter (OTC) trading, in which crypto transactions are completed directly between individuals without an exchange. Police believe the activity may be linked to money laundering on a scale of several billion yen.

The report said stablecoins operate on blockchain networks where transaction records are difficult to tamper with, but rapid cross-border transfers and peer-to-peer trading can make tracing more difficult.

Naoyuki Iwashita, an emeritus professor at Kyoto University, said that once digital assets are used by criminals, subsequent investigations and fund tracking become more challenging. As stablecoin use expands in Japan, industry participants said stronger anti-money laundering measures and tighter transaction oversight will be necessary conditions for further development.