December 25, 2025 • 31 mins
An investigation by The Indian Express, in partnership with the International Consortium of Investigative Journalists (ICIJ), has revealed how cryptocurrency has increasingly become a channel for money laundering, creating a shadow economy that regulators around the world are struggling to keep up with.
In this episode, we speak with The Indian Express’s Ritu Sarin, Soumyarendra Barik, and Jay Mazoomdar, who led the India leg of Coin Laundry — a 10 month global investigation involving 113 reporters across 38 newsrooms, including The New York Times. They discuss how crypto exchanges have facilitated illicit transactions, the challenges this poses for law enforcement agencies, and why the Indian government has yet to pass legislation to regulate this industry.
Hosted, written and produced by Shashank Bhargava
Edited and mixed by Suresh Pawar
In this episode, we speak with The Indian Express’s Ritu Sarin, Soumyarendra Barik, and Jay Mazoomdar, who led the India leg of Coin Laundry — a 10 month global investigation involving 113 reporters across 38 newsrooms, including The New York Times. They discuss how crypto exchanges have facilitated illicit transactions, the challenges this poses for law enforcement agencies, and why the Indian government has yet to pass legislation to regulate this industry.
Hosted, written and produced by Shashank Bhargava
Edited and mixed by Suresh Pawar
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Hi, I'm Chashang Harder and you're listening to three Things
the Indian Express News Show. Over the past few years,
cryptocurrencies rise has been swift and global. What began as
an alternative to banks and governments after the two thousand
and eight financial crisis has grown into a powerful market,
(00:25):
one that has also raised serious concerns about transparency, risk
and widespread misuse. But before we talk more about that,
it might help to first understand what cryptocurrency actually is,
something that at times can be surprisingly tricky to explain.
Speaker 2 (00:43):
You know, it is a difficult question to answer, but
also when you think about it a little, it's actually
very easy. The simple answer is that if you don't
know anyth about cryptocurrencies, do not invest.
Speaker 3 (00:51):
It's a highly volatile asset class.
Speaker 1 (00:54):
That's the Indian expresses somemwday in Ribarik.
Speaker 2 (00:58):
So cryptocurrencies are digital assets, right, which is built on
this technology, which is called the blockchain technology. Just imagine
like it's a web where you know, if you do
something on that web, that gets recorded, and when someone
else interacts with your interaction, that gets recorded, and that's
how this entire block chain, basically that chain proceeds further,
(01:18):
so just imagine it as illustratively as that in your mind.
And technically it's a decentralized online ledger. It's a ledger
system that essentially records transactions securely and transparently, at least
on paper.
Speaker 3 (01:30):
That's the hard sell about it, right.
Speaker 2 (01:32):
And unlike traditional currencies like you know, the Indian groupee,
the US dollar, et cetera, which are traditional feared currencies,
cryptocurrency is the common examples being bitcoin and ethereum, two
of the most popular cryptocurrencies. They are not regulated by
any government just simply because of their nature.
Speaker 4 (01:46):
You know.
Speaker 2 (01:46):
It's not like how the RBI issues the I in
r how the US FED issues the US dollar, et cetera.
The bitcoin is not issued by anyone. There are different
ways to get bitcoin. The most traditional way and the
most technology intensive wave is that you solve a bunch
of very difficult mathematical equations through which you can mine cryptocurrencies,
or of course, you can just simply buy it off.
Speaker 1 (02:08):
And a cryptocurrency's value is shaped by supply and demand
as well as market sentiment and geopolitics, factors that make
it especially volatile.
Speaker 2 (02:18):
So yeah, again, if you don't know anything about cryptocurrency
to stay away from it.
Speaker 1 (02:22):
But given how volatile it is and the fact that
it's not even regulated, why do people invest in it
at all? The simple answer is the quick gains that
it promises to offer.
Speaker 2 (02:33):
If you look at the history of cryptocurrencies, and when
I mean, you know, you would hear stories that I
got into crypto when bitcoin was like a few hundred dollars,
when bitcoin was a few tens of dollars, et cetera.
And today when you look at bitcoin, I remember a
few weeks ago. Now, of course it's fallen down a
little bit, but a few weeks ago it had reached
an all time high with one bitcoin being worth one
hundred and ten thousand dollars. So you know, there is
(02:54):
this promise of there being significant gains if you invest
in this currency, and I think that is simply the
biggest pull for many people, specifically a lot of young
people who are increasingly investing in the sector. And also,
you know, it's at twenty four to seven industry, you know,
unlike our traditional stock exchanges, et cetera, where you invest
in public companies and all which have a set time,
like you know, they begin at nine nine fifteen in
(03:16):
the morning, they close off at three thirty in the afternoon,
and after that you can't really invest in the market.
Speaker 3 (03:21):
In the public markets.
Speaker 2 (03:22):
Cryptocurrency markets you can invest at any point in time,
you can come out of at any point in time.
So really it's at twenty four by seven by three
sixty five kind of an industry. And I think that's
also again, you know, another lucrative part of it, where
the trading can be done for a much more longer time.
You can be invested in the market for a much
longer time, but also as importantly come out of the
market whenever you want to. So I think there is
(03:43):
some amount of layer there for some people who maybe
you know, caveat being who see cryptocurrencies as a legitimate
means of investment. Perhaps that is what really makes these
currencies really lucrative for them.
Speaker 1 (03:53):
And this is why this industry has witnessed a global rise,
and India actually is one of its biggest markets.
Speaker 2 (04:01):
You know, India has surprisingly seen a very grassroots sort
of adoption of cryptocurrencies. You know, it's one of the
largest markets globally, estimated to have close to one hundred
and twenty million users that's a significant amount as far
as market value is concerned. It was valued in twenty
twenty four at about two point six billion dollars. But
also there are estimates that this can rise to more
(04:21):
than fifteen billion dollars by the end of twenty thirty five.
That's actually a CGR of over seventeen percent. Quite impressive,
you know, for something that from an Indian investment sense,
is as far from being traditional as possible. It is, right,
it is such a different kind of an investment asset
investment class that say, for instance, several people in our
(04:41):
parents' generation, for instance, would probably stay away from it
because you know, they would rather invest in something that
they feel as much safer, et cetera.
Speaker 1 (04:49):
But that's not the case for many younger people who
tend to have a much bigger appetite for risk.
Speaker 2 (04:55):
So there's this crypto exchange called coins which one of
the biggest in India. They recently release a report which
showed that people from this Gen Z generation, who basically
people who are between eighteen to twenty five years of
age right now, they are actually topping the investor base
for cryptocurrencies, accounting for as much as you know, thirty
eight percent of the total investors. This is again you know,
(05:15):
data for this one particular exchange, but you know, the
trends can translate across the industry. The second biggest investor again,
you know, you see that gradation visa we age, right,
the youngest of the lot, between eighteen to twenty five,
they formed a significant chunk close to thirty eight percent.
Then you have millennials, people between twenty six to thirty
five years of age, who come in close at about
thirty seven percent. Then you see a sharp drop for
(05:35):
people aged between thirty six to forty five, who account
for about eighteen percent.
Speaker 3 (05:39):
You know, so there is a clear demarcation.
Speaker 2 (05:41):
You know, as the younger you are, it seems that
the more likely you are to.
Speaker 3 (05:45):
Invest in this and you know vice versa.
Speaker 2 (05:47):
But also what is more interesting beyond this age dynamic
is also you know, the geographical dynamic of it. You know,
of course you'd expect that cities like Delhi, Bangalore, Bombay
and all they would dominate as far as the investor
base is concerned. But also this report showed that you know,
some Tier two cities like Jeppur, Lucknow and even Patna
they're also emerging as very strong centers of adoption. So
(06:07):
that really shows you the nature of cryptocurrencies and how
and where the traction is coming from. Right, So it's
clear that it's primarily younger people. The younger you are,
the more likely you are to be an investor. But
also you know, it's not a tier one or a
metrocity phenomenon anymore. Clearly you see people from cities like
Patna and lucknow and investing in this. So clearly, like
you know, it has gone into the grassroots, which is
very surprising given that it's not promoted by the government. Rather,
(06:29):
the government very regularly antagonizes it, the Reserve Bank very
regularly antagonizes it. But despite that, you know, and I
think that is to say that that's just how strong
the promise of making that quick buck on crypto is
that you see all these young people getting attracted to
the sector.
Speaker 1 (06:43):
Now, the reason we're talking about crypto is that over
time it has increasingly become a preferred channel for money laundering,
with agencies around the world scrambling to keep pace with
the scale of the problem. That's according to findings from
an investigation by the Indian Express in partnership with the
International consortium of investigative journalists spanning ten months and involving
(07:07):
one hundred and thirteen reporters across thirty eight newsrooms, including
The New York Times. The project, titled coin Laundry, reveals
how crypto exchanges worldwide have helped create a shadowy economy
where illicit transactions move with unprecedented ease. Now, the investigation,
like we mentioned, primarily focused on crypto exchanges, the main
(07:30):
gateways through which people invest in the sector.
Speaker 2 (07:34):
So, crypto exchanges are online platforms that allow users to buy, sell,
and trading cryptocurrencies. You know, they function somewhat similar to
like a stock trading platform, but these entities deal exclusively
in the digital tokens or their units that can be represented.
Speaker 3 (07:49):
You know.
Speaker 2 (07:49):
Popular exchanges that are globally known are some examples are
binance coinbased, but there are also some very prominent Indian
exchanges such as coinswitch, Zepe and zerox, And you know,
just the basic underlying factor is that basically you can
invest into cryptocurrencies via lupiece on these exchanges and then
they stored them in their own digital wallets.
Speaker 3 (08:08):
So yeah, a lot of.
Speaker 2 (08:08):
The investigation actually focused on some of these most prominent
cryptocurrency exchanges, and what we found is that how you know,
these exchanges are operating in sort of a regulatory gray
zone around the world, but more so in India. And
also you know, because of the underlying technology that powers them,
that they're able to like you know, steer far ahead
of policy making of regulation.
Speaker 3 (08:28):
Formation, et cetera.
Speaker 2 (08:29):
And how they have now become the newest gateways and
hubs for dirty money to cross borders. You know, a
lot of the Indian agencies and the Indian investigators that
we spoke to here as part of the India part
of the investigation, the picture was quite clear that you know,
our investigators are scrambling to keep up pace, you know,
because of the cross border nature, because of the twenty
four to seven by three sixty five nature of cryptocurrencies.
(08:50):
You know, they hit dead end after dead end whenever
they're investigating cryptocurrencies. So really, like you know, the basic
essence of the investigation is that you know, you of
course have your old traditional networks of how et cetera.
You know, but now cryptocurrency is again you know, because
of the ease of investment, because of how easily you
can divert money how quickly can divert money, you know,
while still shielding yourself relatively from the traditional banking sector,
(09:12):
et cetera. That has made cryptocurrencies a very lucrative asset,
not just as an investment class, but also you know,
as a potential to store away a lot of your
dirty money.
Speaker 1 (09:20):
The investigation shows that over the last nine years, crypto
exchanges have faced at least five point eight billion dollars
in fines, penalties and settlements. That figure of five point
eight billion dollars points to just how large and how
opaque this parallel financial universe has become a space once
(09:41):
dominated by traditional tax havens.
Speaker 4 (09:45):
And what is different is that probably for the first time,
people were looking at the VDA industry, the VDA industry,
I mean the digital asset industry.
Speaker 1 (09:56):
That's the investigative journalist Ritu Serene who along with some
undertook this investigation.
Speaker 4 (10:03):
And also coilacing it with the fact that a lot
of dirty money is also being laundered into cryptocurrency. And interestingly,
just two days after we finished Coin Laundry, I was
off to Kuala Lumpur to attend the Global International Conference
of Investigative Journalists, where you have about fifteen hundred investigative
journalists attending and among the people speaking there was Joseph Stiglitz,
(10:28):
Nobel Laureate, and he in the question answer session at
the end of his talk, was also asked about cryptocurrency
and he said that looking at it as you know,
a money laundering device and etc. In terms of banking,
he thinks it's a step backward for the financial industry,
and in fact he said the whole cryptocurrency industry is
(10:48):
a fraud, and also that the media has not exposed
it as a fraud. So, you know, coming from him
just at this time, I just thought it was interesting
and a lot of work has been done by the
steam of one hundred plus journalists. ICIJ themselves that their
data experts looked at hundreds and hundreds of transactions. A
(11:09):
transaction in the crypto world. It's like they are crypto wallets,
wallet addresses, and the exchanges are akin to a bank
and the blockchain, of course is akin to a ledger.
So hundreds of transactions through several hops were investigated by
them and some very important work has been done.
Speaker 1 (11:31):
She says. As part of the India leg of the investigation,
the team access data from the Home Minustry covering the
period between January twenty twenty four and September twenty twenty five.
Speaker 4 (11:42):
They have a unit called the ifour C you know,
which looks at digital frauds and looks at now cryptocurrency
frauds also, and we got some exclusive data published for
the first time which sort of matched this global data
that twenty seven exchanges in India have laundered money via cryptocurrency,
(12:02):
totaling sixy caroles. And I said twenty seven exchanges. In
these twenty seven exchanges, it could range from one exchange,
you know, having three hundred and sixty caroles, So the
largest figure for any of these exchanges was three hundred
and sixty caroles and of illicit money being transferred through cryptocurrency,
and the lowest was just six caros.
Speaker 1 (12:24):
Ritu says that one thing that really stood out to
her during the investigation was also the sheer volume of
frauds being carried out by Indians abroad, you know.
Speaker 4 (12:33):
So we sort of did a primer of some of
the most important cases and we got the chart sheets
of some cases of Indians who had committed frauds in
the US but are now languishing in jail here or
there's an extradition request for them, very very serious offenses,
and the money was laundered in cryptocurrency. I also got
a new aspect and that is agencies. The two agencies
(12:56):
I mentioned, they recover and they seize the VDA asset
just like you see, you know, money lying in a
bank account or a locker. So the Indian agencies are
confronted with the problem of where to keep the ceased cryptocurrency.
So one agency we got to know has stored with
a private with an Indian private store wallet company, and
the Home Ministry is apparently now preparing guidelines on where
(13:19):
this cryptocurrency should be stored by government agencies. The other
thing is, of course, you know, freezing of assets and
if there's a case against the thing that they also
do one is to freeze cryptocurrency and seize it and
then moveable and immovable assets.
Speaker 1 (13:35):
Now, while storing cryptocurrency poses a challenge for agencies, it's
nothing compared to the difficulty of recovering these funds in
the first place.
Speaker 4 (13:44):
So you know, there was the lead reporter from ICIJ
is Spencer Woodman. Spencer said that at least in the US,
it's almost impossible for agencies to recover money. The thing
about crypto is that, yes, there is traceability. When you
talk to the exchanges, they'll say, this is something that
(14:05):
can always be traced. And we are in India, for example,
FIU compliant. All Indian exchanges are registered with the Financial
Intelligence Unit. But we also when we were working on
the story, we realize that even if you take the
help of experts, you can track one hop or two
hop or three hops, but can you track the last hop?
(14:26):
You know? So if and certainly for the enforcement and
investigating agency, even with FOREIGNSIC expert and we spoke to
several of them, you know, can they get to the
last you know? Bitcoin? So, in the words of Stiglitz,
he calls the whole industry a fraud. And in India
the Finance ministry and the government have been wary of
(14:47):
banning it. Of course, we know what has happened in
the Supreme Court and all that. So it's a great zone.
They're very of regulating it, you know, or making it
authorized or banning it. Neither has been done. Now.
Speaker 1 (15:00):
Among the cases highlighted in this investigation is that of
a man named Vladimir A. Khonnyikov, better known as Lado,
a forty seven year old Russian entrepreneur accused of orchestrating
a series of global cryptocurrency scams. Investigators alleged that these
schemes siphoned off as much as one billion dollars from
(15:20):
millions of unsuspected investors across four continents.
Speaker 4 (15:25):
So it's just a case of an intrepid fraudster or scammer,
whatever you want to call him, who's now wanted in
several countries. He has the cases against him in the US,
in Slovenia, in Georgia. In fact, Georgia has an arrest
warrant against him. He lives in the Way where he
has been reconfiguring his crypto platforms, giving new names for
(15:49):
all of them, and he interestingly has been focusing on
India also. He has a marketing plan for India and
the states that he is concentrating Onesh, Telangana, and he
has a marketing team there and he is trying to
get investors in India.
Speaker 1 (16:07):
Interestingly, Lado has now also entered the film industry and
was involved in the production of a film called Portal
of Force, which released earlier this month.
Speaker 4 (16:18):
And there's an Indian actress featuring in it, Deshah Patani
and in an important role. Maybe she's among the top
six in the film, so you have an Indian there.
So we sent her questions on are you aware of
Flado's background? And are you aware he's a wanted man?
Are you aware that he's alleged to have committed frauds
of you know, millions of dollars? So there was no reply.
(16:39):
And the other India angle is that he launched a
magazine for his company and the occasion was the birthday
of Elon Musk's mother, which was celebrated in Mumbai, and
the magazine launch was their.
Speaker 1 (16:54):
Now Lado's case is of course the flashier one involving
several prominent names. But as ready to mention, there are
many individuals around the world who have been arrested for
money laundering using cryptocurrencies, and one concern raised by agencies
like the Enforcement Directorate is the emergence of a dangerous
new model international hawala transactions using crypto transactions.
Speaker 5 (17:20):
So to put it simply, in hawala transaction, it's a
very old method being used for centuries.
Speaker 1 (17:28):
That's the Indian expresses Jmazumdar, who along with Mahinder Singh
Manraal was also part of this investigation.
Speaker 5 (17:35):
So in this system, it happens informally from point A
to point B, usually across international boundaries. Transactions are made,
but money doesn't really move physically. So person X, who
is the center, he gives money to person A in
his own territory or his own country, and then person
A he contracts his partner. They'd be in another jurisdiction
(17:58):
there called the hawalathers so based on trust between person
A and person B. Person B in his jurisdiction there
was the fund to person Y. So between X and Y,
fund moves based on the trust between person A and B.
But the real money doesn't have to move through bank
or they don't have to really cross any international boundary.
And this remains under the rudder of any regulator or
(18:20):
banking system.
Speaker 1 (18:22):
And it turns out that many of these transactions are
now happening through crypto. In fact, in some ways cryptocurrency
has become Havala two point two.
Speaker 5 (18:31):
The very fundamentals are the same, but what is happening
here is because of the tech involved, it is becoming
more efficient in terms of speed in terms of volume,
and also more critically, it is adding too many layers
between the sender and the receiver. So in the traditional
HOLA model, you would imagine that there could be two
(18:52):
to four layers because the to be these are the
two unknown layers that is existing between the cener and
the receiver. But in this case, because the blockchains inherent
nature where you can't trace the movement if it happens
beyond or outside a QC compliant system, then potentially you
can add any number of layers between the center and receiver,
(19:14):
so it becomes even more difficult to crack for the
regulator or the investigators. And secondly, because in traditional hawala,
the receiver and the deliverer they're both handling in physical cash,
so there is certain geographic or physical limitations. In crypto,
you can keep bouncing jurisdictions from one country to another,
(19:36):
then further to any jurisdiction for any duration, adding any
number of layers you want. So this is basically Hawala two,
which is much more tech efficient and much more secretive.
Speaker 1 (19:50):
And this is exactly why these transactions are so difficult
for law enforcement agencies to track. Ja explains that money
from a single source is immediately split a loss multiple
accounts and then later pulled into a different one.
Speaker 5 (20:05):
This is a stage where it is still possible for
the agencies and the regulated to track because the banks
are now very conscious about such funds movement, because if
we recall that Samia's bag, they had had this new
regulation that even funds movement under fifty thousand rupees would
require PC. Earlier bottom line was fifty thousand, So many
(20:27):
bad actors who are manipolluting that by sending funds in
denominations such as forty eight forty nine thousand into many
transactions to cover up their target, but using that gray area.
So these things can still be traced, but then it
becomes increasingly more complex because.
Speaker 1 (20:45):
From this pooled account the money is usually moved through
UPI transfers and then converted into cryptocurrency.
Speaker 5 (20:53):
Now this conversion, if it happens on a regular platform
which are KIC and anti money honoring rules compliant, then
these will be tracked, but they usually go through models.
Speaker 3 (21:04):
Which are called P two P or OTC, that is
peple tiple.
Speaker 5 (21:07):
Transfer over the counter transferred transaction where you don't have
to follow strange and KIC rules, and this can stay
under the rudder and then comes another layer of ofuscation
where you are going into something called tumbling that this
crypto This is similar to the stage one where we
saw that money coming from different sources, many small accounts
(21:30):
to a pool account, So tumbling or mixing is similar.
Speaker 1 (21:34):
Here.
Speaker 5 (21:34):
Instead of a currency, you were having crypto coins sourced
from different wallets, and then there are being mixed and reassigned,
so it firt that obscures the trail. And during this change,
the crypto coins are held in unhosted or private to wallet.
Unhosted typically means not hosted by any compliant regular exchange
or platform, and it is controlled by the individual who
(21:57):
owns the wallet, so they're again tracking becomes difficult.
Speaker 1 (22:00):
That's level four.
Speaker 5 (22:01):
And then again it can become even more complicated when
they try to switch between a blockchain so safe from
a bitcoin going to another cryptocurrency, which makes it extremely difficult.
It is called bridging or swapping, and agencies have repeatedly
said in the internal communications that you have seen that
at this stage it becomes almost impossible to technically track
(22:25):
this kind of firscation. And then the exit mode, of
course after all this is done, then when eventually the
money is taken out, either through ATMs or through offshore accounts,
or then further parked in other jurisdictions, then it usually
remains beyond the reach of the investigators now Here.
Speaker 1 (22:41):
It's important to note that crypto platforms, a crypto exchanges
compliant with the rules of the Financial Intelligence Unit would
not knowingly be involved in such transactions.
Speaker 5 (22:53):
But it is also possible that we have seen that
many foreign exchanges in the USA and exact finance, they
promised to the US administration and judiciary that they would
not allow crime proceeds to roll through their platform, but
it happened, and for that they have been penalized heavily.
So this could be some sort of oversight, and it
(23:15):
cannot be ruled out completely that no Indian exchange got
into a similar situation. That's for the agencies to investigate.
But as of now, we don't have any example where
any Indian exchange which is an AMC compliant, has played
any role unknowingly in any such transaction way. And we
have to remember that no such transaction the way we
(23:38):
have been describing it, that is going through many layers.
To add secrecy and obscure the trail. They will not
use any one platform or even two or three legit platforms.
They will use a whole range of mechanisms and exchanges.
Some are compliants, some non compliant, and eventually the target
is to add layers and some of these layers can
(24:00):
will be legit. But if you imagine it in a
way that if you know that you don't know the source,
you don't know the destination. Even if you know two
or three steps, two or three zones in the middle,
it doesn't always help the investigators to crack the complete trail.
Speaker 1 (24:18):
But investigators, it's like chasing a mouse with hundreds of
tunnels to escape through block one and it can easily
slip through another.
Speaker 5 (24:27):
I mean the exchanges here they have this grouse that
over two dozens of them they are now complyingt to
their FORU and they try to follow and they claim
that they follow all the rules in India, but they
say that others who do not many offshoot channels exchanges,
they are still high level in India. So it doesn't
stop a bad actor to manipult the system just because
the majority of exchanges are following the rule. But there
(24:50):
is still options to take the dark route and move funds.
Speaker 1 (24:54):
But now the question is, despite all this, why isn't
there a specific log governing cript in India and why
has the government been hesitant to regulated?
Speaker 2 (25:05):
So, you know, I had spoken to a couple of
senior officials in the government.
Speaker 1 (25:09):
That summer in Robarick again and you know, the ask.
Speaker 2 (25:13):
Is pretty simple, right, Like you talk to investors, you know,
they'll be like, in the last couple of years, there
have been two major hacks of two major you know,
Indian exchanges, right, I mean I think one was XERX,
one was coin DCX, and collectively I think about two
seventy or two eighty odd million dollars was scammed off, right,
and people lost a lot of money there. But what happens, right,
I mean, you are then at the mercy of that
(25:34):
particular platform to somehow figure out if you know, they
can get some of that money back, all that money back, or.
Speaker 3 (25:40):
You know, just a portion of it, et cetera.
Speaker 2 (25:41):
You simply don't have any you know, support system from
the government side, right, So that is on the investor side.
Speaker 3 (25:48):
Then as a business, you.
Speaker 2 (25:49):
Might want to be a legitimate, you know, rule abiding
Sacrepto exchange or something like that. Right, But again, you
do not know what is right and what's not because
a government simply hasn't told that to you. Right, and
we spoke about the law enforcement problem. They don't have
the SUPs. So you know, on the face of it,
it would appear that if it is seeing such grassroots adoption,
if you're aware that, you know, it is also at
(26:09):
the same time becoming a new channel for hawala transactions.
You know, your citizens who are investing in this sector
are getting impacted because if they lose money, they don't
have any protection after that. Companies who want to legitimately
do business in your country pay tax, et cetera. They
don't know what is the right way to operate here.
Law enforcement is struggling. Why would the government not want
to bring out a law? Right, the government feels that,
(26:31):
you know, if they bring in a law. What these
officials that have spoke to told me is that if
they bring in this law, it might sort of signal
an amount of legitimacy. That you know, the government is
now saying that, Okay, the sector is fine, it's legit,
and that might boost investor confidence further. And you know,
people might start investing a lot more in the sector
and that maybe, you know, something that the RBA is
not very happy with, because the RABI does continue to
(26:51):
hold the point that you know, they see cryptocurrencies as
a bit of a threat to India's financial stability.
Speaker 1 (26:57):
He says. Historically, the Reserve Bank has been very cautious
about cryptocurrencies. In fact, in twenty eighteen, it had even
banned banks from providing services to crypto exchanges, though this
band was later overturned by the Supreme Court in twenty twenty.
Speaker 2 (27:13):
Since then, an absolute ban has never been spoken about.
And I think India has also eventually signaled, you know,
when India was heading the G twenty a couple of
years ago under our presidency, under our chairpersonship, there was
a report that was prepared basically by the FSB which
basically you know, signaled that okay, India is now maybe
easing a little bit, basically because that particular report said that,
(27:36):
you know, an outright ban was probably not the right way,
but it did call for like a lot of international
cooperation and sort of said that international cooperation is perhaps
the only way to go ahead and regulate the currencies
because you know, the problem with law enforcement that we
spoke about, right, it is the problem about international cooperation.
Speaker 1 (27:52):
Right.
Speaker 3 (27:52):
If two governments are not willing to.
Speaker 2 (27:54):
Engage when an investigation has to happen on cryptocurrencies, no
regulation within one government can probably ever sort of you know,
address that very core issue. So I think, yeah, increasingly,
while the RBI remains to be, you know, a major
skeptic about the sector, about these currencies, and while the
government is also not you know, very keen on like
promoting them in any way possible, I think talks of
(28:16):
a ban largely since the twenty eighteen ban, which was
eventually overturned in twenty twenty. I think a ban is
increasingly now seeming like a slim possibility. But what is
being really missed is that, you know, if there is
not going to be a ban, and if all the
trends are showing to you that people are going to
be investing in this sector, I think what is really
being missed is actually a regulation now.
Speaker 1 (28:36):
When the Supreme Court overturned the ban in twenty twenty,
it essentially said that everyone had the right to do
business and that the ban was disproportionate, and that the
RBI had not found any evidence of harm or adverse
impact caused by the activities of these virtual currency exchanges.
Speaker 2 (28:55):
But in a very recent case, actually it was, you know,
very ironically, the Supreme Court itself in May, this was
a case about you know, some money launding that happened
via cryptocurrencies, and I think the perpetrator of the case
has gone to quote et cetera. And in that you know,
the quote has lamented saying that there is no clear
cut policy on cryptocurrencies, you know, and the courte is
not even mincing its words in that particular hearing when
(29:17):
it is happening in May, the Supreme Court said that
trading in bitcoin in India is like dealing with a
refined way of avala business. There are no regulations at present.
So clearly, you know, a Supreme Court which overturned the
band saying that you know, a ban is just not
the right way to deal with things. And five years
down the line now since that very landmark judgment, to
be honest for the industry, the same courte itself is
lamenting the fact that you know, it has now become
a refined way of avala business. But the government is
(29:39):
sleeping on it, and because there is simply no way
to regulate the sector, or the government is not keen
to regulate the sector. So yeah, I think the court's
attitude towards it is also like reflective of the times
and also very reflective of the investigation that we've done
in that you know, this is now what's increasingly happening
in the sector. The quote very rightly has pointed out that,
you know, cryptocurrencies have now become a refined way of
avaala business.
Speaker 3 (29:59):
Of course, not of them.
Speaker 2 (30:00):
We have to have that caveat at all points. There
are legitimate, no innocent investors in the sector who also
lose a lot of money when something goes wrong, when
a scam happens, when they willingly walk into a.
Speaker 3 (30:09):
Trap, et cetera.
Speaker 2 (30:10):
And I think all of it really can be addressed
by having an overarching legislation. The government has tried it.
I remember it was trying to bring out a bill.
There were some intermedistial committees. An interminational committee actually had
recommended a ban this somewhere around twenty eighteen or twenty nineteen,
but again that never really was fruitful. There was once
I remember in Parliament where the government had listed a
bill called the Regulation of Cryptocurrencies, something to the effect
(30:32):
of virtual currencies, et cetera. But again that bill never
got presented in Parliament and now no one knows what's
supposed to happen. We also had some insistence from you know,
the Markets Regulator SEBI.
Speaker 3 (30:42):
Wee.
Speaker 2 (30:42):
SEBBI said that, you know, the overarching architecture of a
crypto exchange is not very different from you know, stock
trading platforms, et cetera. The underlying fact is the same. No,
you're trading in commodities, you're trading in futures and options
and things like that. So the SEBBI has also offered,
you know, to be like the central regulator for the sector.
But of course again the government has been really slow
on reacting to these things. You were listening to Three
(31:04):
Things by the Indian Express. Today's show was written and
produced by Mishashan Bhargov and was edited and mixed by Seshbawar.
If you like the show, then do subscribe to us
wherever you get your podcasts. You can also recommend the
show to someone you think we'll like it, share it
with a friend or someone in your family.
Speaker 1 (31:20):
It's the best way for people to get to know
about us. You can tweet us at The Express Podcasts
and write to us at podcasts at Indian express dot
com
Hi, I'm Chashang Harder and you're listening to three Things
the Indian Express News Show. Over the past few years,
cryptocurrencies rise has been swift and global. What began as
an alternative to banks and governments after the two thousand
and eight financial crisis has grown into a powerful market,
(00:25):
one that has also raised serious concerns about transparency, risk
and widespread misuse. But before we talk more about that,
it might help to first understand what cryptocurrency actually is,
something that at times can be surprisingly tricky to explain.
Speaker 2 (00:43):
You know, it is a difficult question to answer, but
also when you think about it a little, it's actually
very easy. The simple answer is that if you don't
know anyth about cryptocurrencies, do not invest.
Speaker 3 (00:51):
It's a highly volatile asset class.
Speaker 1 (00:54):
That's the Indian expresses somemwday in Ribarik.
Speaker 2 (00:58):
So cryptocurrencies are digital assets, right, which is built on
this technology, which is called the blockchain technology. Just imagine
like it's a web where you know, if you do
something on that web, that gets recorded, and when someone
else interacts with your interaction, that gets recorded, and that's
how this entire block chain, basically that chain proceeds further,
(01:18):
so just imagine it as illustratively as that in your mind.
And technically it's a decentralized online ledger. It's a ledger
system that essentially records transactions securely and transparently, at least
on paper.
Speaker 3 (01:30):
That's the hard sell about it, right.
Speaker 2 (01:32):
And unlike traditional currencies like you know, the Indian groupee,
the US dollar, et cetera, which are traditional feared currencies,
cryptocurrency is the common examples being bitcoin and ethereum, two
of the most popular cryptocurrencies. They are not regulated by
any government just simply because of their nature.
Speaker 4 (01:46):
You know.
Speaker 2 (01:46):
It's not like how the RBI issues the I in
r how the US FED issues the US dollar, et cetera.
The bitcoin is not issued by anyone. There are different
ways to get bitcoin. The most traditional way and the
most technology intensive wave is that you solve a bunch
of very difficult mathematical equations through which you can mine cryptocurrencies,
or of course, you can just simply buy it off.
Speaker 1 (02:08):
And a cryptocurrency's value is shaped by supply and demand
as well as market sentiment and geopolitics, factors that make
it especially volatile.
Speaker 2 (02:18):
So yeah, again, if you don't know anything about cryptocurrency
to stay away from it.
Speaker 1 (02:22):
But given how volatile it is and the fact that
it's not even regulated, why do people invest in it
at all? The simple answer is the quick gains that
it promises to offer.
Speaker 2 (02:33):
If you look at the history of cryptocurrencies, and when
I mean, you know, you would hear stories that I
got into crypto when bitcoin was like a few hundred dollars,
when bitcoin was a few tens of dollars, et cetera.
And today when you look at bitcoin, I remember a
few weeks ago. Now, of course it's fallen down a
little bit, but a few weeks ago it had reached
an all time high with one bitcoin being worth one
hundred and ten thousand dollars. So you know, there is
(02:54):
this promise of there being significant gains if you invest
in this currency, and I think that is simply the
biggest pull for many people, specifically a lot of young
people who are increasingly investing in the sector. And also,
you know, it's at twenty four to seven industry, you know,
unlike our traditional stock exchanges, et cetera, where you invest
in public companies and all which have a set time,
like you know, they begin at nine nine fifteen in
(03:16):
the morning, they close off at three thirty in the afternoon,
and after that you can't really invest in the market.
Speaker 3 (03:21):
In the public markets.
Speaker 2 (03:22):
Cryptocurrency markets you can invest at any point in time,
you can come out of at any point in time.
So really it's at twenty four by seven by three
sixty five kind of an industry. And I think that's
also again, you know, another lucrative part of it, where
the trading can be done for a much more longer time.
You can be invested in the market for a much
longer time, but also as importantly come out of the
market whenever you want to. So I think there is
(03:43):
some amount of layer there for some people who maybe
you know, caveat being who see cryptocurrencies as a legitimate
means of investment. Perhaps that is what really makes these
currencies really lucrative for them.
Speaker 1 (03:53):
And this is why this industry has witnessed a global rise,
and India actually is one of its biggest markets.
Speaker 2 (04:01):
You know, India has surprisingly seen a very grassroots sort
of adoption of cryptocurrencies. You know, it's one of the
largest markets globally, estimated to have close to one hundred
and twenty million users that's a significant amount as far
as market value is concerned. It was valued in twenty
twenty four at about two point six billion dollars. But
also there are estimates that this can rise to more
(04:21):
than fifteen billion dollars by the end of twenty thirty five.
That's actually a CGR of over seventeen percent. Quite impressive,
you know, for something that from an Indian investment sense,
is as far from being traditional as possible. It is, right,
it is such a different kind of an investment asset
investment class that say, for instance, several people in our
(04:41):
parents' generation, for instance, would probably stay away from it
because you know, they would rather invest in something that
they feel as much safer, et cetera.
Speaker 1 (04:49):
But that's not the case for many younger people who
tend to have a much bigger appetite for risk.
Speaker 2 (04:55):
So there's this crypto exchange called coins which one of
the biggest in India. They recently release a report which
showed that people from this Gen Z generation, who basically
people who are between eighteen to twenty five years of
age right now, they are actually topping the investor base
for cryptocurrencies, accounting for as much as you know, thirty
eight percent of the total investors. This is again you know,
(05:15):
data for this one particular exchange, but you know, the
trends can translate across the industry. The second biggest investor again,
you know, you see that gradation visa we age, right,
the youngest of the lot, between eighteen to twenty five,
they formed a significant chunk close to thirty eight percent.
Then you have millennials, people between twenty six to thirty
five years of age, who come in close at about
thirty seven percent. Then you see a sharp drop for
(05:35):
people aged between thirty six to forty five, who account
for about eighteen percent.
Speaker 3 (05:39):
You know, so there is a clear demarcation.
Speaker 2 (05:41):
You know, as the younger you are, it seems that
the more likely you are to.
Speaker 3 (05:45):
Invest in this and you know vice versa.
Speaker 2 (05:47):
But also what is more interesting beyond this age dynamic
is also you know, the geographical dynamic of it. You know,
of course you'd expect that cities like Delhi, Bangalore, Bombay
and all they would dominate as far as the investor
base is concerned. But also this report showed that you know,
some Tier two cities like Jeppur, Lucknow and even Patna
they're also emerging as very strong centers of adoption. So
(06:07):
that really shows you the nature of cryptocurrencies and how
and where the traction is coming from. Right, So it's
clear that it's primarily younger people. The younger you are,
the more likely you are to be an investor. But
also you know, it's not a tier one or a
metrocity phenomenon anymore. Clearly you see people from cities like
Patna and lucknow and investing in this. So clearly, like
you know, it has gone into the grassroots, which is
very surprising given that it's not promoted by the government. Rather,
(06:29):
the government very regularly antagonizes it, the Reserve Bank very
regularly antagonizes it. But despite that, you know, and I
think that is to say that that's just how strong
the promise of making that quick buck on crypto is
that you see all these young people getting attracted to
the sector.
Speaker 1 (06:43):
Now, the reason we're talking about crypto is that over
time it has increasingly become a preferred channel for money laundering,
with agencies around the world scrambling to keep pace with
the scale of the problem. That's according to findings from
an investigation by the Indian Express in partnership with the
International consortium of investigative journalists spanning ten months and involving
(07:07):
one hundred and thirteen reporters across thirty eight newsrooms, including
The New York Times. The project, titled coin Laundry, reveals
how crypto exchanges worldwide have helped create a shadowy economy
where illicit transactions move with unprecedented ease. Now, the investigation,
like we mentioned, primarily focused on crypto exchanges, the main
(07:30):
gateways through which people invest in the sector.
Speaker 2 (07:34):
So, crypto exchanges are online platforms that allow users to buy, sell,
and trading cryptocurrencies. You know, they function somewhat similar to
like a stock trading platform, but these entities deal exclusively
in the digital tokens or their units that can be represented.
Speaker 3 (07:49):
You know.
Speaker 2 (07:49):
Popular exchanges that are globally known are some examples are
binance coinbased, but there are also some very prominent Indian
exchanges such as coinswitch, Zepe and zerox, And you know,
just the basic underlying factor is that basically you can
invest into cryptocurrencies via lupiece on these exchanges and then
they stored them in their own digital wallets.
Speaker 3 (08:08):
So yeah, a lot of.
Speaker 2 (08:08):
The investigation actually focused on some of these most prominent
cryptocurrency exchanges, and what we found is that how you know,
these exchanges are operating in sort of a regulatory gray
zone around the world, but more so in India. And
also you know, because of the underlying technology that powers them,
that they're able to like you know, steer far ahead
of policy making of regulation.
Speaker 3 (08:28):
Formation, et cetera.
Speaker 2 (08:29):
And how they have now become the newest gateways and
hubs for dirty money to cross borders. You know, a
lot of the Indian agencies and the Indian investigators that
we spoke to here as part of the India part
of the investigation, the picture was quite clear that you know,
our investigators are scrambling to keep up pace, you know,
because of the cross border nature, because of the twenty
four to seven by three sixty five nature of cryptocurrencies.
(08:50):
You know, they hit dead end after dead end whenever
they're investigating cryptocurrencies. So really, like you know, the basic
essence of the investigation is that you know, you of
course have your old traditional networks of how et cetera.
You know, but now cryptocurrency is again you know, because
of the ease of investment, because of how easily you
can divert money how quickly can divert money, you know,
while still shielding yourself relatively from the traditional banking sector,
(09:12):
et cetera. That has made cryptocurrencies a very lucrative asset,
not just as an investment class, but also you know,
as a potential to store away a lot of your
dirty money.
Speaker 1 (09:20):
The investigation shows that over the last nine years, crypto
exchanges have faced at least five point eight billion dollars
in fines, penalties and settlements. That figure of five point
eight billion dollars points to just how large and how
opaque this parallel financial universe has become a space once
(09:41):
dominated by traditional tax havens.
Speaker 4 (09:45):
And what is different is that probably for the first time,
people were looking at the VDA industry, the VDA industry,
I mean the digital asset industry.
Speaker 1 (09:56):
That's the investigative journalist Ritu Serene who along with some
undertook this investigation.
Speaker 4 (10:03):
And also coilacing it with the fact that a lot
of dirty money is also being laundered into cryptocurrency. And interestingly,
just two days after we finished Coin Laundry, I was
off to Kuala Lumpur to attend the Global International Conference
of Investigative Journalists, where you have about fifteen hundred investigative
journalists attending and among the people speaking there was Joseph Stiglitz,
(10:28):
Nobel Laureate, and he in the question answer session at
the end of his talk, was also asked about cryptocurrency
and he said that looking at it as you know,
a money laundering device and etc. In terms of banking,
he thinks it's a step backward for the financial industry,
and in fact he said the whole cryptocurrency industry is
(10:48):
a fraud, and also that the media has not exposed
it as a fraud. So, you know, coming from him
just at this time, I just thought it was interesting
and a lot of work has been done by the
steam of one hundred plus journalists. ICIJ themselves that their
data experts looked at hundreds and hundreds of transactions. A
(11:09):
transaction in the crypto world. It's like they are crypto wallets,
wallet addresses, and the exchanges are akin to a bank
and the blockchain, of course is akin to a ledger.
So hundreds of transactions through several hops were investigated by
them and some very important work has been done.
Speaker 1 (11:31):
She says. As part of the India leg of the investigation,
the team access data from the Home Minustry covering the
period between January twenty twenty four and September twenty twenty five.
Speaker 4 (11:42):
They have a unit called the ifour C you know,
which looks at digital frauds and looks at now cryptocurrency
frauds also, and we got some exclusive data published for
the first time which sort of matched this global data
that twenty seven exchanges in India have laundered money via cryptocurrency,
(12:02):
totaling sixy caroles. And I said twenty seven exchanges. In
these twenty seven exchanges, it could range from one exchange,
you know, having three hundred and sixty caroles, So the
largest figure for any of these exchanges was three hundred
and sixty caroles and of illicit money being transferred through cryptocurrency,
and the lowest was just six caros.
Speaker 1 (12:24):
Ritu says that one thing that really stood out to
her during the investigation was also the sheer volume of
frauds being carried out by Indians abroad, you know.
Speaker 4 (12:33):
So we sort of did a primer of some of
the most important cases and we got the chart sheets
of some cases of Indians who had committed frauds in
the US but are now languishing in jail here or
there's an extradition request for them, very very serious offenses,
and the money was laundered in cryptocurrency. I also got
a new aspect and that is agencies. The two agencies
(12:56):
I mentioned, they recover and they seize the VDA asset
just like you see, you know, money lying in a
bank account or a locker. So the Indian agencies are
confronted with the problem of where to keep the ceased cryptocurrency.
So one agency we got to know has stored with
a private with an Indian private store wallet company, and
the Home Ministry is apparently now preparing guidelines on where
(13:19):
this cryptocurrency should be stored by government agencies. The other
thing is, of course, you know, freezing of assets and
if there's a case against the thing that they also
do one is to freeze cryptocurrency and seize it and
then moveable and immovable assets.
Speaker 1 (13:35):
Now, while storing cryptocurrency poses a challenge for agencies, it's
nothing compared to the difficulty of recovering these funds in
the first place.
Speaker 4 (13:44):
So you know, there was the lead reporter from ICIJ
is Spencer Woodman. Spencer said that at least in the US,
it's almost impossible for agencies to recover money. The thing
about crypto is that, yes, there is traceability. When you
talk to the exchanges, they'll say, this is something that
(14:05):
can always be traced. And we are in India, for example,
FIU compliant. All Indian exchanges are registered with the Financial
Intelligence Unit. But we also when we were working on
the story, we realize that even if you take the
help of experts, you can track one hop or two
hop or three hops, but can you track the last hop?
(14:26):
You know? So if and certainly for the enforcement and
investigating agency, even with FOREIGNSIC expert and we spoke to
several of them, you know, can they get to the
last you know? Bitcoin? So, in the words of Stiglitz,
he calls the whole industry a fraud. And in India
the Finance ministry and the government have been wary of
(14:47):
banning it. Of course, we know what has happened in
the Supreme Court and all that. So it's a great zone.
They're very of regulating it, you know, or making it
authorized or banning it. Neither has been done. Now.
Speaker 1 (15:00):
Among the cases highlighted in this investigation is that of
a man named Vladimir A. Khonnyikov, better known as Lado,
a forty seven year old Russian entrepreneur accused of orchestrating
a series of global cryptocurrency scams. Investigators alleged that these
schemes siphoned off as much as one billion dollars from
(15:20):
millions of unsuspected investors across four continents.
Speaker 4 (15:25):
So it's just a case of an intrepid fraudster or scammer,
whatever you want to call him, who's now wanted in
several countries. He has the cases against him in the US,
in Slovenia, in Georgia. In fact, Georgia has an arrest
warrant against him. He lives in the Way where he
has been reconfiguring his crypto platforms, giving new names for
(15:49):
all of them, and he interestingly has been focusing on
India also. He has a marketing plan for India and
the states that he is concentrating Onesh, Telangana, and he
has a marketing team there and he is trying to
get investors in India.
Speaker 1 (16:07):
Interestingly, Lado has now also entered the film industry and
was involved in the production of a film called Portal
of Force, which released earlier this month.
Speaker 4 (16:18):
And there's an Indian actress featuring in it, Deshah Patani
and in an important role. Maybe she's among the top
six in the film, so you have an Indian there.
So we sent her questions on are you aware of
Flado's background? And are you aware he's a wanted man?
Are you aware that he's alleged to have committed frauds
of you know, millions of dollars? So there was no reply.
(16:39):
And the other India angle is that he launched a
magazine for his company and the occasion was the birthday
of Elon Musk's mother, which was celebrated in Mumbai, and
the magazine launch was their.
Speaker 1 (16:54):
Now Lado's case is of course the flashier one involving
several prominent names. But as ready to mention, there are
many individuals around the world who have been arrested for
money laundering using cryptocurrencies, and one concern raised by agencies
like the Enforcement Directorate is the emergence of a dangerous
new model international hawala transactions using crypto transactions.
Speaker 5 (17:20):
So to put it simply, in hawala transaction, it's a
very old method being used for centuries.
Speaker 1 (17:28):
That's the Indian expresses Jmazumdar, who along with Mahinder Singh
Manraal was also part of this investigation.
Speaker 5 (17:35):
So in this system, it happens informally from point A
to point B, usually across international boundaries. Transactions are made,
but money doesn't really move physically. So person X, who
is the center, he gives money to person A in
his own territory or his own country, and then person
A he contracts his partner. They'd be in another jurisdiction
(17:58):
there called the hawalathers so based on trust between person
A and person B. Person B in his jurisdiction there
was the fund to person Y. So between X and Y,
fund moves based on the trust between person A and B.
But the real money doesn't have to move through bank
or they don't have to really cross any international boundary.
And this remains under the rudder of any regulator or
(18:20):
banking system.
Speaker 1 (18:22):
And it turns out that many of these transactions are
now happening through crypto. In fact, in some ways cryptocurrency
has become Havala two point two.
Speaker 5 (18:31):
The very fundamentals are the same, but what is happening
here is because of the tech involved, it is becoming
more efficient in terms of speed in terms of volume,
and also more critically, it is adding too many layers
between the sender and the receiver. So in the traditional
HOLA model, you would imagine that there could be two
(18:52):
to four layers because the to be these are the
two unknown layers that is existing between the cener and
the receiver. But in this case, because the blockchains inherent
nature where you can't trace the movement if it happens
beyond or outside a QC compliant system, then potentially you
can add any number of layers between the center and receiver,
(19:14):
so it becomes even more difficult to crack for the
regulator or the investigators. And secondly, because in traditional hawala,
the receiver and the deliverer they're both handling in physical cash,
so there is certain geographic or physical limitations. In crypto,
you can keep bouncing jurisdictions from one country to another,
(19:36):
then further to any jurisdiction for any duration, adding any
number of layers you want. So this is basically Hawala two,
which is much more tech efficient and much more secretive.
Speaker 1 (19:50):
And this is exactly why these transactions are so difficult
for law enforcement agencies to track. Ja explains that money
from a single source is immediately split a loss multiple
accounts and then later pulled into a different one.
Speaker 5 (20:05):
This is a stage where it is still possible for
the agencies and the regulated to track because the banks
are now very conscious about such funds movement, because if
we recall that Samia's bag, they had had this new
regulation that even funds movement under fifty thousand rupees would
require PC. Earlier bottom line was fifty thousand, So many
(20:27):
bad actors who are manipolluting that by sending funds in
denominations such as forty eight forty nine thousand into many
transactions to cover up their target, but using that gray area.
So these things can still be traced, but then it
becomes increasingly more complex because.
Speaker 1 (20:45):
From this pooled account the money is usually moved through
UPI transfers and then converted into cryptocurrency.
Speaker 5 (20:53):
Now this conversion, if it happens on a regular platform
which are KIC and anti money honoring rules compliant, then
these will be tracked, but they usually go through models.
Speaker 3 (21:04):
Which are called P two P or OTC, that is
peple tiple.
Speaker 5 (21:07):
Transfer over the counter transferred transaction where you don't have
to follow strange and KIC rules, and this can stay
under the rudder and then comes another layer of ofuscation
where you are going into something called tumbling that this
crypto This is similar to the stage one where we
saw that money coming from different sources, many small accounts
(21:30):
to a pool account, So tumbling or mixing is similar.
Speaker 1 (21:34):
Here.
Speaker 5 (21:34):
Instead of a currency, you were having crypto coins sourced
from different wallets, and then there are being mixed and reassigned,
so it firt that obscures the trail. And during this change,
the crypto coins are held in unhosted or private to wallet.
Unhosted typically means not hosted by any compliant regular exchange
or platform, and it is controlled by the individual who
(21:57):
owns the wallet, so they're again tracking becomes difficult.
Speaker 1 (22:00):
That's level four.
Speaker 5 (22:01):
And then again it can become even more complicated when
they try to switch between a blockchain so safe from
a bitcoin going to another cryptocurrency, which makes it extremely difficult.
It is called bridging or swapping, and agencies have repeatedly
said in the internal communications that you have seen that
at this stage it becomes almost impossible to technically track
(22:25):
this kind of firscation. And then the exit mode, of
course after all this is done, then when eventually the
money is taken out, either through ATMs or through offshore accounts,
or then further parked in other jurisdictions, then it usually
remains beyond the reach of the investigators now Here.
Speaker 1 (22:41):
It's important to note that crypto platforms, a crypto exchanges
compliant with the rules of the Financial Intelligence Unit would
not knowingly be involved in such transactions.
Speaker 5 (22:53):
But it is also possible that we have seen that
many foreign exchanges in the USA and exact finance, they
promised to the US administration and judiciary that they would
not allow crime proceeds to roll through their platform, but
it happened, and for that they have been penalized heavily.
So this could be some sort of oversight, and it
(23:15):
cannot be ruled out completely that no Indian exchange got
into a similar situation. That's for the agencies to investigate.
But as of now, we don't have any example where
any Indian exchange which is an AMC compliant, has played
any role unknowingly in any such transaction way. And we
have to remember that no such transaction the way we
(23:38):
have been describing it, that is going through many layers.
To add secrecy and obscure the trail. They will not
use any one platform or even two or three legit platforms.
They will use a whole range of mechanisms and exchanges.
Some are compliants, some non compliant, and eventually the target
is to add layers and some of these layers can
(24:00):
will be legit. But if you imagine it in a
way that if you know that you don't know the source,
you don't know the destination. Even if you know two
or three steps, two or three zones in the middle,
it doesn't always help the investigators to crack the complete trail.
Speaker 1 (24:18):
But investigators, it's like chasing a mouse with hundreds of
tunnels to escape through block one and it can easily
slip through another.
Speaker 5 (24:27):
I mean the exchanges here they have this grouse that
over two dozens of them they are now complyingt to
their FORU and they try to follow and they claim
that they follow all the rules in India, but they
say that others who do not many offshoot channels exchanges,
they are still high level in India. So it doesn't
stop a bad actor to manipult the system just because
the majority of exchanges are following the rule. But there
(24:50):
is still options to take the dark route and move funds.
Speaker 1 (24:54):
But now the question is, despite all this, why isn't
there a specific log governing cript in India and why
has the government been hesitant to regulated?
Speaker 2 (25:05):
So, you know, I had spoken to a couple of
senior officials in the government.
Speaker 1 (25:09):
That summer in Robarick again and you know, the ask.
Speaker 2 (25:13):
Is pretty simple, right, Like you talk to investors, you know,
they'll be like, in the last couple of years, there
have been two major hacks of two major you know,
Indian exchanges, right, I mean I think one was XERX,
one was coin DCX, and collectively I think about two
seventy or two eighty odd million dollars was scammed off, right,
and people lost a lot of money there. But what happens, right,
I mean, you are then at the mercy of that
(25:34):
particular platform to somehow figure out if you know, they
can get some of that money back, all that money back, or.
Speaker 3 (25:40):
You know, just a portion of it, et cetera.
Speaker 2 (25:41):
You simply don't have any you know, support system from
the government side, right, So that is on the investor side.
Speaker 3 (25:48):
Then as a business, you.
Speaker 2 (25:49):
Might want to be a legitimate, you know, rule abiding
Sacrepto exchange or something like that. Right, But again, you
do not know what is right and what's not because
a government simply hasn't told that to you. Right, and
we spoke about the law enforcement problem. They don't have
the SUPs. So you know, on the face of it,
it would appear that if it is seeing such grassroots adoption,
if you're aware that, you know, it is also at
(26:09):
the same time becoming a new channel for hawala transactions.
You know, your citizens who are investing in this sector
are getting impacted because if they lose money, they don't
have any protection after that. Companies who want to legitimately
do business in your country pay tax, et cetera. They
don't know what is the right way to operate here.
Law enforcement is struggling. Why would the government not want
to bring out a law? Right, the government feels that,
(26:31):
you know, if they bring in a law. What these
officials that have spoke to told me is that if
they bring in this law, it might sort of signal
an amount of legitimacy. That you know, the government is
now saying that, Okay, the sector is fine, it's legit,
and that might boost investor confidence further. And you know,
people might start investing a lot more in the sector
and that maybe, you know, something that the RBA is
not very happy with, because the RABI does continue to
(26:51):
hold the point that you know, they see cryptocurrencies as
a bit of a threat to India's financial stability.
Speaker 1 (26:57):
He says. Historically, the Reserve Bank has been very cautious
about cryptocurrencies. In fact, in twenty eighteen, it had even
banned banks from providing services to crypto exchanges, though this
band was later overturned by the Supreme Court in twenty twenty.
Speaker 2 (27:13):
Since then, an absolute ban has never been spoken about.
And I think India has also eventually signaled, you know,
when India was heading the G twenty a couple of
years ago under our presidency, under our chairpersonship, there was
a report that was prepared basically by the FSB which
basically you know, signaled that okay, India is now maybe
easing a little bit, basically because that particular report said that,
(27:36):
you know, an outright ban was probably not the right way,
but it did call for like a lot of international
cooperation and sort of said that international cooperation is perhaps
the only way to go ahead and regulate the currencies
because you know, the problem with law enforcement that we
spoke about, right, it is the problem about international cooperation.
Speaker 1 (27:52):
Right.
Speaker 3 (27:52):
If two governments are not willing to.
Speaker 2 (27:54):
Engage when an investigation has to happen on cryptocurrencies, no
regulation within one government can probably ever sort of you know,
address that very core issue. So I think, yeah, increasingly,
while the RBI remains to be, you know, a major
skeptic about the sector, about these currencies, and while the
government is also not you know, very keen on like
promoting them in any way possible, I think talks of
(28:16):
a ban largely since the twenty eighteen ban, which was
eventually overturned in twenty twenty. I think a ban is
increasingly now seeming like a slim possibility. But what is
being really missed is that, you know, if there is
not going to be a ban, and if all the
trends are showing to you that people are going to
be investing in this sector, I think what is really
being missed is actually a regulation now.
Speaker 1 (28:36):
When the Supreme Court overturned the ban in twenty twenty,
it essentially said that everyone had the right to do
business and that the ban was disproportionate, and that the
RBI had not found any evidence of harm or adverse
impact caused by the activities of these virtual currency exchanges.
Speaker 2 (28:55):
But in a very recent case, actually it was, you know,
very ironically, the Supreme Court itself in May, this was
a case about you know, some money launding that happened
via cryptocurrencies, and I think the perpetrator of the case
has gone to quote et cetera. And in that you know,
the quote has lamented saying that there is no clear
cut policy on cryptocurrencies, you know, and the courte is
not even mincing its words in that particular hearing when
(29:17):
it is happening in May, the Supreme Court said that
trading in bitcoin in India is like dealing with a
refined way of avala business. There are no regulations at present.
So clearly, you know, a Supreme Court which overturned the
band saying that you know, a ban is just not
the right way to deal with things. And five years
down the line now since that very landmark judgment, to
be honest for the industry, the same courte itself is
lamenting the fact that you know, it has now become
a refined way of avala business. But the government is
(29:39):
sleeping on it, and because there is simply no way
to regulate the sector, or the government is not keen
to regulate the sector. So yeah, I think the court's
attitude towards it is also like reflective of the times
and also very reflective of the investigation that we've done
in that you know, this is now what's increasingly happening
in the sector. The quote very rightly has pointed out that,
you know, cryptocurrencies have now become a refined way of
avaala business.
Speaker 3 (29:59):
Of course, not of them.
Speaker 2 (30:00):
We have to have that caveat at all points. There
are legitimate, no innocent investors in the sector who also
lose a lot of money when something goes wrong, when
a scam happens, when they willingly walk into a.
Speaker 3 (30:09):
Trap, et cetera.
Speaker 2 (30:10):
And I think all of it really can be addressed
by having an overarching legislation. The government has tried it.
I remember it was trying to bring out a bill.
There were some intermedistial committees. An interminational committee actually had
recommended a ban this somewhere around twenty eighteen or twenty nineteen,
but again that never really was fruitful. There was once
I remember in Parliament where the government had listed a
bill called the Regulation of Cryptocurrencies, something to the effect
(30:32):
of virtual currencies, et cetera. But again that bill never
got presented in Parliament and now no one knows what's
supposed to happen. We also had some insistence from you know,
the Markets Regulator SEBI.
Speaker 3 (30:42):
Wee.
Speaker 2 (30:42):
SEBBI said that, you know, the overarching architecture of a
crypto exchange is not very different from you know, stock
trading platforms, et cetera. The underlying fact is the same. No,
you're trading in commodities, you're trading in futures and options
and things like that. So the SEBBI has also offered,
you know, to be like the central regulator for the sector.
But of course again the government has been really slow
on reacting to these things. You were listening to Three
(31:04):
Things by the Indian Express. Today's show was written and
produced by Mishashan Bhargov and was edited and mixed by Seshbawar.
If you like the show, then do subscribe to us
wherever you get your podcasts. You can also recommend the
show to someone you think we'll like it, share it
with a friend or someone in your family.
Speaker 1 (31:20):
It's the best way for people to get to know
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and write to us at podcasts at Indian express dot
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