India’s Financial Intelligence Unit (FIU-IND) has turned its attention to large over-the-counter (OTC) cryptocurrency deals being executed by premier clients on Indian exchanges, according to a report by The Economic Times.
Following a meeting at the end of May 2026, FIU-IND individually told at least three leading crypto exchanges to share OTC trade data for transactions above $10,000 (~₹9.44 lakhs), two people with direct knowledge of the matter told ET.
These off-market transactions, negotiated directly between the platform and the client and insulated from open-market price volatility, are frequently carried out by closely held private entities whose true beneficial owners are sometimes difficult to trace.
The directive may be connected to specific intelligence received by the agency, the report noted. FIU-IND, an arm of the Ministry of Finance, is the nodal agency responsible for tracking suspicious transactions and combating money laundering under the Prevention of Money Laundering Act (PMLA).
How OTC deals work and why they attract scrutiny
OTC deals operate differently from standard exchange trading. Instead of anonymous order matching, the platform takes the client’s order on its own books, uses its funds to purchase the cryptocurrency, and then finds a counterparty. The order size and price are negotiated upfront, shielding large transactions from the price slippage that would occur on an open order book. These deals routinely outstrip volumes generated by retail traders.
One of the most significant concerns is the preferential treatment OTC clients receive on withdrawals. Once a cryptocurrency is withdrawn from the custody of an exchange to an external private wallet, the assets can be moved to anyone, anywhere in the world. While most large exchanges conduct enhanced due diligence on destination wallets, they have no control over assets after withdrawal.
OTC investors, as part of their arrangements with platforms, typically insist on having a greater say over the timing and conditions of these withdrawals.
KYC challenges and the mule account problem
The know-your-customer challenge with OTC players is structurally different from retail onboarding. OTC clients are primarily private companies, and verifying their identity requires tracing the chain of ownership to ultimate beneficial owners (UBOs). Corporate structures can obscure who actually controls the funds.
“There are instances where fake IDs are used. This is typically the case with mule account holders in banks. The KYC and anti-money laundering software used by banks are almost the same as the one used by crypto service providers,” an official with a crypto intermediary told ET.
FIU-IND did not respond to queries. However, a government official confirmed that exchanges are expected to have preserved OTC trade records since January 2026, and the agency can demand data when suspicious transaction reports (STRs) submitted by platforms are insufficient or when investigative agencies require more information.
The scope of FIU-IND’s request could also extend to inter-intermediary trades, where a service provider acts as a broker with another platform and finds a counterparty, or buys crypto as a principal and sells it down. Such trades are usually OTC deals and may not get reported to FIU-IND in the regular course, creating a potential blind spot.
Part of a wider regulatory push
The OTC scrutiny fits into a broader tightening of India’s crypto compliance framework in 2026. In January, FIU-IND issued updated AML/CFT guidelines mandating CERT-In cybersecurity audits and tightened Travel Rule norms. The agency also rolled out stricter KYC requirements, including live selfie verification and geo-tracking during onboarding. As of early 2026, 49 crypto exchanges have registered with FIU-IND as reporting entities.
Meanwhile, the CBDT formally classified crypto assets as financial assets under the FATCA/CRS framework in March 2026, and the Ministry of Home Affairs’ PRAHAAR strategy flagged crypto wallets as potential tools for terror financing. India has also committed to implementing the OECD’s Crypto-Asset Reporting Framework (CARF) by April 2027.
The message from India’s financial intelligence apparatus is clear: no corner of the crypto market, on-exchange or off-market, will remain outside the scope of oversight.
Also Read: Indian Crypto Users Continue Facing Bank Account Freezes over P2P Trades
