India's Crypto Regulation Gap Poses Challenge for Law Enforcement

India's crypto assets landscape has expanded at an extraordinary pace, powered by rising public interest and rapid technological innovation.

- TBG NETWORK

According to Chainalysis' 2024 Geography of Crypto Report, the country remains the top nation in crypto adoption, cementing its status as a growing hub for blockchain ventures and digital asset trading. Yet this rapid expansion has also exposed a glaring vulnerability: the absence of a unified regulatory framework enabling law enforcement agencies (LEAs) to effectively combat crypto-related crimes; a situation that emboldens illicit activities and constrains legitimate market participants under an atmosphere of legal uncertainty.

Recent data from Chainalysis indicate that illicit crypto transactions globally reached about USD 46.1 billion in 2023, climbing to USD 51+ billion in 2024. In India, these risks are magnified by the large user base and the lack of clear oversight. While extending the Prevention of Money Laundering Act (PMLA) to crypto businesses in March 2023 was a positive step, critical gaps persist. In many cases, LEAs are left without adequate legal tools to trace suspects across jurisdictions.

India's federal structure adds another layer of complexity. Policing powers predominantly lie with state governments, resulting in varied levels of technology adoption and investigative capacity. Some state police forces—especially in tech-savvy regions—are equipped to handle complex cybercrimes. Others, however, lack the forensic tools, specialized training, and legal expertise to tackle crypto-related offenses effectively. Criminals frequently exploit these inconsistencies, committing crimes in one state and then shifting operations to another with weaker enforcement.