India’s Financial Intelligence Unit (FIU-IND) is investigating Binance and WazirX for potential loopholes in cross-border digital asset transfers, focusing on unregulated wallet transactions linked to Pakistan and concerns about illegal funding and money laundering near sensitive areas like Jammu and Kashmir.

Binance paid a fine of INR 18.9 crores to restart operations in India after resolving compliance issues, while WazirX was hacked for $235 million, exposing security weaknesses. Both exchanges face regulatory scrutiny and investigations into cross-border wallet transactions, with concerns about terrorism financing and national security.

India and Pakistan are taking divergent paths towards crypto regulation, with Pakistan establishing the Pakistan Crypto Council and the Pakistan Virtual Assets Regulatory Authority, while India focuses on AML measures and tax compliance for crypto exchanges. Efforts are being made to align with global standards like the Crypto-Asset Reporting Framework.

Cross-border crypto transactions between India and Pakistan pose risks due to regulatory differences, anonymity concerns, tensions, and rising cybercrime. The Financial Action Task Force warns of terrorists exploiting cryptocurrencies for financing extremist activities, leading to enhanced vigilance on crypto transactions to prevent illicit flows of money.

Governments worldwide are tightening crypto regulations, with India investigating Binance and WazirX mirroring global initiatives against crypto-enabled terrorist financing. The US has disrupted terrorist financing operations involving digital currency, while EU and US Congress advance acts for regulatory clarity and licensing measures to combat money laundering and illicit financial activities.

Read more at Cointelegraph: Why is India investigating Binance and WazirX over crypto loopholes?