India orders crypto exchanges to monitor J&K deals amid laundering fears

The Indian government has directed local cryptocurrency exchanges to step up surveillance of transactions originating from Jammu & Kashmir and nearby border regions, India Today reported. This initiative is part of broader efforts to prevent the misuse of digital assets for money laundering and potential funding of illicit activities.

According to The Economic Times, the Financial Intelligence Unit of India (FIU-IND) has issued an advisory to several domestic crypto platforms, urging heightened vigilance around the use of private wallets. These wallets allow users to send and receive cryptocurrencies without relying on exchanges or custodians, thereby complicating law enforcement efforts to trace the source and destination of funds.

Sources familiar with the matter told the publication that crypto exchanges have been specifically asked to prioritize the monitoring and reporting of transactions from border regions to the FIU over the usual Suspicious Transaction Reports (STRs). Normally, like banks, exchanges are required to submit STRs highlighting any potentially suspicious activity.

The government’s concerns stem from the anonymity and decentralization inherent in cryptocurrency technology. Private wallets, in particular, enable peer-to-peer transactions that bypass traditional banking oversight. While Indian exchanges do not list high-anonymity cryptocurrencies like Monero or Zcash, individuals can still use mainstream tokens such as USDT, transfer them to global platforms like Binance, and convert them into privacy coins—effectively obscuring the transaction trail.

In response, Indian crypto platforms have tightened withdrawal procedures over the past year. Many now require users to disclose the recipient’s identity and the purpose of the transaction. Some exchanges also restrict transfers to Binance wallets unless ownership can be verified. However, once assets reach overseas exchanges, Indian authorities face significant hurdles due to limited regulatory control over international transfers.