As India grapples with the discussion around the future of cryptocurrencies, experts warn that simply imposing a 30% tax on digital assets is insufficient. They highlight the increasing use of cryptocurrencies for money laundering and hawala-based transactions on the Dark Web, posing a significant risk to India’s national security.
In New Delhi, experts warn that India’s approach to the future of cryptocurrencies must go beyond just imposing a 30% tax on digital assets. They highlight the escalating use of cryptocurrencies for money laundering and hawala-based transactions on the Dark Web, which poses a serious threat to the country’s national security.
Last week, a Supreme Court bench noted that money laundering is considered a more serious and heinous crime than murder, as it has a detrimental impact on the entire economy.
Non-fungible tokens (NFTs) are also susceptible to money laundering. A report by the Blockchain data platform Chainalysis indicates that a small yet increasing portion of activity on NFT marketplaces could be linked to money laundering.
Last week, the report stated, “While quantifying money laundering in physical art is challenging, we can provide more accurate estimates of NFT-based money laundering due to the inherent transparency of the Blockchain.”
Bitcoin and other cryptocurrencies have emerged as the dominant currency on the Dark Web. The utilization of crypto assets and cryptocurrencies creates a challenging scenario for law enforcement agencies to trace the origin of a specific cyber act on the Dark Net. Duggal remarked, “This entire Blockchain-enabled tech is going to present a huge amount of challenges for nations, including India.”
Experts are concerned that the absence of a detailed Crypto Bill is complicating the assessment of taxation regarding digital assets, especially regarding their illegal use. Virag Gupta, a cyberlaw expert based in New Delhi, noted that as Web 3.0 evolves, crypto assets will become increasingly popular. He warned, “It will change the landscape of financial frauds and crimes since digital assets are a safe haven for criminals. Digital assets can be misused by drug traffickers, militant organizations, hawala operators, and money laundering players. It poses a serious threat to national security and presents huge challenges to security agencies in India.”
India is not ready for the upcoming wave of Blockchain-based cybercrimes, according to Dr. Pavan Duggal. He cautioned, “Not only will money laundering increase significantly, but cryptocurrencies will also be used for cyber terrorism and radicalization.” Jiten Jain, a cybersecurity expert, pointed out that despite the government’s 30% tax on digital assets, including NFTs, the crypto/NFT market is set to thrive. He warned that many companies might try to scam people without technical knowledge by offering them false promises of substantial profits.
Indian law enforcement agencies face another challenge as crimes involving crypto-based technology are barely covered under Indian cyberlaw. Dr. Pavan Duggal warned, “If we do not take effective and timely steps, this technology could be extensively used by terrorists to target India’s sovereignty, security, and integrity.”
There is a pressing need to amend legal frameworks to include coverage of crypto or Blockchain-based technology and its potential misuse.
Prime Minister Narendra Modi emphasized the importance of democratic nations collaborating on cryptocurrencies to prevent them from falling into the wrong hands. “Take cryptocurrency or Bitcoin for example. It is important that all democratic nations work together on this and ensure it does not end up in the wrong hands, which can spoil our youth,” he said during a virtual keynote address at the Sydney Dialogue organized by the Australian Strategic Policy Institute last November.
Reports last year revealed that the Enforcement Directorate (ED) in India uncovered over Rs 4,000 crore of illegal transactions via cryptocurrency exchanges in the past year. There are serious concerns about the misuse of digital coins on the Dark Web for terrorist activities, drug trafficking by militant organizations, money laundering, and hawala-based transactions, posing a grave threat to national security and presenting a significant challenge to security agencies in the country.
“Following the Union Budget 2022-23, top officials have warned investors about the risks involved but have overlooked risks from underworld operations and the money-laundering syndicate,” said Gupta.
Experts believe that it is time for a more comprehensive approach so that India can leverage the benefits of crypto-based technology while having effective legal frameworks to regulate its misuse for committing cybercrimes and breaches in cybersecurity.
