Japan’s National Police Agency has announced the successful dismantling of a Monero (XMR)-linked scam, resulting in the arrest of 18 individuals, including the alleged ringleader, Yuta Kobayashi. This significant operation highlights a landmark development in the use of blockchain analysis for law enforcement.

Local media outlet Nikkei reported that the arrests stemmed from an investigation into approximately 900 fraudulent Monero transactions, which collectively caused financial damages exceeding 100 million yen.

Monero is renowned for its robust privacy and anonymity features, making it a preferred choice for malicious actors seeking to exploit its security. This characteristic has also attracted regulatory scrutiny due to criminals including the north korean government using it to launder stolen funds.

The Japanese police indicated that this case represents the first known instance of utilizing Monero’s blockchain data to identify and apprehend a criminal network. However, specific details regarding the analytical methods employed remain undisclosed, leaving room for speculation about the techniques used in tracking these transactions.

This investigation follows recent controversies involving blockchain analytics firm Chainalysis, which claimed that Monero transactions could potentially be traceable. This assertion has sparked backlash among Monero users who value the coin’s privacy features.

In a related development, a post on Monero’s subreddit revealed that network developers had identified and removed hundreds of malicious node IP addresses. These nodes may have been linked to Chainalysis and could have been used to expose the IP addresses of users conducting Monero transactions.

Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People (DPP), has put forward a bold proposal aimed at reforming the country’s cryptocurrency tax framework. On October 20, he announced plans to reduce the tax on cryptocurrency gains to a flat rate of 20%, a significant reduction from the current rates that can reach as high as 55% due to the classification of crypto gains as miscellaneous income.

Tamaki’s plan includes eliminating taxes on exchanges between different cryptocurrencies, addressing a major barrier that has historically hindered trading activities.

The DPP is positioning itself as a proponent of financial innovation while acknowledging the need for regulatory clarity in the cryptocurrency space. This aligns with broader efforts by Japan’s Financial Services Agency (FSA) to reassess crypto regulations and lower tax burdens on digital assets.

In recent years, Japan has made strides to enhance its digital asset sector by requiring cryptocurrency exchanges to obtain licenses for their business activities inside the country.