Fraudulent and suspicious transactions among India’s cryptocurrency users have surged from a mere 1,343 reported instances in 2023-24 financial year to 11,720 in the first eight months of the current fiscal 773% , with 82% involving Indians aged 20-40, according to government a report seen by HT.
The explosive growth in dubious activity comes as India’s cryptocurrency market has expanded rapidly despite persistent regulatory concerns. As of November 30, 2025, the country has 34 million virtual digital asset (VDA) users — industry parlance for cryptocurrencies and related tokens — holding assets worth ₹24,800 crore. Nearly 41% have invested through offshore platforms, beyond the direct reach of Indian authorities.
The government has been wary of cryptocurrencies, citing risks of money laundering, terror financing and tax evasion. In March 2023, the Narendra Modi government brought cryptocurrency exchanges, transfers and related financial services under the Prevention of Money Laundering Act in an attempt to bring the largely unregulated sector under scrutiny.
Under the law, any VDA service provider operating in India — whether based offshore or onshore — must register with the Financial Intelligence Unit (FIU), the country’s financial intelligence agency, which compiles reports on such activity. The obligation is activity-based: if a platform allows Indian users to exchange cryptocurrencies for rupees, transfer digital assets, or store them, it must register and report suspicious activity, regardless of where the company is physically located.
So far, 52 VDA service providers have registered with the FIU. These platforms must file suspicious transaction reports (STRs) whenever they detect activity that raises red flags — transactions that may involve proceeds of crime, appear unusually complex without justification, or have no clear economic purpose. Red flags include sudden activity in dormant accounts, transactions deliberately kept just under reporting thresholds, circular trading to create artificial losses, and cases where the source of funds cannot be verified.
The number of such reports has exploded. Service providers filed 1,343 STRs in fiscal 2024. The figure jumped to 6,272 in fiscal 2025, and has already reached 11,720 in the current fiscal year till November 30, according to FIU analysis seen by HT.
An analysis of 9,795 reports filed between May 2023 and May 2025 revealed the patterns. Tether (USDT) — a so-called stablecoin pegged to the US dollar — was the most common digital asset, featuring in 7,467 cases (76%). Bitcoin accounted for 6%, these documents show.
Fraud transactions made up 62% of VDA-related suspicious activity. Unusual or complex transactions accounted for 16%, while unusual account activities made up 10%.
Geographically, Rajasthan led with 18% of suspicious transaction reports, followed by Uttar Pradesh at 11%. Maharashtra and West Bengal each accounted for 7%, and Madhya Pradesh 6%, according to the STR analysed by the government.
Bharatiya Janata Party (BJP) lawmaker Bhartruhari Mahtab-led standing committee on finance has begun reviewing the crypto sector.
Authorities have levied ₹29 crore in penalties so far and blocked 63 websites for failing to register or comply with Indian laws under Section 69A of the Information Technology Act, 2000.
The Cambodia connection
One case study flagged by the FIU illustrates the threats posed by such activity. Investigators identified 34 customers whose internet addresses traced back to Cambodia. These individuals, the analysis determined, were using Cambodian mobile phone numbers to access their Indian cryptocurrency accounts and receiving deposits through Huione Pay, a Cambodian payment service. Authorities suspect the money was linked to cybercrimes and human trafficking.
“These individuals exhibited consistent behaviour of funding their accounts with USDT, immediately liquidating it, and withdrawing the corresponding amount in rupees to their bank accounts,” the FIU report said.
Blockchain monitoring tools — software that tracks cryptocurrency transactions — revealed the USDT originated from Huione Pay. Several customers shared the same device fingerprint, meaning they had logged in from the same phone or computer, and used common internet addresses.
Huione Pay is stated to have responded, saying that after repeated attempts via WhatsApp, the service provider connected with 21 of these customers. They were located in Cambodia (eight), Thailand (six), Vietnam (one) and India (one), working as hotel or restaurant workers, civil engineers and supermarket employees — occupations unlikely to generate the kind of transaction volumes authorities had flagged.
However, the company’s own status is sanctioned. The US announced that it had cut off Huione Group and its subsidiaries from the American financial system, taking away its ability to trade in dollars.
The tax challenge
Beyond money laundering concerns, cryptocurrencies pose a major challenge for tax collection. The assets permit anonymous, borderless and near-instant transfer of value without relying on banks or other regulated financial institutions that typically report transactions to tax authorities.
The growing use of offshore exchanges, private digital wallets that users control entirely, and decentralised platforms makes it difficult for tax authorities to detect taxable income, identify who actually owns the assets, and recover tax dues. As a result, substantial cryptocurrency-related income remains outside the tax system.
