Will India’s new cryptocurrency tool help in combatting cyber frauds and money laundering?

By Roshan Aslam

The rapid growth of India’s cryptocurrency market growth is the combination of several factors. To begin with, banking and payment systems in India are still in the maturity stage leading to cryptocurrency emerging as a viable and efficient means of payment. The increase in adoption by small and medium-sized business and having a population that is mostly young and tech-savvy has also played a huge role in the increased adoption of cryptocurrency. Let us not forget the government’s stance or lack thereof on regulations around cryptocurrency has led to India becoming a fast-growing market for cryptocurrencies.

The 2021 Chainalysis report, ‘Global Crypto Adoption Index’, marked a 600% increase amounting to a total of $40 billion in total cryptocurrency value received by Indian users between July 2020 and June 2021. These statistics are a clear indication of India’s growing appetite for cryptocurrency leading to India quickly becoming a dominant player in the global world of cryptocurrency. However, it has not been an easy ride or all smooth sailing in India for cryptocurrency. Cryptocurrency in short can be viewed as a direct challenger to traditional monetary systems and process when it comes to making transactions anywhere in the world today. With more and more people opting to deal in cryptocurrency, the Government of India issued a series of warnings to curb the potential financial instability that was potentially being caused by cryptocurrencies. When all else failed, the Government issued a ban on all cryptocurrencies which was overturned a year later by the Supreme Court deeming the ban unconstitutional prompting an increase in trading by 10X.

The Government of India has since after weighing the market trends and trying to understand the people sentiment decided to look at carefully framing its own regulatory framework after multiple rounds of dialogue with both domestic and international stakeholders to assess risk related to cryptocurrencies. The biggest concerns that need to be addressed by these regulations is to keep financial control and manage growth of the sovereign currency while at the same time prevent the use of cryptocurrencies for unethical, illegal, and dangerous purposes.

Operations of cryptocurrencies have been on the radar of both national and international monetary and legal authorities prompting crypto exchanges to ensure that compliance and safety is a top priority. Hence, cryptocurrency operators are establishing robust screening processes, strict KYC processes to verify customers’ particulars like address, identity and most importantly, the sources of funds. Along with this, KYC and AML mechanisms being instituted by crypto operators in becoming fully compliant with local authorities which will help in identifying any red flags that may show up.

This however is just one part of the puzzle, but a more holistic solution needs to be developed and instituted by the Government to get onto the dark Web and identify perpetrators of crimes committed using cryptocurrencies. As of today, no tool or solution exists that law and enforcement authorities can use to monitor and act on IP addresses that are engaged in illegal activities on the dark web. However, the Government of India has put the wheels in motion to develop an indigenous Cryptocurrency Intelligence and Analysis Tool (CIAT) made by the Indian Cyber Crime Coordination Centre, an MHA establishment. The tool is being developed on a war-footing to monitor and crawl the dark net non-stop to identify and monitor addresses linked to try and snuff out all cyber frauds, scams and money laundering activities linked to cybercurrency.

The data thrown up by the crawlers of this tool will help to create records of these transactions to create a centralized database of dates, timestamps, IP addresses, names of crypto exchanges, etc. and will trigger an alert if any red flags show up. The database created by CIAT will comprise all the necessary information and data from globally recognised cryptocurrency exchanges. This database will be an invaluable source of information and data for law enforcement and monetary agencies, allowing them to be an arm’s length away when needed to be contacted for any ongoing or potential investigation.

The CIAT is being developed to be one of the most important defensive tools to protect India’s financial ecosystem from instability and being relegated to second choice leaving its citizens at the mercy of fraudsters if not careful. The tool will ensure that cryptocurrency transactions in the country being carried out are legal, legitimate, and honest. It is extremely refreshing and encouraging to see the reaction and speed of the efforts of the Government of India to curb crypto related cyber fraud and money laundering activities linked to cryptocurrencies.

This proactive approach taken by the Government and Ministry of Finance is reflected through the urgent development of CIAT. It showcases a deep-rooted commitment from the Government to provide financial security for its citizens through a secure and regulated cryptocurrency regulatory structure. The CIAT when LIVE will consist ground-breaking technology and features, real-time monitoring capabilities, automatic trigger, and alert system. A fully functioning CIAT is poised to become a game-changer in the battle against crimes related to cryptocurrencies leading to a more efficient, regulated, and safer digital environment for all Indians.


(The author is Roshan Aslam, Co-founder & CEO, GoSats, and the views expressed in this article are his own)

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