COAI's Sudden Share Price Drop: Regulatory Scrutiny and Market Sentiment Shifts in India's Crypto Sector

India's cryptocurrency sector has been roiled by a wave of regulatory enforcement actions in late 2025, triggering a sharp decline in the share price of COAI, one of the country's leading crypto exchanges. The drop, which has drawn significant investor concern, is closely tied to a dual assault on offshore crypto platforms and unregulated financial influencers, both of which have exacerbated market uncertainty. This analysis unpacks the regulatory dynamics, their impact on investor sentiment, and the broader implications for India's crypto ecosystem.

Regulatory Crackdown on Offshore Exchanges

In November 2025, India's Financial Intelligence Unit (FIU-IND) intensified its enforcement efforts by issuing compliance notices to 25 offshore cryptocurrency exchanges, including Huione, BingX, and Paxful, for violating anti-money laundering (AML) laws under the Prevention of Money Laundering Act (PMLA), 2002. These platforms, which had been operating in India without registration, were ordered to remove their apps and URLs from public access. The move aligns with India's broader strategy to bring virtual digital asset (VDA) service providers-both offshore and onshore-under a unified regulatory framework, mandating compliance with AML obligations such as reporting and record-keeping.

The enforcement actions reflect a shift toward an activity-based regulatory model, focusing on the nature of services provided (e.g., on/off-ramping, custody) rather than the technical structure of platforms. This approach has been reinforced by the Madras High Court's 2025 ruling recognizing cryptocurrencies as property, signaling a gradual move toward legal clarity. However, the immediate impact has been disruptive, with smaller exchanges struggling to meet compliance costs and larger players like Bybit and Binance navigating registration processes as per recent reports.

SEBI's Enforcement Against Crypto Influencers

Parallel to the crackdown on exchanges, India's Securities and Exchange Board of India (SEBI) has taken unprecedented action against unregulated financial influencers. In October 2025, SEBI banned Avadhut Sathe, a prominent finfluencer, and his trading academy for providing unregistered investment advisory services under the guise of stock market education. The regulator found that Sathe's academy had collected over ₹601 crore from 3.37 lakh investors by offering live trading sessions with misleading buy/sell recommendations and selective testimonials. SEBI ordered the recovery of ₹546.16 crore in "unlawful gains" and prohibited the entities from using live market data or advertising performance metrics.

This case underscores SEBI's growing focus on curbing fraudulent practices in the financial advisory space. According to the SEBI Investor Survey 2025, 62% of investors base their decisions on finfluencer advice, with 93% finding these influencers credible. The regulator's actions have not only targeted individual actors but also highlighted systemic risks, such as behavioral biases like FOMO and overconfidence, which amplify market volatility.

Market Sentiment and Investor Behavior

The combined regulatory pressure has significantly altered market sentiment. For retail investors, the crackdown on influencers has eroded trust in unregulated advice, while the takedown of offshore exchanges has limited access to platforms they previously relied on. Meanwhile, institutional investors remain hesitant due to the lack of clear guidelines for licensing and taxation. India's 30% tax on crypto gains, 18% GST on exchange services, and 1% tax deduction at source on transactions above ₹50,000 have further dampened participation.

COAI's share price drop in November 2025 has been attributed to these factors, compounded by macroeconomic headwinds. India's foreign exchange reserves fell by $5.6 billion by October 2025, with $3.8 billion of that decline linked to gold reserves, signaling broader financial fragility. The Reserve Bank of India's (RBI) continued prioritization of the e-rupee over crypto recognition has also stymied institutional adoption.

### Macroeconomic and Policy Uncertainty
Despite India's top ranking in the 2025 Chainalysis Global Crypto Adoption Index, the sector remains constrained by regulatory ambiguity. The government's delayed introduction of a comprehensive crypto framework has stifled innovation and venture capital funding for Web3 startups. Experts like Zia ul Haque note that while India has high user adoption, it lacks a robust base of blockchain developers and real-world applications, reducing political urgency for reform.

The planned implementation of the OECD's Crypto-Asset Reporting Framework (CARF) by April 2027 offers a potential path to global compliance but also raises concerns about increased transaction reporting burdens. For COAI and similar platforms, the challenge lies in balancing compliance costs with user retention in a market where trust is eroding.

Expert Analysis and Future Outlook

Analysts argue that regulatory clarity-such as a crypto regulatory sandbox or streamlined tax guidelines-is critical for stabilizing the market. However, the current enforcement actions suggest a preference for punitive measures over innovation-friendly policies. As noted by industry associations like the Bharat Web3 Association, India's approach risks stifling growth while failing to address the root causes of illicit activity.

For COAI, the path forward hinges on navigating these regulatory headwinds while rebuilding investor confidence. The exchange's response to FIU-IND's crackdown-such as exploring compliance pathways for offshore platforms-will be pivotal. Meanwhile, the broader sector must contend with a regulatory environment that prioritizes risk mitigation over fostering innovation.

Conclusion

COAI's share price drop is a symptom of India's crypto sector grappling with regulatory overreach, market sentiment shifts, and macroeconomic pressures. While enforcement actions against offshore exchanges and influencers aim to protect investors, they have also created an environment of uncertainty that discourages participation. For the industry to thrive, policymakers must strike a balance between oversight and innovation-a challenge that will define India's crypto landscape in the coming years.