A TRENDS study conducted by the federal financial intelligence unit of India has expressed “suspicion” that cryptocurrency is being used across the country’s landscape in serious criminal acts like terrorist financing, fuelling secessionist activities, cybercrime, narcotics trafficking apart from illegal betting and gambling. The typologies report for the virtual digital assets (VDAs) and their service providers (crypto exchanges) was prepared by the Financial Intelligence Unit (FIU) during the 2023-24 financial year after gathering a number of suspicious transaction reports (STRs) generated from this sector and conducting their “operational analysis”.

 

The report, however, made it explicitly clear that these trends were based “only on suspicion” and involved financial and national security implications. The FIU, as per the report accessed by PTI, shared these trends as well as “credible” intelligence on the operations of cryptocurrency in the country with relevant law enforcement agencies like the ED, CBI and the Income-Tax Department and “necessary” enforcement action was taken by them in certain cases. India is currently formulating a framework for regulating and monitoring cryptocurrencies, but until that is implemented, crypto is not yet illegal in the country. Income earned out of cryptocurrency transactions is taxed at a flat rate of 30 per cent since 2022. The Reserve Bank of India (RBI) too has been sceptical about the use of private crypto assets and considers it a major threat to the macro-economic and financial stability of the country. The trends analysis found that VDAs or crptocurrency were “involved in” Child Sexual Abuse Material (CSAM), terror financing, narcotics trafficking, betting and gambling activities.

 

ule accounts at Indian crypto exchanges, through the use of VPN (virtual private network), were receiving “high volume” deposits from un-hosted and offshore exchanges apart from the laundering of cybercrime funds. The federal agency also stated in its trend report about the suspicion of “high-volume” cryptocurrency, hawala and online gaming-related transactions by persons based in “sensitive” regions allegedly for terrorist and secessionist activities, money laundering through cryptocurrency by persons of origin from “sensitive” foreign countries apart from the existence of “illegal” and “unregistered” online Virtual Digital Asset Service Providers (VASP) or crypto exchanges.

 

The presence of some ‘pump and dump’ schemes involving fake coin and crypto tokens, “high volume” of crypto transactions involved in running “illegal” forex applications apart from attempts to onboard persons suspected to be involved in unlawful activities in “sensitive regions” were also among the suspicions reported by the trends study. The report concluded that based on these trends and patterns, it can be said that VDAs like Bitcoin, Tron and Stable coins (USDT/TRC-20) are very “widely” used by “illicit actors” because of their widespread acceptability and stability in value. The report underlined that the cryptocurrency landscape in India has been “rapidly” evolving and gaining “popularity” among investors and traders. The VDAs have gained significant attention in recent years due to their potential to transform the financial sector and provide new opportunities for wealth creation, it stated.