India's Enforcement Directorate (ED) has uncovered alleged unauthorized cryptocurrency-based cross-border transactions involving more than ₹5,000 crore, following searches across Bengaluru and Madhya Pradesh on October 27, 2026. According to an October 29 press release, the ED's Bengaluru Zonal Office conducted searches under Section 37 of the Foreign Exchange Management Act (FEMA), 1999.

The investigation concerns alleged misuse of stablecoins, offshore entities, and cryptocurrency exchanges to move funds internationally outside authorized remittance channels. The agency named Bengaluru-based RPFAS Technologies Private Limited, associated with Mudrex and Saber.money, in one investigation.

ED Investigates ₹5,000 Crore in Crypto Transfers

The ED initiated its investigation following complaints alleging large-scale FEMA violations involving RPFAS Technologies Private Limited, which operates platforms identified as Mudrex and Saber.money. Investigators alleged that the platforms facilitated unauthorized cross-border payments and cryptocurrency trading, including services allowing customers to purchase, sell, swap, and convert digital assets for international transfers.

The agency specifically highlighted advertisements promoting instant international transfers and cross-border payment infrastructure powered by stablecoins. According to the ED, these activities were allegedly undertaken without the necessary RBI authorization for inward and outward remittances.

The press release reported alleged violations involving more than ₹5,000 crore in transactions. This figure represents the scale of transactions under investigation, not an amount confirmed to have been seized or laundered.

The investigation follows earlier enforcement activity targeting India's cryptocurrency markets. In June, India's Financial Intelligence Unit sought information on OTC transactions exceeding $10,000, reflecting increased attention toward large cryptocurrency transfers.

How Stablecoins and Offshore Entities Were Allegedly Used

The ED described a transaction mechanism involving traditional banking infrastructure, cryptocurrency purchases, and subsequent conversion into fiat currency. According to the agency, customers first registered on the platforms and deposited money into company bank accounts.

These funds were then used to purchase virtual digital assets (VDAs), particularly dollar-pegged stablecoins such as USDT and USDC. The assets were subsequently sold through Indian cryptocurrency exchanges, and the resulting funds were remitted to intended recipients.

This process allegedly enabled transfers outside the authorized banking channels governing international remittances. The investigation also identified offshore entities incorporated in Canada, Lithuania, and the United States, which the agency alleged were controlled and operated from India.

According to the ED, substantial over-the-counter cryptocurrency transactions were conducted through foreign trading platforms, including Binance and Bybit. The agency further reported unauthorized cryptocurrency balances on foreign platforms exceeding ₹4,600 crore.

Stablecoins have become increasingly important in global settlement infrastructure because they enable blockchain-based transfers without relying on conventional banking hours. EtherWorld previously explored this development in Can Stablecoins Replace International Bank Transfers?.

However, faster settlement does not eliminate foreign exchange compliance requirements. The distinction is particularly relevant in India, where domestic USDT premiums reflect liquidity shortages, regulatory friction, and restrictions affecting access to international cryptocurrency markets.

ED Bengaluru has conducted searches under FEMA on 27.10.2026 at 3 locations in Bengaluru & Madhya Pradesh over unauthorized cross border financial transactions using cryptocurrency involving more than ₹5,000 Crore (Approx.). The probe exposed use of shell entities in tax haven countries, massive OTC deals and illegal foreign payouts via platforms like Binance and Bybit in violation of FEMA provisions.

— ED (@dir_ed) October 29, 2026

Instadapp Faces Separate $40 Million FEMA Investigation

In a separate development, the ED disclosed an investigation involving Instadapp, an Ethereum-based DeFi platform offering lending, borrowing, and cryptocurrency swapping through smart contracts. Founded in 2018, Instadapp has developed infrastructure intended to simplify access to decentralized financial protocols.

EtherWorld previously covered the platform's expansion into account abstraction through its Avocado smart contract wallet, designed to simplify multichain interactions and wallet management. According to the ED, searches were conducted at two premises in Bengaluru and one in Madhya Pradesh in connection with the platform.

Investigators alleged that Instadapp's development and associated activities were managed from India despite operating through entities incorporated in foreign jurisdictions. The agency identified companies registered in the United States, British Virgin Islands, Singapore, and the United Arab Emirates.

It alleged that some of these entities lacked physical offices or employees in their registered jurisdictions. The investigation further claimed that revenue earned from the DeFi protocol was routed through overseas accounts before being transferred to India to cover development, consultancy, and operational expenses.

The agency also identified payments to foreign service providers through cryptocurrency. According to the press release, preliminary findings indicated potential FEMA violations amounting to approximately $40 million.

These allegations relate to the legal and financial arrangements surrounding the protocol's operations. They do not establish that Instadapp's smart contracts, lending mechanisms, or underlying DeFi services were inherently unlawful.

What the Investigation Means for India's Crypto Regulations

India currently regulates cryptocurrency through overlapping taxation, anti-money-laundering, transaction-reporting, and foreign exchange provisions rather than a comprehensive crypto-specific regulatory framework.

In July, authorities introduced expanded reporting requirements under the Crypto-Asset Reporting Framework. As EtherWorld explained in India Issues New Crypto Tax Rules From 2026, qualifying digital-asset service providers face additional customer identification and transaction disclosure obligations.

Meanwhile, 49 cryptocurrency exchanges registered with India's FIU during FY 2024–25, indicating increasing emphasis on formal compliance. An August Chainalysis report, covered in India Records $19B in Taxable Crypto Activity, estimated approximately $19 billion in potentially taxable cryptocurrency activity during 2025.

Yet a significant portion of trading continues through offshore platforms, complicating supervision and reporting. These developments have intensified discussions about India's long-term approach to digital assets.

As explored in Will India Regulate Crypto? What to Expect From Monsoon Session, policymakers face competing priorities involving innovation, capital controls, financial stability, and investor protection. The parliamentary review discussed in India's Parliament to Question Finance Ministry on Crypto further illustrates how cryptocurrency oversight is becoming a cross-regulatory issue.

For cryptocurrency exchanges, payment providers, and DeFi businesses operating from India, the ED investigations underscore the importance of distinguishing digital-asset transactions from legally authorized international remittance services. The allegations against the named entities remain subject to investigation and have not been established through final adjudication.

The immediate question is whether authorities will identify additional entities or transactions connected to the alleged cross-border transfer arrangements. The broader question is how India will regulate stablecoin-powered financial infrastructure without limiting legitimate blockchain innovation.

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