Are cryptocurrencies being used for funding terror activities in JK?:Authorities suspect China’s role; put security agencies on high-alert

Security agencies have discovered a sneaky way that money is being sent into Jammu and Kashmir, bypassing the country’s financial rules. This method, called “crypto hawala,” uses cryptocurrency to move money without leaving a trace, raising serious concerns that the funds are being used to support terrorist activities. What is “Crypto Hawala”? “Crypto hawala” is a digital version of the traditional hawala system, where money is sent through unofficial channels instead of banks. In this case, cryptocurrency is used to hide the financial trail and inject cash into the local economy. Because cryptocurrency transactions can be anonymous, it’s difficult to track where the money is coming from and who is receiving it. Why is This a Problem? Security officials are worried that this “crypto hawala” network is being used to: Fund Terrorist Activities: The money could be used to support terrorist groups operating in the region.
Revive Separatist Movements: The funds could be used to reignite anti-national sentiment and support separatist groups.
Bypass Financial Regulations: The network operates outside of the regulated financial system, making it difficult to detect and prevent illegal activities. How Does It Work? Here’s how the “crypto hawala” network operates: 1. Foreign Handlers: People in countries like China, Malaysia, Myanmar, and Cambodia direct individuals in Jammu and Kashmir to create private crypto wallets.
2. Private Crypto Wallets: These wallets are often set up using Virtual Private Networks (VPNs) to hide their location and don’t require identity verification.
3. Cryptocurrency Transfers: The foreign handlers send cryptocurrency directly into these private wallets.
4. Cash Conversion: The wallet holders travel to major cities like Delhi or Mumbai to meet unregulated peer-to-peer (P2P) traders and sell the cryptocurrency for cash at negotiated rates.
5. Untraceable Cash: This effectively “breaks the financial trail,” allowing foreign money to enter the local economy as untraceable cash. The Role of “Mule Accounts” The network relies on “mule accounts,” which are parking accounts used to layer transactions and further obscure the financial trail. Ordinary people are recruited to open these accounts with the promise of earning a commission (0.8 to 1.8 per cent per transaction). The scammers gain full control of these accounts, including online banking credentials. Government Efforts to Combat “Crypto Hawala” The Indian government is taking steps to combat “crypto hawala,” including: Registration of Crypto Exchanges: Requiring all Virtual Digital Asset Service Providers (VDA SPs) to register with the Financial Intelligence Unit (FIU).
Enhanced KYC Norms: Implementing stricter Know Your Customer (KYC) requirements, such as liveness detection, geographical tracking, and “live selfies.”
VPN Ban: The Jammu and Kashmir Police has suspended the use of VPNs in the region to prevent the creation of anonymous crypto wallets. Challenges and Concerns Despite these efforts, “crypto hawala” presents a significant challenge for law enforcement agencies because it: Operates Off-Exchange: The trading occurs in the “grey market,” evading anti-money laundering laws.
Bypasses Formal Banking Systems: The method is designed to avoid leaving any financial traces.
Involves Foreign Actors: The network involves individuals and entities located outside of India, making it difficult to investigate and prosecute.