Key Highlights
- Forty-nine crypto exchanges have registered with the Financial Intelligence Unit (FIU), bringing most of India’s digital asset platforms under the anti-money laundering law.
- Out of the 49 registered platforms, 45 are India-based, while four offshore exchanges serve Indian users.
- FIU found crypto funds were misused for hawala transfers, scams, gambling, fraud, and even an illegal adult content case.
India’s cryptocurrency sector is steadily moving deeper into the regulatory mainstream. According to the 2024-25 annual report from the Financial Intelligence Unit of India (FIU-India), there are currently 49 Virtual Digital Asset Service Providers (VDA-SPs) that are registered as Reporting Entities in the Prevention of Money-Laundering Act (PMLA).
Out of these, 45 are based in India, while four operate from offshore locations but serve Indian users. The move comes after the FIU’s strategic analysis of suspicious transaction reports (STRs) submitted by crypto exchanges.
The review found growing exploitation of crypto funds for serious criminal activities. These include hawala-style unaccounted transfers, gambling networks, scams, and fraud. One case was also linked to an illegal adult content website.
Crypto under India’s AML law
In India, cryptocurrencies are categorized as Virtual Digital Assets (VDAs), and cryptocurrency exchanges are termed as Virtual Digital Assets Service Providers (VDA SPs).
In 2023, these entities came within the ambit of the Prevention of Money Laundering Act (PMLA) by being connected to the reporting system. This action ensured that crypto-exchange platforms belonged to the same compliance category as banking, financial, and payment entities.
As reporting entities, VDA SPs must submit Suspicious Transaction Reports (STRs) to the FIU, which serves as India’s central financial intelligence agency. The FIU is responsible for receiving, analyzing, and sharing financial data with enforcement agencies to prevent and detect money laundering and terror financing.
According to the FIU’s annual report, India’s crypto ecosystem has been “rapidly evolving” and drawing “significant” attention due to its potential to reshape financial services and open new channels for wealth creation. However, this growth also brings risk.
“VDAs and VDA SPs have potential money laundering and terror financing risks,” the agency said, pointing to their global reach, capacity for rapid settlement, peer-to-peer (P2P) structure, and the ability to obscure transaction trails and counterparties.
A single authority for crypto oversight
Unlike some countries where crypto oversight is spread across several regulators, India has designated the FIU as the single-point authority for registering and monitoring crypto exchanges for AML and counter-terror financing compliance.
As of March 2025, FIU said 49 VDA SPs were officially registered as reporting entities. Registration is mandatory for any platform offering crypto services to Indian users.
The process includes background screening, direct interactions with the FIU, and the submission of corporate, banking, and business information. The exchanges must prove the existence of systems that can conduct know-your-customer (KYC) checks, sanctions screening, blockchain tracking, transaction monitoring, and Travel Rule compliance.
Officials say the aim is to ensure that only traceable and accountable platforms operate in the Indian market.
What registered exchanges must do
Once registered, exchanges must comply with detailed obligations. They must verify customers at onboarding and conduct annual re-KYC. They must identify and report the beneficial owners of wallets. They must also monitor token-raising activity by blockchain projects, including initial coin offerings (ICOs) and initial token offerings (ITOs).
This includes requiring exchanges to reveal all their bank and financial institution accounts, as well as appointing a designated Director and Principal Officer for AML compliance. Additionally, they are also required to hold the complete platform information at the FIU.
In addition to these, they are compelled to conduct internal audits, use a risk-based approach to customer due diligence, screen for sanctions, and periodically assess risk to the agency.
What the FIU’s crypto analysis found
During FY 2024–25, STRs filed by crypto exchanges were selected for detailed strategic analysis.
These were categorized under “well-defined” and “high-risk” segments, including scam and fraud networks, gambling and betting operations, and peer-to-peer crypto abuse.
Some STRs also carried red flags linked to child sexual abuse material (CSAM), terror financing, darknet services, and laundering of criminal proceeds. The FIU said these findings pointed to the “growing exploitation of crypto assets for serious criminal activity.”
The agency’s geographic mapping of STRs showed a significant regional concentration of suspicious crypto activity. The analysis also identified commonly used digital assets involved in illegal transactions, though the report did not publicly name specific tokens.
Enforcement and penalties
FIU’s oversight is also backed by enforcement action. During the 2024–25 financial year, the agency imposed penalties totalling ₹28 crore on crypto exchanges found to be non-compliant with PMLA requirements.
These penalties followed risk-based inspections, both remote and onsite. The FIU examined whether platforms had functioning KYC systems, effective transaction monitoring tools, proper record-keeping, and timely STR reporting.
Where serious gaps were found, exchanges were fined and directed to implement corrective measures.
Officials have also signalled a tougher stance on unregistered offshore platforms, which are seen as higher risk due to limited accountability and weaker supervision.
Crypto linked to wider investigations
The FIU’s work in crypto has extended beyond compliance audits. During the year, the agency’s operational and tactical analysis units supported major investigations involving digital assets and cross-border financial trails.
In one case, the FIU-shared intelligence helped Indian agencies trace funds and attach immovable property worth ₹205 crore in a foreign jurisdiction.
The agency also examined hawala-type operations in which large sums were alleged to have moved through crypto wallets linked to private wallets and unregistered offshore platforms.
In another case, cryptocurrency payments were used by an illegal adult content website to route funds into India, highlighting how VDAs can be used to bypass traditional payment channels.
A sector under closer watch
To handle the increasing amount of data associated with cryptocurrencies, the FIU makes use of its FINnet 2.0 financial intelligence platform to verify the reports that are being received and use analytical means to identify risky transactions.
India has also attempted to deal with the risks related to crypto through legislative provisions, such as taxation on the income from crypto in the Income-tax Act.
Now that most registered exchanges operate in India, home-based exchanges play an important role in identifying crypto-suspicious transactions.
FIU stated that reporting entities constitute the front line of defense against financial crimes. The organization has increased consultation sessions, developed red flag indicators, and increased collaboration with enforcement agencies, as well as the international community.
The regulation of 49 cryptocurrency exchanges is indicative of an evolving paradigm of treating this phenomenon in India. The cryptos were, of course, not part of mainline activities earlier. However, they are now an integral part of financial intelligence in this country, albeit subject to strict regulatory scrutiny.
Also Read: India’s ED Raids 9 Sites to Crack Down on Fake Crypto Syndicate
