India Tightens Crypto Oversight, Leaving Retail Traders With Fewer Platforms

• India brings 49 crypto exchanges under AML rules, reshaping retail access nationwide.
• FIU blocks non-registered offshore exchanges, narrowing options for Indian crypto traders.
• Transaction monitoring drives enforcement, forcing platforms to track wallets closely.

India has tightened crypto oversight, bringing dozens of exchanges under strict anti-money laundering rules. The move is reshaping where retail traders can buy, sell, and move digital assets. For Indian users, platform choice now carries regulatory weight alongside price and liquidity.

India’s Financial Intelligence Unit confirmed that 49 crypto exchanges now fall under strict AML rules. The disclosure appeared in the FIU’s annual report for the 2024–2025 fiscal year. It marks a key shift in how India manages retail crypto activity. The report said the FIU imposed penalties totaling ₹28 crore, about $3.1 million on non-compliant crypto exchanges.

In 2023, India brought virtual digital asset providers under the Prevention of Money Laundering Act. That decision placed crypto exchanges under the same legal standards as banks. The latest report shows how that policy now works in practice.

As of January 5, 2026, forty-five domestic exchanges completed local registration. Four offshore platforms also finished the process with the FIU. All 49 must now follow Indian reporting and monitoring requirements.

Registered platforms must verify user identities and confirm wallet ownership. They must track transfers from exchange wallets to private wallets. They must also report suspicious activity to the FIU.

The government says these steps help limit financial crime. It also says the measures improve visibility into how crypto moves across borders. Transaction monitoring now sits at the center of oversight.

FIU Uses Transaction Data to Flag Criminal Activity

The FIU’s analysis relies on Suspicious Transaction Reports from registered exchanges. These reports help authorities trace how digital assets move through the system. They also highlight areas of misuse. The FIU acknowledged crypto’s role in innovation and investment. However, it warned that criminal activity remains widespread. The agency flagged several high-risk use cases.

These include hawala-style transfers linked to cross-border networks. They also include illegal online gambling and large fraud schemes. Adult content platforms operating unlawfully also appeared in the findings.

In one case, analysts traced crypto payments to an illegal adult website. They followed wallet movements across the blockchain. The FIU cited this as proof that monitored transactions remain traceable.

The report also noted penalties for non-compliant platforms. The FIU fined exchanges that failed to meet reporting standards. This enforcement continued throughout the previous fiscal year.

Related: India Leads Call for Global Ethical AI Rules at Fintech Fest

Offshore Platforms Face Access Restrictions

India’s crackdown has divided the crypto market into compliant and non-compliant platforms. Several major offshore exchanges registered with the FIU. These include Binance, Coinbase, and Mudrex. These platforms can continue serving Indian users under the AML framework. However, other foreign exchanges refused registration. That decision led to enforcement action.

The FIU blocked access to 25 offshore platforms. The list includes BitMEX, LBank, and Phemex. Indian users cannot legally trade on these exchanges. Authorities say the restriction remains until platforms comply. The move narrowed retail trading options across the country. Most volume now flows through approved exchanges.

Registered platforms must also appoint senior compliance officers. Each must name a director and a principal officer. These officers act as direct points of contact with authorities.

Officials say the goal is not to ban crypto outright. Instead, they want trading to occur within transparent systems. Close supervision remains the priority. The FIU warned that digital assets carry unique risks. These include speed, global reach, and peer-to-peer transfers. Anonymity can also obscure transaction flows.

For retail traders, the shift is already visible. Platform access now depends on regulatory approval. Compliance, not liquidity alone, shapes the trading experience. India’s crypto market continues to operate. However, it now moves within tighter boundaries. Oversight has become the defining feature of participation.