Srinagar/New Delhi: Security agencies have flagged a sophisticated “crypto hawala” network bypassing the country’s financial safeguards to funnel untraceable foreign funds into Jammu and Kashmir, sparking grave concerns that the money is being used to support terror activities, officials said on Sunday. This has put the security establishment on high alert, with officials warning that these shadow funds are intended to give a fresh lease of life to separatist elements and reignite the anti-national rhetoric within the Union Territory that had otherwise been virtually neutralised by a crackdown by police and central agencies, they said.
Mirroring the traditional hawala system, where money is sent through non-banking channels, this digital version uses the anonymity of unregulated cryptocurrency to erase the financial trail and inject cash into the domestic economy. While India requires all Virtual Digital Asset Service Providers (VDA SPs) to register with the Financial Intelligence Unit (FIU), this shadow network operates entirely off the grid.
For the 2024-25 fiscal year, only 49 exchanges have registered as legal reporting entities, prompting the government to come out with fresh guidelines that include a mandatory liveness detection and geographical tracking, besides asking users to take a “live selfie”.