Srinagar/New Delhi | Security agencies have flagged a renewed attempt to revive separatist and terror-linked activities in Jammu and Kashmir through a sophisticated funding mechanism that bypasses traditional financial surveillance systems. Investigators say militant and separatist networks are increasingly turning to what officials describe as “crypto hawala” to move foreign funds into the region without leaving conventional audit trails.
According to inputs shared by multiple agencies, the shift marks a significant evolution from cash couriers and traditional hawala channels to decentralised digital routes involving cryptocurrencies, private wallets and peer-to-peer transactions. The new model, officials say, has complicated efforts to trace the origin, movement and final use of funds.
From cash couriers to digital shadows
Security officials note that sustained enforcement actions over the past few years had severely disrupted conventional hawala networks operating in the Valley. With cash movements becoming easier to detect and intercept, handlers based abroad are now relying on digital currencies to transfer money covertly.
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In the crypto hawala model, funds are moved without involving banks or regulated financial intermediaries. This allows transfers to take place outside the purview of standard reporting mechanisms, significantly reducing the visibility of transactions for enforcement agencies.
“This is a technology-driven workaround designed to defeat financial oversight,” an official assessment said, adding that the method enables fund flows to remain anonymous across borders.
Foreign handlers, private wallets and VPNs
Investigators say handlers operating from multiple foreign locations are persuading local contacts to create private cryptocurrency wallets without completing know-your-customer (KYC) verification. These wallets are often accessed through virtual private networks (VPNs) to mask digital footprints and geographic locations.
Once the wallets are activated, cryptocurrency is transferred directly from overseas accounts. The funds are then routed through multiple digital layers before being converted into cash within India, effectively breaking the transaction trail.
Officials say the use of VPNs and non-custodial wallets makes attribution difficult, while the absence of centralised records hampers timely detection.
P2P trades bridge digital and cash worlds
The final leg of the operation typically involves peer-to-peer (P2P) traders operating in major urban centres such as Delhi and Mumbai. Through these informal arrangements, cryptocurrency is exchanged for cash without routing money through bank accounts.
Investigators note that “mule accounts” and intermediaries are frequently used to further obscure the flow of funds. By the time cash reaches end recipients, the digital trail has largely gone cold.
“This is where digital opacity meets physical cash,” an official said, describing the process as one of the most challenging aspects of the investigation.
Funds aimed at reviving dormant networks
Security agencies believe the money is being channelled to revive separatist elements that had been rendered inactive following sustained action by police and central agencies. While the scale of funding is still being assessed, officials say even relatively small amounts can be strategically deployed to rebuild local networks, support logistics and fuel propaganda.
Authorities stress that there is no indication of a mass resurgence, but warn that the evolving funding mechanisms point to adaptive strategies by hostile networks.
Regulatory and investigative challenges
Experts say crypto hawala represents a broader challenge for financial intelligence and law enforcement agencies worldwide. Unlike traditional banking systems, decentralised digital currencies operate across jurisdictions, often beyond the reach of a single regulatory authority.
Officials underline the need for tighter regulatory frameworks, advanced technical monitoring and deeper international cooperation to counter such networks. Enhanced data analytics, blockchain forensics and real-time intelligence sharing are seen as critical tools in this effort.
Heightened vigilance across agencies
Security agencies have stepped up coordination with financial intelligence units and cybercrime divisions to identify suspicious digital patterns and disrupt emerging channels. Monitoring of cryptocurrency exchanges, P2P platforms and informal trading hubs has been intensified.
Authorities have also emphasised the role of public awareness, warning against participation in unregulated crypto transactions that could inadvertently support illegal activities.
A shifting threat landscape
The emergence of crypto hawala underscores how rapidly the threat landscape is evolving in response to enforcement pressure. Officials say the shift highlights the need for constant adaptation in investigative approaches, as adversarial networks increasingly exploit technological loopholes.
While agencies remain confident of countering the threat, they acknowledge that digital finance has added a complex new layer to an already challenging security environment in Jammu and Kashmir.
