India’s premier anti-smuggling authority has issued a stark warning over the accelerating use of cryptocurrency and stablecoins in organised trafficking networks, calling it one of the most significant financial threats in cross-border crime today.
The Directorate of Revenue Intelligence (DRI), in its Smuggling in India Report 2024-25 released on Thursday, observed that digital assets are fast becoming the preferred conduit for narcotics cartels and gold syndicates due to speed, anonymity, and minimal compliance checks.
According to the report, virtual currencies enable instant settlement of proceeds, bypassing traditional banking channels and regulatory oversight, giving traffickers a powerful shield against financial surveillance.
The report emphasises that cryptocurrency has become “a strategic enabler for global smuggling syndicates owing to its decentralised structure, pseudonymous identities, and borderless transaction capability.”
Crypto-Hawala Trail Uncovered
One of the most striking cases documented involves a 108-kg gold smuggling operation that moved bullion across the Indo-China corridor in July last year. After being sold in Delhi, the network’s kingpin reportedly remitted more than ₹108 crore (USD 12.7 million) to China using a hybrid model of hawala transfers and USDT (Tether) stablecoin settlements.
Investigators found that the mastermind operated through multiple crypto wallets, used Tether to layer and obscure transfers, communicated via encrypted foreign apps like WeChat and routed devices through VPN networks
Forensic tracing of wallet identifiers, transaction hashes, and seized chat logs helped the DRI reconstruct the entire payment trail, marking a rare breakthrough in a crypto-hawala ecosystem, which typically evaporates without a digital footprint.
Commenting on the emerging threat, Musheer Ahmed, MD of Finstep Asia, noted that incomplete regulatory frameworks across regions leave dangerous gaps that organised crime syndicates are now exploiting.
“Most jurisdictions still lack comprehensive crypto regulations, creating opportunities for regulatory arbitrage and facilitating illicit transactions,” Ahmed said.
He cautioned that bans or extreme restrictions will not address the problem, and may instead push operations deeper into darknet corridors, shielding criminal networks even further.
Ahmed recommended:
- A robust licensing regime for all virtual asset service providers
- Mandatory KYC and transaction monitoring norms
- Stronger crypto forensics capabilities
- Increased cross-border intelligence cooperation
The DRI’s caution comes amid a sharp uptick in digital-asset-enabled criminal activity.
In June, the CBI arrested Delhi resident Rahul Arora, seizing ₹2.8 crore in cryptocurrency tied to a global cyber-fraud racket targeting American and Canadian victims.
In July, the Narcotics Control Bureau apprehended a Kerala engineer allegedly running the darknet drug network ‘Ketamelon’, recovering LSD, ketamine, and ₹68 lakh in crypto, with significant laundering mapped through Monero, a privacy-centric coin known for zero-visibility transactions.
‘Regulate, Don’t Erase,’ Warns Industry
Experts and enforcement agencies now agree on a central principle: oversight, not prohibition.
The DRI report underscores that though blockchain forensic tools provide traceability, the pace of innovation outstrips enforcement readiness.
It calls for Artificial intelligence-enabled tracking, Inter-agency crypto analysis cells, Training for enforcement personnel, and Updated AML frameworks aligned with FATF guidelines
The report concludes that international cooperation and upgraded forensic capacity are critical to countering crypto-fuelled smuggling networks, which are now embedded in narcotics supply chains, gold pipelines, and darknet trafficking routes with unprecedented sophistication.
