A total of 49 cryptocurrency exchanges were registered with the Financial Intelligence Unit (FIU) during the 2024-25 fiscal year, marking a major step in India’s efforts to regulate the digital asset sector and mitigate risks related to money laundering and terrorist financing. According to a recent report by the federal agency, the majority of these registered entities are based in India, with 45 onshore platforms and four offshore exchanges now operating under the country’s legal reporting framework.
The report reveals that a strategic analysis of Suspicious Transaction Reports (STRs) submitted by these exchanges uncovered significant exploitation of crypto funds for serious criminal activities. Federal analysts identified instances of digital assets being used for hawala transactions, illegal gambling, fraudulent scams, and even the operation of an unauthorized adult content website. These findings underscore the “high-risk” nature of Virtual Digital Assets (VDAs) due to their capacity for rapid, peer-to-peer global settlements and their potential for transaction obfuscation.
Under the Prevention of Money Laundering Act (PMLA) guidelines established in 2023, these Virtual Digital Asset Service Providers (VDA SPs) are now classified as reporting entities. This designation requires them to perform rigorous duties, including determining the beneficial ownership of digital wallets and monitoring crowdfunding efforts for blockchain projects, such as initial coin offerings. They are also mandated to track transfers between hosted and un-hosted wallets to prevent the flow of illicit capital.
The FIU, operating under the Union Finance Ministry, serves as India’s single-point authority for monitoring these platforms. Beyond reporting, registered exchanges must disclose their bank accounts, appoint a designated director and principal officer, and implement internal audits. They are also required to conduct risk-based customer due diligence (CDD) and sanctions screening to ensure they are not facilitating transactions for blacklisted individuals or organizations.
In addition to monitoring efforts, the agency has taken firm enforcement action against those failing to comply with these regulations. During the 2024-25 fiscal year, the FIU imposed total penalties amounting to ₹28 crore against non-compliant exchanges. This enforcement coincides with broader legislative actions, including the introduction of specific income tax and withholding tax provisions for crypto transactions under the Income-Tax Act.
The report concludes that while the cryptocurrency landscape in India offers potential for financial transformation and wealth creation, its evolution necessitates a robust regulatory net. By bringing these 49 exchanges into the formal reporting fold, the government aims to bridge data gaps and ensure that the growing exploitation of crypto assets for activities such as child sexual abuse material (CSAM) and terror financing is effectively countered.
