India’s largest anti-smuggling agency has sounded the alarm over the increasing use of virtual currencies. stable coin Enables rapid, untraceable international movement of funds in drug and gold trafficking, bypassing formal financial oversight.
The warning comes from the Revenue Intelligence Bureau’s India Smuggling Report 2024-25, released on Thursday, which notes that digital assets enable “fast and anonymous payments, minimal oversight and weak anti-money laundering compliance”.
“Due to their decentralized, anonymous, and borderless nature, virtual currencies have emerged as powerful tools for smuggling syndicates,” the report said, noting how digital assets are now widely used to route illicit payments and move the proceeds of crime, “particularly in drug trafficking and gold smuggling cases.”
Encrypted hawala network exposed
Among the incidents highlighted in the report was a 108kg cross-border gold racket that crossed the India-China border in July last year, with proceeds of more than $12.7 million being transferred to China via hawala and Tether’s stablecoin USDT after the gold was sold in Delhi.
“The Chinese masterminds used multiple cryptocurrency wallets, layered funds for anonymity, and communicated via encrypted apps such as WeChat using VPNs,” DRI said. “Forensic analysis of chats, transaction hashes, and wallet IDs corroborated the traces of smuggling, marking a significant advance in crypto hawala detection by DRI.”
“Most jurisdictions around the world still lack comprehensive cryptocurrency regulation, resulting in regulatory arbitrage and gaps that are being exploited for criminal and illegal activities,” said Musheer Ahmed, Founder and MD of FinStep Asia. decryption.
“Through a proactive regime, regulators and government agencies can allow only compliant operators and introduce KYC rules and transaction monitoring, reducing the misuse of virtual assets by illegal activities,” Ahmed said.
He said it would be prudent for India and similar jurisdictions to consider “a comprehensive regulatory regime that not only prevents illegal activities but also provides a higher degree of consumer protection.”
He added that “a blanket ban would not necessarily deter such activity,” warning that crime could go further underground and undermine the legitimate use of tokenized assets that enable more efficient cross-border commerce.
Ahmed also said that regulators and law enforcement agencies need to be “trained in virtual asset activities and trading tools” so that they can act quickly and effectively when faced with suspicious or illegal cryptocurrency activity.
Regulatory gaps still exist
The DRI report comes as India grapples with crypto-based crimes on multiple fronts.
In June, the Central Bureau of Investigation arrested Delhi resident Rahul Arora and seized $327,000 worth of virtual currency after busting a cross-border cybercrime operation targeting victims in the United States and Canada.
In July, India’s NCB arrested a 35-year-old engineer from Kerala on suspicion of running a darknet drug syndicate called Ketameron, and seized LSD, ketamine and more than $82,000 worth of cryptocurrencies. Investigators said the man sourced drugs around the world and laundered the proceeds through the privacy coin Monero.
Although the report acknowledges that: blockchain The transaction offers an opportunity to enhance intelligence gathering, saying, “The evolving nature of digital assets requires stronger regulatory frameworks, enhanced anti-money laundering compliance, and advanced forensic tools, supported by global cooperation to curb the misuse of cryptocurrencies.”
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