Key Highlights
- ndia is building a Virtual Asset Lab to detect unregistered offshore crypto platforms (oVASPs) using analytics and web tracking.
- So far, 85 illegal oVASP websites have been taken down by directing social media, web hosts, and internet providers.
- Offshore platforms are bypassing Indian rules, allowing Indian users to trade without proper KYC or tax compliance.
The Indian government is actively working to set up a Virtual Asset Lab to detect unregistered virtual asset service providers that are not based in the country. The lab would use analytics and web tracking tools to monitor foreign platforms that let Indian users trade virtual assets without following the rules.
The project is led by FIU-India and the Home Ministry to ensure virtual asset trading stays legal and safe in India.
Tracking illegal offshore platforms
According to a report from the Financial Action Task Force (FATF), efforts to create the lab are ongoing. The report also explained that FIU-India and the Home Ministry have already asked social media, web hosts, and internet providers to remove content from illegal oVASPs.
“So far, 85 URLs pertaining to unregistered non-compliant oVASPs have been taken down,” the report said. The lab would allow authorities to continuously track suspicious virtual asset activity and identify platforms operating outside India’s legal framework.
Working with multiple agencies on the project
The country’s Virtual Assets Contact Sub-Group, created in 2023, is working on the project. The group includes law enforcement, intelligence agencies, and regulators.
According to the report, the group holds regular meetings to identify emerging risks and create strategies for supervision. FIU-India is also working with banks, payment gateways, and local VASPs to develop Red Flag Indicators (RFIs) that help detect irregular activity quickly.
Indians’ shift to foreign exchanges
Offshore VASPs are foreign-registered platforms that offer services to Indian clients while bypassing Indian rules. They often allow deposits via UPI or card networks and withdraw funds to Indian accounts through local intermediaries.
After India introduced a virtual asset tax in 2022, many traders shifted from regulated Indian VASPs to platforms outside the country. However, these platforms do not comply with India’s KYC rules, travel rule obligations, or tax laws.
FIU-India is currently designated as India’s money laundering regulator for virtual digital asset service providers. The agency can take supervisory actions, issue notices, and require entities to comply with the law.
The lab, once fully operational, is expected to provide a continuous monitoring system for offshore platforms, which aims to help the country reduce financial risks and ensure virtual asset trading follows legal and tax rules.
Also Read: ₹85 Cr USDT Fraud: 70+ Mule Accounts Linked to India-China Route
