New Delhi’s underworld is updating its ledger. According to intelligence from the Directorate of Revenue Intelligence (DRI), organised smuggling networks are increasingly settling deals in stablecoins — primarily USDT — rather than the centuries-old hawala channels that once dominated cross‑border illicit payments.
A quiet exodus from hawala
Hawala has long been prized by smugglers for speed and deniability. But stablecoins combine the instant settlement of digital rails with a familiar unit of account: one tethered to the dollar. That mix — price stability plus near-instant transfer — is attractive to criminal syndicates moving high‑value goods such as gold and narcotics, DRI officials say. VPNs, anonymized wallets and decentralized exchanges let operatives mask locations and ownership while shifting value across borders in minutes.
The result: fewer suitcases, fewer cash couriers, and fewer paper trails through banks. In many networks the DRI has investigated, sellers remit proceeds directly to overseas masterminds in crypto. Locally, hawala operators still sometimes act as a cash-out bridge — converting crypto into cash for on-the-ground payouts — but their gatekeeper role appears to be shrinking.
Why law enforcement is on the back foot
Stablecoins exploit frictions in current regulation. Anti‑money‑laundering and know‑your‑customer (AML/KYC) frameworks are still catching up to peer‑to‑peer transfers, cross‑chain swaps and noncustodial wallets. Transactions that never touch a regulated exchange can evade mandatory reporting, and mixers or privacy tools can layer obfuscation on top of that.
That said, decentralization is a double-edged sword. Blockchains create immutable records of transactions. With the right analytic tools, investigators can cluster wallets, map flows and link on‑chain patterns to off‑chain identities. The problem is practical: successful tracing often requires cooperation from foreign exchanges, timely data sharing across jurisdictions, and technical capacity that many agencies are still building.
Tools, gaps and a new enforcement playbook
The DRI has begun deploying blockchain forensics, wallet analytics and pattern‑detection platforms. Those capabilities are starting to pay dividends: investigators can identify payment corridors, spot repeated wallets used for settlement, and follow funds that hop across chains or leave via over‑the‑counter desks.
But tech alone won’t solve the problem. Investigation teams also need cyber hygiene and secure infrastructure to handle sensitive data — an area where flaws can cripple operations. Recent supply‑chain and control panel vulnerabilities have shown how attackers can exploit weak links in agency systems, reminding authorities that digital forensics requires hardened infrastructure as well as software tools. CISA’s recent KEV additions are a useful illustration of how patching and secure deployment matter for any modern investigative stack.
Agencies are also experimenting with AI to speed analysis and surface suspicious patterns from mountains of blockchain data. Those efforts echo broader debates about the promise and limits of powerful AI tools in public service and law enforcement — a discussion currently playing out in other fields as well. See how AI is reshaping workplace search and analysis in the private sector for a parallel: Gemini’s Deep Research integration and new multimodal models from companies like Microsoft suggest the direction analytics can take when paired with domain expertise. Microsoft’s recent advances in model tooling highlight how quickly these capabilities are maturing, though governance and accuracy remain concerns.
Where regulation could bite
DRI and experts point to a handful of reforms that would tighten the net:
- Stronger AML/KYC for crypto service providers, including mandatory suspicious-activity reporting.
- Real‑time information‑sharing agreements between customs, tax, financial intelligence units and foreign counterparts.
- Clear rules around travel‑rule compliance for exchanges and custodians that handle stablecoins and cross‑chain bridges.
- Enhanced monitoring of peer‑to‑peer markets and OTC desks that can be used to cash out large amounts of crypto.
Without harmonized international standards, the DRI warns, criminals will keep exploiting jurisdictional loopholes. That’s not just a legal headache; it’s a fiscal one — underreported imports and undeclared sales erode customs revenue and tax collections.
Criminal innovation, regulatory catch‑up
The shift from hawala to stablecoins says something larger about the criminal economy: it adapts quickly when technology offers efficiency and reduced exposure. For investigators, the answer lies in a mix of tools and treaties — forensic software and AI to decode blockchains, plus diplomacy and legal frameworks to pursue actors beyond borders.
Expect both sides to keep iterating. Smugglers will test new bridges, privacy services and on‑ramps. Regulators will push exchanges for greater transparency and require faster reporting. Meanwhile, agencies like the DRI will try to turn the blockchain’s permanent ledger into an advantage — if they can secure their systems, scale analytic talent and win cooperation from partners abroad.
This is not a single battle; it is a shifting front where law, technology and money intersect. The players will change tactics, but the core contest — between rapid, anonymous value transfer and the institutions that seek to regulate it — will only intensify.