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As part of India’s tightening oversight of the crypto sector, 49 cryptocurrency exchanges were registered with the Financial Intelligence Unit (FIU) during FY 2024–25, most of them domestic entities, according to a report accessed by PTI. The registrations aim to reduce risks related to financial crime and illicit fund flows involving digital assets.
The report highlights India’s evolving approach to supervising the rapidly expanding digital asset ecosystem, which has gained significant attention due to its potential to reshape financial services and create new investment opportunities.
Crypto Exchanges Under India’s AML Framework
In legal terms, cryptocurrencies are classified as Virtual Digital Assets (VDAs), while platforms facilitating their trade are referred to as VDA Service Providers (VDA SPs). These exchanges were brought under India’s Prevention of Money Laundering Act (PMLA) reporting framework in 2023.
As reporting entities under the PMLA, VDA SPs are required to submit Suspicious Transaction Reports (STRs) to the FIU, a federal agency under the Union finance ministry responsible for detecting, preventing, and deterring misuse of India’s financial system.
Unlike several other jurisdictions where crypto oversight is divided among multiple regulators, India has designated the FIU as the single-point authority for registering and monitoring crypto exchanges for AML and counter-terrorist financing compliance.
Majority of Registered Exchanges Based in India
The report noted that as of March 2025, all 49 registered VDA SPs were officially onboarded with the FIU. Of these, 45 exchanges were onshore, meaning they are based in India, while four were offshore platforms operating from outside the country.
Following registration, crypto exchanges are required to disclose their bank and financial institution accounts, appoint a designated director and principal officer, and provide verified contact details of their platforms to the FIU.
They must also implement internal audits, adopt risk-based customer due diligence (CDD) and enhanced due diligence (EDD) mechanisms, conduct sanctions screening, and undertake periodic risk assessments for regulatory review.
STR Analysis Flags Serious Criminal Activity
A key finding of the report was a strategic analysis of STRs filed by registered crypto exchanges during the last fiscal year. According to the FIU, these reports revealed the exploitation of crypto assets for a range of serious criminal activities.
High-risk categories identified in the STRs included scams and fraud, online gambling, peer-to-peer scams, and hawala-style unaccounted transactions. The analysis also flagged an instance involving the operation of an illegal adult content website funded through crypto transactions.
Some STRs were further linked to red flags involving child sexual abuse material (CSAM), terror financing, dark net services, and proceeds of crime, underscoring what the agency described as a “growing exploitation” of digital assets for illegal purposes.
Geographic Patterns and Asset Usage Identified
The FIU’s report added that a geographic analysis of suspicious transactions revealed a significant regional concentration of illicit activity, although specific regions were not disclosed. The agency also identified commonly used digital assets linked to these illegal transactions, indicating emerging behavioral patterns within crypto-enabled crime.
These insights, the report said, are being used to strengthen risk-based supervision and improve coordination between crypto exchanges and law enforcement agencies.
₹28 Crore Penalty Imposed on Non-Compliant Exchanges
During FY 2024–25, the FIU imposed penalties totaling ₹28 crore on certain crypto exchanges found to be non-compliant with AML and reporting requirements. While the report did not name the entities involved, it emphasized that enforcement actions were taken to reinforce compliance discipline across the sector.
The penalties signal increased regulatory scrutiny as India tightens oversight of crypto platforms operating within or serving the domestic market.
India’s Legislative Response to Crypto Risks
The report stated that India has responded to risks associated with VDAs through multiple legislative and policy measures. These include the introduction of taxation on income from crypto transactions and the implementation of withholding taxes under the Income-Tax Act.
According to the FIU, while cryptocurrencies offer innovation and financial inclusion opportunities, their global reach, rapid settlement capability, peer-to-peer nature, and potential anonymity continue to pose money laundering and terror financing risks.
Strengthening Oversight Amid Crypto Growth
The findings reflect India’s attempt to strike a balance between allowing innovation in the digital asset space and safeguarding the financial system from abuse. With crypto adoption growing and transaction volumes increasing, the FIU’s role as the central supervisory authority is expected to expand further.
As regulatory expectations tighten, crypto exchanges operating in India are likely to face greater compliance costs, deeper transaction monitoring, and stricter enforcement, shaping the next phase of the country’s digital asset landscape.