Crypto Smuggling Driving Narcotics, Gold Trafficking With Anonymous Digital Payments: DRI Report
The DRI report highlights that the anonymity of online platforms, combined with the use of cryptocurrency, provides a secure and difficult-to-trace environment for illicit transactions and sales.
Cryptocurrencies have become a sophisticated tool for smuggling, increasingly replacing traditional hawala networks in facilitating illicit financial flows, particularly in narcotics trafficking and gold smuggling, according to the 'Smuggling in India Report 2024-25' from the Directorate of Revenue Intelligence (DRI).
The decentralised, borderless, and pseudonymous nature of digital assets poses new challenges for enforcement agencies, who must now adapt the growing convergence between traditional and emerging digital smuggling systems.
The DRI report highlights that the anonymity of online platforms, combined with the use of cryptocurrency, provides a secure and difficult-to-trace environment for illicit transactions and sales. This shift has been rapid, with stablecoins like USDT now frequently replacing the traditional hawala system for settlement due to the promise of faster, anonymous transfers, minimal oversight, and weak anti-money laundering compliance.
The use of crypto wallets, often anonymous and accessible via Virtual Private Networks (VPNs), allows fraudsters to keep their identities behind codes and execute hard-to-trace international transfers.
" Crypto wallets, often anonymous and accessible via VPNs, facilitate off-the-book illicit payments, including for under-invoiced and misdeclared imports allowing smugglers to evade customs duties and taxes, and other regulatory requirements," said the report.
This bypassing of formal financial oversight enables smugglers to make off-the-book payments for under-invoiced and misdeclared imports which allows then to evade customs duties, taxes, and other regulatory requirements. In high-value operations like gold and narcotics smuggling, the sale proceeds are now often transferred to masterminds abroad using cryptocurrency instead of traditional channels.
To combat this evolving threat, the DRI is focusing on enhancing intelligence gathering and the adoption of advanced blockchain analytics and specialised digital forensics. This coupled with increased inter-agency coordination, aims to trace and prevent crypto-enabled illicit financial flows and safeguard the integrity of India's trade ecosystem.
The traceability inherent in blockchain transactions, despite the pseudonymous nature of the users, offers a key opportunity for enhanced investigation. The report also provided context on ongoing enforcement efforts, noting that Indian Customs carried out wide-ranging enforcement actions nationwide in financial year 2024 to 2025.
Gold smuggling remained a major focus, reflecting continued high-risk inflows, resulting in a pan-India Customs crackdown that involved 3,005 cases, the seizure of 2,600 kg of gold, and 533 arrests.
