I just fell into an interesting rabbit hole about a money transfer system that has existed for centuries and that most people in crypto don’t even know: the hawala method. The fascinating thing is that it operates on such a simple principle that it almost seems absurd in 2026 — pure trust, no banks, no paperwork, just a network of intermediaries called hawaladars who know each other.

Think of it this way: you are an expatriate who needs to send money home. Instead of going to a bank and waiting days, you visit a trusted local hawaladar, give him cash, and within hours your family receives the equivalent in their country. The hawala method doesn’t move physical money across borders — hawaladars simply settle debts among themselves. It’s so efficient that according to the World Bank, around $785 billion in remittances flowed to developing countries in 2024, with a significant portion passing through informal channels like this.

Now, here’s where it gets complicated. The hawala method is a lifeline for millions of people in regions where traditional banking is inaccessible or prohibitively expensive. But that same lack of transparency has made it a nightmare for regulators. No records, no oversight, no Know Your Customer (KYC). UNODC estimates that between $800 billion and $2 trillion are laundered globally each year, and informal systems like this play a significant role. Hawala has been used to finance terrorism, smuggle goods, evade taxes — all activities that are practically impossible to trace.

Then cryptocurrencies arrived, and things got even more complex. Imagine combining the speed and low cost of the hawala method with Bitcoin’s anonymity. That’s what happened. A case that illustrates this well: Anurag Pramod Murarka, an Indian national, was sentenced to over 10 years in prison for running a crypto hawala network that laundered more than $20 million. He operated under pseudonyms on the dark web, receiving money from drug traffickers and hackers, then laundering it through a hawala network that stretched from India to the United States, moving cash in books and envelopes. He was dismantled when the FBI took over his online identity.

Regulators have already moved. FATF introduced the Travel Rule in 2019, requiring virtual asset service providers to share transaction details for transfers over $1,000. The U.S. tightened regulations with the Bank Secrecy Act, requiring reports on transactions over $10,000. The European Union launched MiCA in 2024, creating a unified regulatory framework that mandates crypto exchanges and wallets to implement strict KYC and AML procedures. The United Arab Emirates now requires hawaladars to obtain licenses.

But here’s the real dilemma: the hawala method is deeply rooted in economies where banking infrastructure is weak. In Pakistan and India, it’s technically illegal but widely used because it works. How do you regulate something that millions depend on for survival? Regulators are focusing on two fronts — international cooperation to share intelligence and AI tools and blockchain analysis to track suspicious patterns. It’s a delicate balance between preserving legitimate benefits and fighting abuse.

What’s interesting is that although the hawala method and cryptocurrencies may seem like perfect allies for illicit activities, the reality is that the percentage of money laundering in crypto is lower than in traditional financial services. Probably because blockchain transactions are traceable and not as globally well-known as informal transfer methods. Still, it’s a space worth monitoring.