Why did India launch an investigation into Binance and WazirX?
India’s Financial Intelligence Unit (FIU-IND) is investigating the global cryptocurrency exchange Binance and the Indian exchange WazirX, focusing on potential loopholes in cross-border digital asset transfers.
The investigation is driven by concerns about unregulated wallet transactions linked to accounts from Pakistan. Authorities are particularly worried about activities near sensitive areas like Jammu and Kashmir, where such transfers could be used for illegal funding or money laundering. They are also investigating the funds sent from India to addresses located outside the country.
Although no direct criminal connection has been found yet, a lack of transparency in crypto wallets has led the FIU-IND and the Enforcement Directorate (ED) to monitor blockchain activities. The investigation began due to unusual cryptocurrency transactions, particularly wallet-to-wallet transfers.
These transfers, often made through private addresses not linked to regulated exchanges, are hard to track and do not follow standard reporting rules. Concerns regarding funding of terrorism and separatist activities in the Indian region of Kashmir have given the investigation a more urgent tone.
The investigation has become more urgent due to geopolitical concerns. Authorities noticed increased crypto activity between accounts connected to Pakistan and recipients in sensitive border areas like Jammu and Kashmir. These transactions raise significant national security concerns because of the region’s instability and history of illegal financial activities.
Did you know? In 2019, Gerald Cotten, CEO of QuadrigaCX crypto exchange, died in India, locking access to $190 million in customer funds. Investigators later revealed Cotten had run Quadriga as a Ponzi-style fraud, using customer funds for personal trading and luxury spending, after claiming they were securely stored in cold wallets.
Binance and WazirX: Past regulatory and security issues in India
Binance and WazirX are facing increased regulatory scrutiny as India strengthens its oversight of cryptocurrency exchanges, thanks to concerns about potential money laundering and the financing of illegal activities through cross-border digital asset transfers.
Binance, the world’s largest crypto exchange, returned to the Indian market after resolving compliance issues. In June 2024, it paid a fine of about INR 18.9 crores (worth $189 million on July 21, 2024) for past violations and registered with the FIU-IND in August 2024. However, the ED has frozen some bank accounts linked to Binance’s Indian operations as part of an ongoing investigation into cross-border wallet transactions.
WazirX has been previously associated with Binance and is widely used for cross-border remittances in India. The exchange was hacked by the Lazarus Group in July 2024, which stole around $235 million, highlighting weaknesses in its security and Know Your Customer (KYC) measures. A 72-page affidavit filed in a Singapore court claims WazirX indirectly supported TRX (Tron) token transfers allegedly connected to ISIS financing.
Both exchanges have been in the spotlight as Indian authorities work to ensure cryptocurrency activities do not threaten financial integrity or national security.
How crypto regulation evolved in India and Pakistan
India and Pakistan have taken divergent yet increasingly structured paths toward crypto regulation. India has adopted a cautious approach, focusing on taxation and Anti-Money Laundering (AML) measures within a framework that doesn’t recognize crypto as legal tender. Pakistan has moved toward legalizing crypto trading and establishing a regulatory authority to attract foreign investment and modernize its financial system.
In March 2025, Pakistan established the Pakistan Crypto Council, with Bilal Bin Saqib appointed as the council chief, while Binance co-founder Changpeng Zhao will serve as its strategic adviser.
On July 8, 2025, Pakistan introduced the Virtual Assets Ordinance, creating the Pakistan Virtual Assets Regulatory Authority (PVARA) to handle licensing and oversight. The PVARA will function as an autonomous regulatory body. Its responsibilities will include licensing, monitoring, and overseeing providers of virtual asset services. Additionally, PVARA will ensure adherence to international standards, particularly those outlined by the Financial Action Task Force (FATF).
India, after initially banning banks from supporting cryptocurrency in 2018, saw the Supreme Court lift the ban in 2020. Since March 2023, crypto exchanges in India must register with the FIU-IND, follow AML rules, conduct complete KYC checks, maintain records and report suspicious activities….
cointelegraph.com