Cryptocurrencies have become concern for India’s national security in 2025. While digital currencies offer financial freedom and innovation, they also enable terror financing. Terror networks exploit crypto’s anonymity and decentralisation to fund cross-border violence. India faces growing challenges in tracking and controlling these digital transactions linked to terrorism.
Emergence of Crypto in Terror Financing
Traditional terror funding used hawala, smuggling, and fake charities. Cryptocurrencies now provide a hidden route. Bitcoin, Monero, and privacy coins allow terror groups to transfer money without banks or government oversight. Funds flow through encrypted wallets, decentralised exchanges, and mixers. Indian intelligence uncovered multiple cases where crypto funded insurgents and sleeper cells. Transactions often use stolen IDs and servers in foreign countries, making detection difficult.
Why Cryptocurrencies Are Favoured by Terror Groups
Five key features make crypto ideal for terror finance – 1. Anonymity – No KYC needed on many decentralised platforms. 2. Borderlessness – No currency controls or customs checks. 3. Decentralisation – No central authority can freeze or track funds easily. 4. Peer-to-peer conversions – Crypto converts to cash via informal agents without scrutiny. 5. Dark web use – Illicit goods and services are transacted exclusively in crypto.
India’s Vulnerabilities in the Crypto Space
India’s rapid digital finance growth has created gaps exploited by criminals. Over 20 million crypto wallets operate with minimal regulation or tax reporting. Police and intelligence lack specialised crypto knowledge. No centralised crypto forensic body exists. International treaties on crypto terror finance are insufficient. Terror groups in Pakistan and beyond fund Indian operatives using disguised crypto transfers.
Real-World Cases of Crypto Terror Funding
In late 2022, Delhi Police stopped a youth funded by Monero via P2P platforms to plan an attack. No bank records existed. Another case in Tamil Nadu involved crypto purchases of drone parts for insurgents. These examples show the real and growing threat of crypto-enabled terror operations inside India.
Measures Taken and Needed
India has imposed crypto taxes and banned anonymous advertisements. However, these steps are insufficient. Recommended measures include – – Creating a federal Blockchain Intelligence Unit using AI tools to track suspicious transactions. – Mandating KYC for all crypto wallets linked to Aadhaar or PAN. – Banning privacy coins like Monero and Zcash. – Establishing Dark Web Surveillance Cells in major metros. – Pursuing bilateral treaties on crypto finance with key countries. – Training law enforcement in blockchain forensics. – Launching whistleblower schemes to encourage reporting of suspicious crypto activity.
The Strategic Imperative
Crypto terror finance is a national security emergency. India must adopt advanced technological and diplomatic strategies to counter this invisible threat. Digital sovereignty is at stake. The fight against crypto-enabled terror requires political will, smarter technology, and international cooperation. Cryptocurrencies are tools that can empower or endanger, depending on who wields them.
Questions for UPSC:
- Point out the challenges posed by emerging technologies like cryptocurrencies to national security frameworks in India.
- Critically analyse the role of international cooperation in combating transnational terror financing through digital currencies.
- Estimate the impact of decentralised finance systems on traditional regulatory mechanisms and suggest reforms with suitable examples.
- Underline the importance of capacity building in law enforcement agencies to tackle cyber-enabled crimes and terror financing in the digital age.
