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The Indian government has asked crypto exchanges to closely monitor transactions linked to individuals based in Jammu & Kashmir and nearby border areas in the wake of the Pahalgam attack, The Economic Times reported on May 12.

The Financial Intelligence Unit (FIU-IND), the agency under the central Finance Ministry that tackles money laundering and other financial crimes, asked the Indian crypto exchanges to watch out for potential money laundering activities, two individuals familiar with the matter told the publication.

The crypto exchanges have been asked to pay particular attention to transactions involving "private wallets."

Private wallets facilitate crypto transfers in such a way that it is difficult to trace the movement of funds transparently. These wallet make it nearly impossible for agencies to investigate financial crimes involving cryptocurrencies.

The FIU has asked crypto exchanges to report trades — instead of Suspicious Transaction Reports (STRs) only — by individuals in border areas to the agency. In normal circumstances, exchanges regularly report only STRs to the agency.

Earlier, a Supreme Court bench in India compared Bitcoin trading to "a refined way of Hawala business." Hawala is an informal system of money transfer outside the purview of the traditional banking and remittance systems.

Though India has not formulated a crypto-focused regulatory regime so far, it taxes crypto gains at 30% and transactions at 1%.

This is despite the fact that India led the global crypto adoption index in 2024, as per Chainalysis . Pakistan stood at the seventh position.

Tensions between the two neighbors continue to simmer following the Pahalgam terror attack on Apr. 22 in which 26 tourists were killed.