3 Indian Crypto Firms Under Scrutiny for $3.3 Billion Worth of Illicit Drug Transactions

3 Indian Crypto Firms Under Scrutiny for $3.3 Billion Worth of Illicit Drug Transactions

India's Union Home Minister Amit Shah expressed his concerns over the spike in drug smuggling via crypto. The Minister made this remark at a high-level regional meeting on drug trafficking in Gujarat, India.

Reports by ANI revealed that authorities destroyed more than 13 tons of seized drugs valued at $76 million (623 crore INR) in the presence of Shah. Additionally, Shah also revealed that between 2006-2013 and 2014-2022, drug-smuggling cases spiked 152% to 3,172 from 1,257. The amount of drugs seized during those periods rose significantly too.

These comments corresponded with an Economic Times report that said Indian investigative agencies had scrutinised three cryptocurrency exchanges for allegedly facilitating illegal drug transactions. 

Indian Crypto Exchanges Facilitated Illegal Drug Transactions?

Following the remarks by Shah, three cryptocurrency exchanges have come under the radar of Indian investigative agencies for allegedly facilitating illegal drug transactions. 

The Financial Intelligence Unit (FIU) alerted about their alleged links in illicit drug transactions worth ₹28,000 crores (Approx. $3.3 billion). The investigative agencies, including the Enforcement Directorate and the income tax department, have initiated a probe.

The report also cited a senior government official claiming, "Digital currency was used to buy and sell drugs, and some of these companies facilitated it."

During the last few weeks, authorities have conducted several inspections of crypto exchanges. 

Drug Trafficking Spikes

The FIU has traced over 200 transactions in Nigeria, the British Virgin Islands and the Cayman Islands. These transactions were made through Indian cryptocurrency exchanges sometime between 2019 and 2021.

Hyderabad Narcotics Enforcement has also detained numerous drug traffickers using cryptocurrency for drug smuggling on the Dark Web.

Meanwhile, during her visit to the United States, Finance Minister Nirmala Sitharaman urged for a worldwide crypto regulation to lower the risk of money laundering, drug trafficking, and terror funding.

Crypto and Web3 Legal Expert Breaks Down the Issue 

Amid the ongoing case, Voice Of Crypto got in touch with Web3 and Blockchain legal expert, Mr Navodaya Singh Rajpurohit, for more insights on the drug trafficking case and the use of cryptocurrencies for the same. 

On being asked about any considerable impact of this case on India's crypto regulatory framework, Rajpurohit stated,

"Cash and cryptocurrency/ digital assets have been illegally used for illicit activities and is the foremost reason for anti-crypto believers. One of the first cases of drug trafficking was the Silk Road case in USA. This will certainly impact the crypto regulatory framework in India. However, we already have laws governing any transaction dealing in illicit financing or payments, i.e. Prevention of Money Laundering Act, 2002, read with the Indian Penal Code, 1860 and Narcotic Drugs and Psychotropic Substances Act (1985) and the Prevention of Illicit Trafficking in Narcotic Drugs and Psychotropic Substances Act (1988)."

VOC further asked him about the tracking process and whether the true culprits could be identified, to stated which Rajpurohit said,

"Identifying the individuals who have used the crypto exchanges would be a challenge for the regulators if the exchanges used to launder the money have not followed the KYC compliances. However, it would be too early to comment on whether the culprits would be caught or not as there are various methods which are used to launder money, such as tornado cash which was recently sanctioned by the United States and anonymises the transaction to hide the actual wallet used to Launder money."

VOC correspondent further questioned Rajpurohit about how this case could hamper the macro narrative for Cryptocurrencies in India. 

The legal expert said,

"This report certainly supports the narrative of digital assets being used for illicit financing and to launder money which has been said to be one of the prominent reasons to reject cryptocurrency in India. 

India is currently ranked in 4th position in cryptocurrency adoption; this report might change the regulatory aspect of digital assets in India. 

In the end, he concluded by claiming, " I don't think this would stop crypto adoption in India".

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