In what could be a workable idea to stifle online crime, Japan is reported to be pressuring local exchanges to drop support for cryptocurrencies favored by cybercriminals.

Forbes reported that Japan’s Financial Services Agency is “quietly pressuring” exchanges to give up support for Monero, Zcash, Dash and other cryptocurrencies favored by criminals and hackers “to discourage the use of certain alternative virtual currencies that have become attractive to the underworld because they are difficult to track.”

Monero, by far the best known of the cryptocurrencies mentioned, runs on a private, encrypted ledger that makes it nearly impossible to trace transactions, in contrast to better-known cryptocurrencies such as bitcoin and Ethereum that can be publicly tracked. Because of its anonymity, Monero became the most popular cryptocurrency used by cybercriminals over the course of 2017, particularly with cryptomining hacks.

The value of any cryptocurrency is tied to its ability to be traded to other cryptocurrencies or fiat currency. There are thousands of small coins and tokens released via initial coin offerings over the last two years that have gone nowhere because of limitations on where they can be traded: a liquidity problem. Cryptocurrencies that are listed on more exchanges are more regularly traded and hence they have higher liquidity.

An example might be the difference between a highly traded fiat currency and a lowly traded one. The Lao Kip, for example, is extremely difficult to trade outside of Laos itself, but the neighboring Thai Baht can be traded worldwide, giving it higher liquidity and a higher inherent value.

The same idea applies to cryptocurrencies. If support for Monero, Dash, Zcash and others used by cybercriminals is heavily restricted, they lose their tradable liquidity, drop in price and hence become less appealing to cybercriminals.

If Japan’s idea were repeated worldwide, it could potentially restrict the appeal of those cryptocurrencies and would likely play well politically with regulators in both Europe and the U.S.

The flip side to the idea is that any cryptocurrency that cybercriminals could use in future may also be restricted in similar ways, even if those cryptocurrencies have been primarily used by legitimate users. It’s not that long ago that bitcoin itself was primarily tied to use by cybercriminals, so there’s the risk that going down this path may take innocent coins, and likewise investors, along with it, causing more harm than good.

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