India Probes Binance WazirX Over Suspected Pakistan-Linked Crypto Transfers Raising Money Laundering Terrorism Fears

India’s Financial Intelligence Unit (FIU-IND) and the Enforcement Directorate (ED) are investigating global cryptocurrency exchanges Binance and WazirX over concerns about unregulated cross-border transactions that could facilitate illegal funding, money laundering, or terrorism financing. The probe centers on suspicious wallet-to-wallet transfers involving accounts linked to Pakistan, particularly in sensitive regions like Jammu and Kashmir. These transactions, often conducted through private addresses not tied to regulated exchanges, lack transparency and bypass standard reporting requirements [1]. Authorities have flagged the risk of such activities supporting separatist or extremist networks, given the region’s history of illicit financial flows [1].

The investigation intensified after officials noted a surge in crypto activity between Pakistani accounts and recipients in border areas. This has raised national security concerns, as cross-border transactions are harder to trace and could be exploited for illegal purposes [1]. While no direct criminal links have been confirmed yet, the lack of oversight in private wallets has prompted increased monitoring of blockchain activities [1].

Binance, the largest crypto exchange globally, returned to India in 2024 after resolving compliance issues. It paid a $189 million fine for past violations and registered with the FIU-IND in August 2024. However, the ED has frozen some of its bank accounts linked to Indian operations as part of the ongoing probe [1]. WazirX, an Indian exchange previously connected to Binance, also faces scrutiny. It suffered a $235 million hack by the Lazarus Group in July 2024 and has been accused of facilitating TRX token transfers allegedly tied to ISIS financing, according to a 72-page Singapore court affidavit [1].

India’s regulatory approach has evolved since 2018, when a Supreme Court ruling overturned a ban on crypto transactions. Exchanges now must register with the FIU-IND, adhere to anti-money laundering (AML) rules, and implement strict know-your-customer (KYC) checks. Cryptocurrency profits are taxed at 30%, with a 1% tax deducted at source. The 2025 budget further tightened disclosure requirements [1]. Despite these measures, cross-border transfers remain a challenge due to differing regulations and geopolitical tensions with Pakistan.

Pakistan, meanwhile, has taken a contrasting path by legalizing crypto trading and establishing the Pakistan Virtual Assets Regulatory Authority (PVARA) in July 2025 to license and oversee virtual asset services [1]. The country aims to attract foreign investment by aligning with international standards, including those set by the Financial Action Task Force (FATF). This divergence in regulatory frameworks has amplified risks for cross-border crypto transactions, with experts warning that unregulated wallets could be exploited for terrorism financing [1].

The investigation into Binance and WazirX aligns with global efforts to tighten crypto oversight. In the U.S., the Department of Justice recently disrupted several terrorist financing operations involving groups like Hamas and ISIS. Similarly, the EU’s AMLA enforces region-wide licensing to combat money laundering. India’s actions reflect a broader trend of balancing innovation with financial integrity, particularly in regions prone to security threats [1].

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[1] Why is India investigating Binance and WazirX over crypto loopholes? https://coinmarketcap.com/community/articles/6888dd12336d8538b1059d92/