India’s Financial Intelligence Unit (FIU), the federal government agency responsible for preventing money laundering and terrorist financing, has issued notices for non-compliance to 25 offshore virtual digital assets service providers (VDA SPs) under the Prevention of Money Laundering (PML) Act.
The regulator has also issued notices to these entities to take down apps, websites, or URLs “that are operating illegally” without complying with the PML Act in India. This directive reinforces the government’s intention to protect users from financial and legal hazards.
These 25 foreign exchanges include some well-known and lesser-known platforms, such as Delaware-based Paxful, Hong Kong’s Changelly, Cambodia’s Huione, Florida’s CEX.IO, the United Kingdom’s BTCC, Hong Kong-based Coinex, Singapore’s Remitano, as well as Bitrue, Seychelles-based BitMex, and Probit Global.
Other exchanges on the list include BC.game, LBank, Youhodler, BingX, PrimeXBT, Poloniex, LCX, BTSE, HIT BTC, LocalCoinSwap, AscendEx, ZooMex, CoinCola and CoinW.
The virtual digital assets service providers operating in India, whether international or domestic, and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, their safekeeping or administration, or instruments enabling control over virtual digital assets, are required to be registered with FIU IND as ‘reporting entity’ and comply with the set of obligations as mandated under Prevention of Money Laundering Act, the Ministry of Finance said in a statement.
“These obligations are activity-based and are not contingent on physical presence of the entity in India. The regulation casts reporting, record keeping, and other obligations on the VDA SPs under the PML Act which also includes registration with the FIU IND,” it stated.
“It must be mentioned that the Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions,” the regulator warned.
So far, 50 VDA SPs have registered with FIU IND, the statement informed. However, from time to time, entities catering to Indian users but not registered, thus remaining outside the AML/CFT framework, are brought to the attention of the FIU IND.
The anti-money laundering/combating the financing of terrorism (AML/CFT) framework is a combination of regulations and procedures designed to prevent criminals and terrorists from abusing the financial system. In March 2023, India brought virtual digital asset service providers (VDA SPs) under this framework, following the provisions of the Prevention of Money Laundering Act.
So far, America’s largest digital asset exchange, Coinbase (NASDAQ: COIN), has registered with the FIU. Binance also registered with the Indian agency after paying a $2.2 million penalty for non-compliance with local regulations. KuCoin digital asset exchange registered with India’s FIU after paying a penalty of $41,000, while Singapore-based Liminal Custody became a compliant digital asset custody for Indian institutions after registering with the agency.
However, Seychelles-headquartered OKX shut down its India operations in 2024, citing regulatory hurdles.
‘Respect Indian law to serve Indian customers’
Appreciating the move, Ritesh Pandey, India’s former member of Parliament (MP), said that this is a positive step toward a secure and forward-looking digital economy. As a believer in technology-driven progress, Pandey reiterated that while digital currency’s potential is huge, it must be grounded in safety and compliance.
“For too long, offshore crypto platforms have operated in a grey zone, serving Indian users without adhering to Indian laws. By bringing them under the anti-money laundering and counter-terror financing framework, this decision ensures greater transparency, accountability, and—most importantly—protection for Indian citizens,” Pandey wrote in a LinkedIn post.
“This is not just about regulation, it is about trust. Clear rules will help protect users from fraud, curb illicit financial flows, and build confidence in digital asset markets. It also sends a strong message: if you want to serve Indian customers, you must respect Indian law,” Pandey added.
Bharat Web3 Association (BWA), an industry body formed to promote and grow the local Web3 industry, also supported the FIU’s action against unregistered offshore VASPs. The industry body said that measures like these are crucial for safeguarding financial integrity and shielding citizens from unlawful activities.
“BWA welcomes FIU action against unregistered offshore VASPs. Such steps are important to protect the financial integrity of our citizens and to protect them from illicit actors,” BWA said in a LinkedIn post.
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Not the first time
This is not the first time FIU has investigated foreign digital asset exchanges for non-compliance. In December 2023, the anti-money laundering agency issued ‘compliance show cause’ orders to nine digital asset exchanges—Binance, Bitfinex, Bitstamp, Bittrex, Gate.io, Huobi, Kraken, Kucoin, and Russia-based MEXC Global. The Indian government stated that these exchanges were operating illegally, failing to comply with the provisions of the PMLA.
In January 2024, following a delay in responding to government orders, India blocked access to foreign digital asset exchanges, including OKX, Binance, and Kucoin, on grounds of non-compliance. Apple (NASDAQ: AAPL) pulled some of these exchanges from its App Store, while Google (NASDAQ: GOOGL) delisted the trading platforms from its Play Store in India.
India has been tightening its oversight on digital asset exchanges in recent months due to a rise in cyber fraud targeting the sector. The Indian government recently issued an urgent directive to all digital asset exchanges, custodians, and related intermediaries to undergo extensive cybersecurity audits to tackle growing concerns over security.
At the same time, India’s taxation policy towards digital assets trading continues to be one of the harshest in the world. While the Asian powerhouse ranks numero uno in global digital asset adoption, it imposes a 30% flat tax on all digital currency income with no provision to offset losses and a 1% tax deducted at source (TDS) on all transactions above INR 10,000 ($112), as well as an 18% goods and services tax (GST) on transactions. While the world’s most populous nation is looking to regulate the digital assets space, Finance Minister Nirmala Sitharaman has clarified that ‘cryptocurrencies’ cannot be a legal currency in India.
Moreover, India said there is no fixed timeline for introducing comprehensive regulatory guidelines for virtual digital assets (VDAs) in the country. With high taxation and no clear legislation in sight, India’s digital asset exchanges are likely looking at a consolidation in 2025, with smaller exchanges either shutting down operations or merging with larger ones.
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Watch: What’s going on with blockchain technology in India?
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Source: https://coingeek.com/indian-regulator-issues-notices-to-25-offshore-crypto-platforms/