India Intensifies Crypto Probe Amid Terror Financing Fears

India’s Financial Intelligence Unit (FIU) has intensified its investigation into cryptocurrency exchanges Binance and WazirX, focusing on suspicious transactions that may be linked to cross-border terror financing. The probe is centered on digital fund movements, particularly those involving Pakistan-based sources and the volatile Jammu & Kashmir region. Authorities are concerned that decentralized finance tools could be used to channel funds to extremist groups, posing a significant threat to national security.

The FIU is scrutinizing transactions that involve transfers to unregulated private wallets, which operate outside the oversight of licensed exchanges. This makes them ideal for illicit activities. The FIU is collaborating with multiple domestic and international exchanges to trace these digital fund flows, which may be supporting terror-linked operations.

Binance and WazirX are under particular scrutiny. Binance resumed full operations in India after settling a $2.25 million penalty for violating anti-money laundering (AML) norms. Since then, Binance has cooperated with Indian authorities on several fronts, including assisting in probes that led to key arrests in financial crime cases. WazirX, on the other hand, is facing intense scrutiny due to a rise in cross-border transfers, particularly along the India-Pakistan border. This has prompted a deeper investigation into the platform’s transaction history.

Investigators are also probing wallet addresses allegedly linked to Syria-based entities, which are believed to have been funded through TRX tokens originating from India. Some of these transactions reportedly had ties to global extremist networks. These revelations stem from a 72-page affidavit that triggered additional compliance reviews for the platform. Recent raids in Jammu & Kashmir uncovered further evidence, with officials finding that Bitcoin had been used by handlers in Pakistan to fund militant activities. This highlights how cryptocurrencies, despite their legitimate uses, are also being exploited for unlawful purposes.

India’s government is reviewing its crypto framework to align with international standards, while the Reserve Bank remains cautious about the systemic risks associated with cryptocurrencies. Despite this, India’s crypto trading volume has shown rapid adoption. In contrast, Pakistan, with an estimated 15–20 million crypto users, ranks among the top global adopters. It established the Pakistan Crypto Council and PVARA this year to regulate the sector.