On 17 June 2026, officers of the Enforcement Directorate descended on six premises throughout Bengaluru linked to 5 cryptocurrency cost corporations. The alleged offence is routing over ₹2,500 crore (roughly $300 million) overseas by means of stablecoin transfers, with out the RBI’s authorisation. 6 crore in financial institution property had been frozen. No arrests have been made. Considerably, the motion was not beneath India’s cash laundering legislation. It was beneath the Overseas Alternate Administration Act, a 1999 statute designed for a world earlier than blockchain existed.
That alternative of authorized instrument tells you all the things about the place India’s crypto regulation stands in the present day.
Authorized tender it’s not – nevertheless it strikes cash anyway
Cryptocurrencies are usually not authorized tender in India. The RBI has stated so repeatedly, starting with public cautions in 2013 and 2017. In 2018, RBI went additional, directing all banks to not take care of crypto businesses- a ban the Supreme Courtroom struck down in 2020 (IAMAI v. RBI, 2020 AIR 2021 SUPREME COURT 2720) on the bottom that it was disproportionate. The courtroom upheld the RBI’s proper to control crypto however stated an outright banking ban went too far.
Since then, Parliament has taxed crypto, 30% flat tax on good points, 1% tax deducted at supply on transactions; however has not regulated it. The proposed Cryptocurrency Invoice of 2021 was by no means debated. There’s nonetheless no devoted crypto legislation, no single regulator, and no clear definition of what cross-border crypto transactions are legally permitted to appear to be.
Crypto falls outdoors the definition of “forex” beneath FEMA, is just not labeled as “overseas trade,” and stablecoins like USDT, pegged to the US greenback and extensively used for cross-border worth transfers; sit in a definitional no-man’s-land between forex and asset beneath Indian legislation. But hundreds of thousands of rupees transfer by means of them each day.
FEMA’s unresolved query
FEMA requires all cross-border cash flows to go by means of RBI-authorised channels. When worth strikes as USDT relatively than as {dollars} by means of a financial institution, it bypasses this framework completely. An Indian exporter paid in USDT by a overseas consumer is, technically, not receiving “overseas trade” as outlined by legislation; and is subsequently not complying with FEMA’s repatriation necessities beneath Sections 7 and eight, no matter whether or not the transaction is commercially legit.
That is the hole the 5 Bengaluru corporations are accused of exploiting, not essentially for cash laundering, however for working what the ED characterises as unauthorised cross-border remittance providers, changing rupees to stablecoins and routing them overseas by means of a mix of OTC buying and selling and offshore platforms.
This isn’t a brand new sample. In 2021, the ED issued a show-cause discover to WazirX-then India’s largest crypto trade, for over ₹2,790 crore in alleged FEMA violations, having discovered that proceeds of a Chinese language-run unlawful on-line lending operation had been transformed into USDT and despatched to a Cayman Islands-registered trade. The investigation discovered WazirX’s pool accounts had obtained and transferred hundreds of crore to Binance, which owned WazirX on the time.
Oblique laundering and the hawala comparability
In Might 2025, the Supreme Courtroom orally noticed that unregulated crypto buying and selling resembles “a extra polished type of Hawala.” The comparability is just not rhetorical. The ED has discovered situations the place crypto and hawala networks had been utilized in mixture for Commerce-Based mostly Cash Laundering, manipulating import and export invoices whereas utilizing crypto transfers to maneuver the precise worth, a way investigators describe as extraordinarily troublesome to hint.
India’s anti-money laundering legislation was prolonged to crypto companies in March 2023 (MoF Notification S.O. 1072(E)), requiring exchanges and pockets suppliers to adjust to KYC norms and report suspicious transactions to the Monetary Intelligence Unit. However the compliance web applies solely to registered platforms. Decentralised exchanges and offshore platforms working with out Indian registration stay largely past sensible attain.
What must occur
The ED can not indefinitely be India’s de facto crypto regulator. FEMA and PMLA are enforcement instruments, not a regulatory structure. India wants, at minimal: a delegated main regulator for VDAs; an modification to FEMA clarifying how cross-border crypto transactions are categorised; and a statutory definition of what VASPs are permitted and required to do. Till that exists, the enforcement actions will continue- and so will the ₹2,500 crore issues. The Supreme Courtroom observed. It’s time Parliament did too.
Writer is an Assistant Professor at Kirit. P. Mehta Faculty of Regulation, NMIMS (Narsee Monjee Institute of Administration Research), Mumbai. Views are private.
