Can you explain the background behind Chainalysis entering the Japanese market and the purpose of establishing a local subsidiary?
Masahiko Uchida (hereinafter, Uchida): Around 2014, Japan was the most active country in the world for cryptocurrency. However, during that time, the unfortunate Mt. Gox incident occurred, where a massive amount of cryptocurrency was illicitly leaked.
One of Chainalysis' co-founders assisted in the investigation of this incident, which ultimately led to the founding of the company. He often jokes that "Chainalysis was born in Japan," but this reflects the deep connection we have with the country.
Building on the success of the Mt. Gox investigation, we have since provided our investigative solutions to government agencies, law enforcement, cryptocurrency-related businesses, and major financial institutions worldwide. Over the years, we have developed various products to help ensure that people can invest and trade cryptocurrencies legally.
In response to Japan positioning Web3.0 as a national strategy, we established a local subsidiary in 2020. By offering services in Japanese and being firmly rooted in the country, we aim to support the creation of a safer trading environment.
While the official report from Chainalysis has yet to be released, what were the key trends in cryptocurrency-related crime in 2024?
Uchida: Recently, we published an update on transactions sent to cryptocurrency addresses associated with illicit activities in 2024. Over the past year, at least $40.9 billion has been identified as flowing into illicit addresses, marking a record-breaking year.
Traditionally, cybercrime has been the primary form of illicit activity involving cryptocurrencies. However, in recent years, its scope has expanded to include national security threats and consumer fraud. Additionally, we have observed cases where illicit earnings generated in fiat currencies are being moved on-chain for money laundering purposes.
That said, an important point to highlight is that in 2024, only 0.14% of the total cryptocurrency transaction volumewas received by illicit addresses.
The reality is that only a very small fraction of growing cryptocurrency transactions are linked to criminal activities. It is crucial not to generalize that cryptocurrencies are inherently prone to misuse.
The reports released by Chainalysis often reference "illicit addresses." How does Chainalysis define and classify an address as "illicit"?
