India's AML Crypto Drive: Combating Illicit Funds Amid Adoption Surge

India's Financial Intelligence Unit (FIU-IND) has intensified its regulatory focus on offshore cryptocurrency exchanges, issuing compliance notices to 25 platforms for failing to adhere to anti-money laundering (AML) requirements. The exchanges, including BingX, LBank, CoinW, ProBit Global, and AscendEX, were ordered to withdraw their apps and websites from public access in India, though many remain accessible as of press time. The affected platforms collectively hold over $9 billion in assets, with 14 of them recording approximately $20 billion in 24-hour trading volume, according to CoinMarketCap dataIndia cracks down on 25 crypto exchanges including BingX, LBank, CoinW over compliance failures^[1].

The enforcement action reflects India's broader strategy to integrate virtual asset service providers (VASPs) into its AML framework. In March 2023, the Indian finance ministry extended the Prevention of Money Laundering Act (PMLA) of 2002 to cover crypto platforms, mandating registration with FIU-IND and compliance with reporting obligationsIndia Cites 25 Crypto Firms for AML Lapses^[2]. Over 50 exchanges have since registered with the regulator, including major players like Binance, Coinbase, and KuCoin, which re-entered the Indian market after meeting compliance requirements. OKX, however, exited the market in 2024India Flags 25 Offshore Crypto Exchanges for AML Breach^[3].

The crackdown follows a pattern of sustained regulatory pressure. In prior years, FIU-IND had targeted platforms such as Binance, Bybit, and KuCoin, leading to app store removals and operational suspensions until compliance was achieved. The current action against 25 exchanges marks a second wave of enforcement, underscoring the government's commitment to curbing illicit financial activity in the crypto sectorIndia Cites 25 Crypto Firms for AML Lapses^[4].

Despite the regulatory hurdles, India remains a significant market for crypto adoption. The 2025 Chainalysis Crypto Adoption Index ranks India first globally for the third consecutive year, driven by a 69% year-over-year increase in on-chain activity. Total transaction volume in the APAC region, including India, surged to $2.36 trillion in the 12 months through June 2025India Cites 25 Crypto Firms for AML Lapses^[5]. This growth has prompted India to plan the implementation of the OECD's Crypto-Asset Reporting Framework (CARF) by April 2027, enabling automatic global reporting of crypto transactions to enhance transparency. The government also aims to join the Multilateral Competent Authority Agreement (MCAA) to facilitate cross-border tax information exchangeIndia Cites 25 Crypto Firms for AML Lapses^[6].

The regulatory environment remains complex, balancing strict compliance demands with high taxation. A 30% tax on crypto profits, a 1% tax deducted at source (TDS) per transaction, and an upcoming 18% goods and services tax (GST) on trading fees have constrained domestic activity. However, officials estimate Indians hold $4.5 billion in digital assets, indicating persistent demand despite regulatory challengesIndia Cites 25 Crypto Firms for AML Lapses^[7].

The enforcement actions highlight India's cautious approach to crypto regulation, prioritizing AML compliance over comprehensive legislative frameworks. While the absence of a dedicated crypto law has led to policy ambiguity, the government's focus on PMLA integration and international reporting standards signals a shift toward structured oversight.