Japan is planning to use the credit information and social media IDs of users to monitor suspicious crypto trading activity and accounts. According to news reports, Japan Credit Information Service, four credit agencies, and information security research firms will join hands to track suspicious account activity, such as large deposits or withdrawals that have the potential to move markets, of institutions and individual traders in cryptocurrency markets. The plan is expected to become operational in the next few weeks. Trading at prominent cryptocurrency exchanges in Japan is limited to Japanese citizens and foreign nationals resident in the country. 

“By providing the personal information of suspicious individuals including credit scores and financial data, the government hopes to protect investors and improve the security of the cryptocurrency industry,” Yizumi Nobuhiko, chair of the Japan Credit Information Service told NHK, Japan’s national public broadcaster. But credit agencies will not share personal data for individuals or organizations that are not suspected of criminal intent. 

Cleaning Up The Crypto Ecosystem

The latest move is part of an effort by Japan to clean up the cryptocurrency ecosystem. A massive theft at Coincheck, a cryptocurrency exchange, in February revealed the absence of security measures at exchanges operating within the country. (See also: Coincheck.)

Recent reports have also suggested that the agency thinks that Yakuza, a Japanese crime syndicate, is using cryptocurrencies to launder money abroad. In response, the country’s Financial Services Authority (FSA) has begun taking a closer look at crypto exchanges and ordered measures to improve their operations. Last week the country’s Financial Services Authority (FSA) ordered cryptocurrency exchanges to step up their efforts to curtail money laundering. (See also: Bitcoin Price Tumbles After Japanese Anti-Money Laundering Order.)

In addition to South Korea and the United States, Japan has the highest cryptocurrency trading volumes in the world. While the majority of its traders are retail investors, the number of people with significant investments in cryptocurrencies has increased over the years. According to the latest statistics, at least 331 Japanese citizens reported income of 100 million yen ($910,000) from cryptocurrency trading in the last financial year. 

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.