India’s Financial Intelligence Unit has beefed up regulatory enforcement on virtual currency exchanges, putting the sector in line with anti-money laundering standards to handle risks from illicit financial flows.
In this regard, it is reported that 49 cryptocurrency exchanges were registered as reporting entities in the fiscal year 2024-25, with fines imposed amounting to ₹28 crore for non-compliance.
Mandatory Registration Under Anti-Money Laundering Law
According to the amended PMLA dated 7th March 2023, all Virtual Digital Asset service providers, including cryptocurrency exchanges, have to declare their operations with the FIU-IND.
This will be applicable not only to domestic platforms but also to foreign ones serving Indian users, irrespective of their physical presence in the country.
The requirement, confirmed in official notifications, ensures oversight over the transactions with a view to preventing misutilization.
Measures against Non-Compliant Offshore Platforms
FIU-IND sent notices to 25 offshore cryptocurrency exchanges on October 2, 2025, for not complying with the norms regarding registration and reporting.
The entities that won’t comply with the regulations shall face punitive actions, including the restriction of operations and the banning of services in India, as mentioned in the government’s press information.
The action, mentioned in the information released by the Press Information Bureau, shall be taken against entities such as Huione and Paxful, among others.
Stronger AML and KYC Requirements
Exchanges that are registered will have to comply with more stringent Know Your Customer (KYC) checks.
Platforms will have to make reports to FIU-IND and share information with the concerned authorities.
The above-mentioned rules, as framed under the PMLA regime, have to be adhered to by digital exchanges just as regular financial entities.
The FIU Report points to the frequent use of cryptocurrency in scams as well as terrorist financing.
Cybersecurity Audits and Operational Controls
Crypto exchanges need to undertake cybersecurity audits by CERT-In empanelled auditors, as stated in an FIU circular issued on September 15, 2025.
This has been required in view of cyber threats, as crypto exchanges need to ensure data protection standards on par with those of banks.
Such audits need to be conducted by crypto exchanges.
Market Impact and Industry Response
The new rules increase the cost of compliance for smaller trading platforms but provide clarity in the industry.
Of the trading platforms that are registered, 45 are onshore and four are offshore. Some companies from other countries have registered, while others may pull out due to challenges.
The new policies ensure that competition drives innovation in the sector.
Implications for Crypto Users
In turn, users enjoy better protection and more transparency but at some cost in terms of anonymity.
Regulators strongly suggest that trading be done on registered platforms only to avoid such risks.
As a result, the FIU minimizes exposure to fraud through constant monitoring of transaction patterns.
A Shift Toward Structured Regulation
These steps take India from minimal regulations to full-fledged regulation of VDAs as per international action against illicit finance.
Further developments are expected, including potential tax adjustments, as the sector evolves.
