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Digital currencies issued by local governments in Japan are increasingly being exploited by phishing scams, with fraudsters taking advantage of reward programs.
A series of fraud cases has exposed vulnerabilities in digital currencies issued by Japanese municipalities, prompting calls for stronger security measures, the Japan Times has learned.
Police in Osaka recently arrested seven Vietnamese nationals accused of using stolen credit card information to fraudulently obtain “machikane points,” a regional digital currency used in Toyonaka City.
The suspects allegedly exploited the currency’s premium reward system, which offers up to ¥2,500 (around $345) for purchases of ¥50,000 (~$6,900), by using the same credit card across multiple accounts. Investigators estimate the group bagged in nearly half a million of dollars in fraudulent premiums in just two days. Authorities suspect the involvement of additional individuals.
Similar scams have surfaced elsewhere, including Kumagaya, Saitama Prefecture, where the local Kuma Pay currency was targeted. Nationwide, several municipalities have reported incidents, though some have been reluctant to disclose details, according to investigative sources.
The popularity of digital regional currencies, designed to boost local economies, has surged in recent years. Data from Senshu University shows the number of municipalities issuing such currencies jumped from 32 in 2019 to 219 in 2023. However, experts warn that phishing groups “tend to target newly introduced digital currencies.”
Authorities are urging municipalities to strengthen identity verification protocols and limit the use of credit cards to those registered under the purchaser’s name. However, some officials argue that phishing-related theft is difficult to prevent entirely.