India's Crypto Crackdown Aims to Curb Money Laundering via Offshore Exchange Compliance

India's Financial Intelligence Unit (FIU-IND) has issued compliance notices to 25 offshore cryptocurrency exchanges, demanding they register under the Prevention of Money Laundering Act (PMLA) or face restrictions on their operations within the country. The action, announced in October 2025, targets platforms such as CoinEx, BingX, Huione, CEX.IO, and BitMex, among others, for failing to adhere to anti-money laundering (AML) and know-your-customer (KYC) normsIndia Flags 25 Offshore Crypto Exchanges for AML …^[1]. The exchanges are required to register as "reporting entities" under PMLA, which mandates transaction monitoring, suspicious activity reporting, and data sharing with regulatorsIndia’s FIU Cracks Down on 25 Offshore Crypto Exchanges^[2]. Failure to comply could result in the blocking of their websites and mobile apps for Indian users, a move officials stress is intended to align with global AML standards and safeguard financial integrityIndia Cracks Down on 25 Crypto Exchanges Over AML Compliance …^[3].

The 25 flagged platforms, which include both well-known global names and mid-sized exchanges, collectively manage billions in user assets and account for over $22 billion in 24-hour trading volumesFIU-IND Notifies 25 Offshore Crypto Platforms for PMLA Violation^[4]. The FIU-IND's action is part of a broader regulatory strategy to bring offshore virtual digital asset service providers (VDA SPs) under India's compliance framework. Since March 2023, all VDA SPs operating in India-regardless of their physical location-have been required to register with the FIU-INDIndia Targets 25 Offshore Crypto Exchanges for AML Violations^[5]. To date, 50 exchanges have successfully registered, but non-compliant platforms remain under scrutiny. This is the second major enforcement wave, following a 2023 crackdown that targeted nine exchanges, including Binance and OKXIndia and the US Lead Global Cryptocurrency Adoption in 2025 …^[6].

India's regulatory approach has evolved rapidly over the past two years, marked by a 30% tax on crypto profits, 1% tax deducted at source (TDS) on transactions, and alignment with Financial Action Task Force (FATF) guidelinesChainalysis Global Index: India Tops Crypto Adoption Rankings^[7]. The government has also introduced stricter KYC requirements, such as mandatory in-person meetings with FIU-IND officials and cybersecurity auditsIndia Ranks First, US Rises to Second in Chainalysis 2025 Global …^[8]. These measures aim to curb illicit activities, including money laundering, tax evasion, and fraud, while fostering a transparent ecosystem. The Finance Ministry has repeatedly warned that crypto products and NFTs are unregulated and carry high risks, emphasizing that investors lack legal recourse in cases of lossHow India’s Crypto Tax Rules in 2025 Could Affect Small Investors^[9].

For Indian investors, the crackdown presents both challenges and opportunities. Short-term disruptions may arise as non-compliant exchanges restrict new registrations or delay withdrawals. However, long-term benefits include enhanced investor protection, reduced fraud, and a level playing field for domestic exchanges adhering to regulatory normsCryptocurrency in India: A Guide to Taxation and Compliance in …^[10]. Industry analysts note that the action could redirect liquidity to compliant platforms, such as WazirX and CoinDCX, which have lobbied for stricter rules to eliminate unfair competition from unregistered offshore rivalsNew Rules for Cryptocurrency in India (2025): What Investors …^[11]. Meanwhile, some offshore exchanges, like CEX.IO, have expressed willingness to register but highlight the burden of India's high tax regime, which continues to drive users to non-compliant platformsCrypto Regulation in India 2025: KYC, Taxes & Compliance^[12].

Globally, India's move aligns with a trend of tightening crypto regulations. The United States, European Union, and other jurisdictions have also imposed penalties on unregistered platforms, reflecting the sector's cross-border challenges. India's efforts are further bolstered by its commitment to adopt the OECD's Crypto-Asset Reporting Framework (CARF) by 2027, which will automate global reporting of crypto transactions and enhance compliance. The government also plans to sign the Multilateral Competent Authority Agreement (MCAA) for digital assets, extending its existing tax information exchange framework to crypto holdings.

The FIU-IND has set strict deadlines for the 25 exchanges to respond to the notices. Non-compliant platforms may face audits, fines of up to ₹1 lakh per violation, or permanent bans. Exchanges that comply will need to implement robust KYC processes, maintain transaction records, and report suspicious activity regularly. The action underscores India's determination to regulate rather than ban crypto, balancing innovation with financial security. As the country's crypto user base grows-estimated at $4.5 billion in digital assets-the government aims to position India as a global hub for regulated digital finance.