India’s FIU Issues Notices to 25 Offshore Crypto Firms for PMLA Breach
- India’s FIU directs 25 offshore platforms to comply with PMLA or face strong penalties.
- The crackdown signals a shift toward regulated frameworks in Asian crypto markets.
- Other nations like Singapore, South Korea, Hong Kong, and Japan enforce similar AML rules
The Financial Intelligence Unit of India (FIU-IND) has issued notices to 25 offshore virtual digital asset (VDA) service providers for alleged violations of the Prevention of Money Laundering Act, 2002 (PMLA). The finance ministry confirmed the action in a statement on Wednesday, marking one of the most essential enforcement steps in India’s efforts to regulate cross-border digital asset operations.
The notices were issued under Section 13 of the PMLA, empowering authorities to launch enquiries, audit records, verify client identities, and demand reports on suspicious transactions. Firms that fail to comply face monetary penalties of up to ₹1 lakh for each violation. The government also confirmed that the Director of FIU-IND issued takedown directions under the Information Technology Act, 2000, ordering the removal of mobile apps and URLs of unregistered crypto platforms operating in India.
The ministry also issued a public warning. It stated that cryptocurrencies and non-fungible tokens remain unregulated in India, posing significant risks. It added that investors may have no legal recourse if losses occur from such transactions.
Offshore Firms Under Scrutiny
According to FIU-IND, 50 VDA service providers have so far registered as reporting entities in compliance with PMLA. Yet, the regulator continues to identify offshore entities catering to Indian users without registration, keeping them outside the country’s anti-money laundering and counter-terrorism financing framework.
Source: Press Release
The notices apply to firms providing services such as exchanges between virtual digital assets and fiat currencies, transfers of cryptocurrency tokens, custody services, or instruments that enable control over digital assets. These activities require mandatory registration with FIU-IND. Offshore platforms ignoring the rules face both financial and operational restrictions, including potential suspension of their services in India.
FIU-IND, set up in 2004, serves as India’s central agency for processing, analyzing, and disseminating information on suspicious financial transactions. The agency has widened its scrutiny of cross-border operations to prevent illegal flows that exploit gaps in the regulatory system.
The finance ministry stated that the regulatory crackdown signals a decisive shift toward tightening oversight. The aim is to compel compliance and prevent foreign firms from bypassing legal frameworks while targeting Indian users. Entities that refuse to comply risk legal action and enforced shutdowns of their local infrastructure.
Asia’s Growing Regulatory Stance
This step is essential in Asia because it demonstrates that regional governments are becoming less tolerant of unregulated crypto operations. The move creates an environment of increased credibility for compliant service providers and strengthens institutional confidence. Following a period when global investors have remained cautious about digital assets, this move from India introduces uncertainty and could prompt capital inflows to regulated platforms.
Meanwhile, in Asia, other countries are taking similar steps. Singapore has asked the unlicensed overseas exchanges to leave its market while reinforcing anti-money laundering checks. Meanwhile, South Korea has required Virtual Asset Service Providers to register with its financial regulators, linking their operations to banks for oversight.
Hong Kong has launched a licensing framework for exchanges and custodians to align with global AML standards. Japan has also established one of the earliest regulatory regimes for exchanges, enforcing strict AML compliance on all registered firms.
Related: Crypto Adoption Grows Among Indian Ministers Amid Policy Delay
Market Implications
Enforcement actions point towards a broader trend in which mere compliance has become critical for survival. The enforcement action conveys that digital assets cannot be allowed to operate outside existing financial laws, thereby reducing illicit avenues. This action builds confidence among investors, both retail and institutional, that regulators will step in to enforce transparency and accountability.
With regulatory pressures stemming from India alongside similar ones from other Asian markets, unlicensed exchanges are graduating from being dark markets. This, in turn, will build momentum toward the harmonization of compliance standards that might transform the operating model for the industry. Those unwilling to adapt may either exit, thus giving those regulating greater control over the market.
