India's DRI Highlights Shift from Hawala to Crypto in Smuggling Operations
India's Directorate of Revenue Intelligence (DRI) released its Smuggling in India Report 2024-25, warning that smugglers are increasingly abandoning traditional hawala networks for cryptocurrencies and stablecoins to facilitate drug and gold trafficking. This shift enables faster and more anonymous cross-border transfers, complicating law enforcement efforts.
The report highlights a significant case involving a 108-kg gold racket at the Indo-China border, where over $12.7 million (₹108 crore) in proceeds were laundered to China via hawala and the stablecoin USDT after the gold sale in Delhi. The smuggling operation was masterminded by a Chinese national who used multiple crypto wallets, layering funds through encrypted communication apps like WeChat with VPNs. Forensic investigators linked chat records, transaction hashes, and wallet IDs to establish the money trail.
Experts note that many jurisdictions lack comprehensive regulations for crypto assets, creating gaps that criminals exploit through regulatory arbitrage. The report calls for an active regulatory regime incorporating Know Your Customer (KYC) protocols and transaction monitoring. Blanket bans on cryptocurrencies are considered ineffective, potentially driving crime underground and hindering legitimate tokenised-asset use. Instead, regulators should adopt targeted and comprehensive approaches.
Officials emphasize the need for training regulators and law enforcement agencies in virtual assets and investigation tools to counter suspicious crypto activities. They also stress the importance of international cooperation in addressing these challenges.
Additionally, the report cites other crypto-related crime cases in India: the June arrest by the Central Bureau of Investigation (CBI) of Rahul Arora, who held over $327,000 in cryptocurrencies; and a July arrest by the Narcotics Control Bureau (NCB) of a Kerala engineer involved with the Ketamelon darknet drug syndicate. This syndicate dealt in LSD, ketamine, and over $82,000 worth of crypto, including the privacy-focused coin Monero used for money laundering.
