Image Source: CoinTelegraph
India’s financial watchdogs have launched a sweeping investigation into cryptocurrency exchanges Binance and WazirX, citing concerns over unregulated cross-border wallet transfers and potential links to illicit financing. The probe, led by the Financial Intelligence Unit (FIU-IND) and the Enforcement Directorate (ED), reflects growing anxiety over crypto’s role in national security and financial integrity.
Key developments driving the investigation
Authorities flagged suspicious wallet-to-wallet transfers involving accounts linked to Pakistan, particularly in sensitive regions like Jammu and Kashmir
These transactions bypass regulated exchanges and standard reporting protocols, raising fears of money laundering and terrorism financing
Investigators are focusing on private wallets that lack transparency and are difficult to trace, especially those used for remittances and crypto mixing
The probe intensified after a surge in crypto activity between Pakistani accounts and recipients in border areas
Binance: compliance comeback meets renewed scrutiny
Binance, the world’s largest crypto exchange, re-entered the Indian market in 2024 after paying a $189 million fine for past violations
It registered with FIU-IND in August 2024, but some of its bank accounts have since been frozen as part of the ongoing investigation
The exchange is cooperating with authorities, providing data on wallet flows and transaction histories
Binance’s return was seen as a compliance milestone, but the current probe underscores lingering regulatory concerns
WazirX: security breaches and legal heat
WazirX, once affiliated with Binance, is under scrutiny for its role in cross-border transfers and alleged links to extremist financing
In July 2024, the exchange was hacked by the Lazarus Group, resulting in a $235 million loss and exposing weaknesses in its KYC protocols
A Singapore court affidavit alleges WazirX indirectly facilitated TRX token transfers tied to ISIS financing
The exchange faces mounting legal pressure over transparency, user fund ownership, and questionable internal transfers
Crypto regulation in India: tightening the net
Since March 2023, Indian exchanges must register with FIU-IND, follow anti-money laundering rules, and conduct full KYC checks
Cryptocurrency profits are taxed at 30 percent, with a 1 percent tax deducted at source
The 2025 budget introduced stricter disclosure norms, aligning India with global standards like the Crypto-Asset Reporting Framework (CARF)
Despite these measures, private wallet transfers remain a blind spot, prompting calls for deeper oversight
Pakistan’s crypto pivot: regulatory divergence
Pakistan legalized crypto trading in July 2025, establishing the Pakistan Virtual Assets Regulatory Authority (PVARA)
The country aims to attract foreign investment and modernize its financial system, with Binance co-founder Changpeng Zhao serving as strategic adviser
This regulatory divergence has amplified risks for cross-border crypto flows between India and Pakistan
National security concerns: crypto in conflict zones
Authorities are alarmed by crypto activity in Jammu and Kashmir, a region with a history of separatist movements and financial irregularities
Raids in Doda, Kupwara, and Jammu uncovered suspected networks using crypto to fund radicalization and cross-border militancy
The Financial Action Task Force (FATF) has warned that terrorists increasingly exploit digital assets, messaging apps, and e-commerce platforms
Global context: crypto oversight intensifies
India’s probe mirrors global efforts to curb illicit crypto financing, with the US and EU enforcing stricter licensing and AML measures
The US Department of Justice recently disrupted crypto-enabled terrorist financing operations involving Hamas and ISIS
The EU’s AMLA mandates region-wide licensing and transaction monitoring to prevent money laundering
Conclusion: balancing innovation with vigilance
India’s investigation into Binance and WazirX highlights the delicate balance between fostering digital innovation and safeguarding national security. As crypto adoption accelerates, regulators are racing to plug loopholes that could be exploited for illicit purposes. The outcome of this probe may shape the future of crypto governance in South Asia and beyond.
Sources: Cointelegraph, AInvest, Coinspeaker, Coinpedia
Advertisement
Advertisement
