Indian crypto currency market is expanding rapidly, driven by technological advancements and growing public interest. According to Chainalysis’ 2024 Geography of Crypto report, India leads the world in crypto adoption and has emerged as a major hub for blockchain startups and digital asset trading. However, this rapid growth has also exposed a significant problem—a lack of clear and comprehensive regulatory frameworks. This absence of structured regulations makes it increasingly difficult for law enforcement agencies (LEAs) to monitor and take action against crypto-related crimes. As a result, illegal activities are thriving, while legitimate investors are left navigating a landscape of legal uncertainty.
Rising Crypto Crimes Amid Regulatory Ambiguity
Globally, crypto-related crimes have surged in recent years. Chainalysis reports that illicit crypto transactions amounted to approximately $46.1 billion in 2023, rising to over $51 billion in 2024. India faces an even greater challenge due to its high number of crypto users but weak regulatory oversight. In March 2023, the scope of the Prevention of Money Laundering Act (PMLA) was expanded to cover crypto businesses—a step in the right direction—but significant enforcement challenges persist. Tracking suspicious transactions and apprehending criminals remains difficult, especially when perpetrators operate across multiple states or international borders.
Federal Structure Adds to Enforcement Challenges
India’s federal governance system further complicates the issue. Law enforcement and policing fall primarily under state governments, resulting in varying capacities to handle cybercrime investigations. While some technologically advanced states have modern cybercrime units, many lack the necessary resources and expertise. Criminals exploit these inconsistencies, committing crimes in one state before fleeing to regions with weaker enforcement, making it harder for authorities to take action.
This fragmented regulatory framework not only enables criminals but also creates hurdles for legitimate crypto businesses. Many startups and exchanges face frozen bank accounts or prolonged legal scrutiny due to the absence of clear operational guidelines for local authorities. Meanwhile, at the national level, the government’s approach appears focused on revenue collection rather than regulation, as seen in the 30% tax on crypto gains and 1% TDS. These policies have driven many Indian traders to foreign platforms, further complicating law enforcement’s ability to track cross-border crypto crimes.
Global Crypto Regulations: A Model for India?
Several countries have taken proactive steps to regulate the crypto sector. The European Union (EU) has implemented the Markets in Crypto-Assets (MiCA) law, providing clear guidelines on consumer protection, market transparency, and anti-money laundering measures. In the United States, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) oversee different aspects of the crypto market, ensuring a structured regulatory approach. Countries like Brazil and Dubai have also established dedicated regulatory bodies to oversee digital assets. In contrast, India has yet to assign any authority with exclusive oversight of Virtual Digital Assets (VDAs), leaving the sector in legal limbo.
Emerging Crypto Technologies Create New Enforcement Challenges
The constantly evolving nature of crypto technology makes law enforcement even more complex. Innovations such as Decentralized Finance (DeFi), stablecoins, and NFTs challenge traditional financial monitoring systems. According to CipherTrace, over 80% of crypto theft cases in 2022 were linked to DeFi hacks. In India, the lack of a unified cybercrime enforcement system and inadequate investigative tools allow criminals to evade detection using techniques like chain-hopping and privacy-enhancing tools.
Major Crypto Crimes in India Highlight the Urgency for Regulation
Several high-profile crypto crimes have already shaken India’s digital economy. The WazirX hack in 2022 resulted in over $230 million being stolen after cybercriminals compromised private keys. In this case, India’s Cyber Crime Coordination Center (I4C) struggled to track the perpetrators due to the lack of standardized data-sharing mechanisms across different states. Similarly, the illegal loan app scam, which led to the seizure of ₹19 crore ($2.3 million) by the Enforcement Directorate (ED), demonstrated the disorganized and slow response to crypto-related financial frauds.
The Need for an Urgent Regulatory Framework
To address these growing challenges, India must establish a robust and clear regulatory framework for the crypto sector. First, the central government should create a dedicated crypto regulatory authority to set nationwide guidelines and standardize enforcement across states. Second, inter-state data sharing should be improved to enable swift action against cybercriminals. Additionally, investments in blockchain forensic tools and specialized cybercrime training are crucial to equipping law enforcement agencies with modern investigative capabilities. Finally, fostering public-private partnerships can help create a balanced regulatory environment that protects investors without stifling innovation.
If India aims to safeguard its booming crypto economy and maintain public trust in digital assets, it must implement an effective regulatory policy without delay. A well-structured framework will not only curb illicit activities but also foster innovation, ensuring India remains a global leader in the digital asset sector while strengthening national security and economic stability. The time for action is now—India must prioritize crypto regulation to create a secure, transparent, and sustainable financial ecosystem.
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