India's 2027 Crypto Data Swap: A Flow-Driven Look at the Impact

India is preparing to join a global network for tracking crypto transactions, starting April 1, 2027. The country will begin automatically sharing and receiving cross-border crypto transaction data with tax authorities under the OECD's Crypto-Asset Reporting Framework (CARF). This move aligns India with a global standard designed to mirror existing banking information exchange systems.

The immediate market context is one of significant offshore activity. Domestic trading recorded ₹51,000 crore ($6.12 billion) in transactions in FY2024-25, a 41% year-on-year increase. Yet this growth is largely happening outside India's regulatory reach, as Indian users execute nearly three-quarters of their crypto volume offshore. The new data-sharing mechanism is explicitly aimed at curbing this capital flight to foreign platforms.

The regulatory push comes alongside stiffer penalties for non-compliant exchanges, signaling a serious effort to build robust reporting systems before the global swap begins. For now, the domestic market's expansion is being fueled by a tax regime that has already pushed most trading overseas, creating a clear target for the new CARF enforcement.

The Catalyst: Penalties and the India-EU FTA

The immediate push for compliance comes from two powerful, overlapping pressures: domestic tax enforcement and international regulatory alignment.

First, the Union Budget 2026 introduced strict penalties to ensure reporting accuracy. Crypto exchanges and intermediaries face a daily fine of ₹200 or a flat penalty of ₹50,000 for failing to report transactions correctly. These measures, effective April 1, 2026, are designed to strengthen adherence to the Income-tax Act and build a robust domestic reporting system before the global data swap begins.

Second, the India-EU Free Trade Agreement (FTA) is mandating tighter anti-money laundering (AML) cooperation. This landmark pact, announced in January 2026, requires aligning India's PMLA-based rules with the EU's broader AML directives. For the crypto sector, this means a significant push to bridge regulatory gaps and prepare for a surge in cross-border financial flows under the new trade regime.

The synthesis is clear: India is facing dual enforcement. Domestically, the 1 percent TDS on crypto transfers already provides a flow-based data point, now backed by stiff penalties. Internationally, the CARF data exchange and the India-EU FTA create a coordinated pressure to bring offshore activity under control. This one-two punch aims to close the regulatory gap that has allowed Indian users to execute nearly three-quarters of their volume offshore.

The Flow Impact: What to Watch in 2026-2027

The real test of the CARF data swap's impact will be on the numbers that move prices: on-chain volume and reported flows. Watch for a clear shift in transaction volume from offshore platforms back to domestic exchanges starting April 2027. The current data shows Indian users execute nearly three-quarters of their crypto volume offshore, but the new data-sharing mechanism aims to change that calculus. A sustained decline in offshore volume and a corresponding rise in domestic on-chain activity would signal the policy is working to bring capital and liquidity home.

Monitor the 1% TDS collection as a key indicator of reported flow. The government collected ₹511.8 crore ($61.42 million) in TDS from crypto trades in FY2024-25, representing a total transaction value of ₹51,180 crore. If oversight tightens and more activity moves onshore, this revenue stream should grow. However, the current system has already driven many traders to foreign or decentralized platforms to avoid the tax, so any increase will depend on the new penalties and CARF enforcement making offshore alternatives riskier.

The primary near-term catalyst is the completion of CARF technical specifications later this year. Officials have confirmed these details are being finalized and should be available in the coming months. This will signal implementation readiness and likely trigger a final wave of compliance efforts by exchanges and a reassessment of offshore trading strategies by users. The market will price in the certainty of the April 2027 launch as these technical details emerge.