India has stepped up its regulatory action against cryptocurrency platforms that serve users in the country without meeting mandatory anti-money laundering requirements.
The Financial Intelligence Unit-India (FIU-IND) has issued compliance notices to 15 Virtual Digital Asset Service Providers (VDA SPs) and sought the removal of their applications and website URLs that remain publicly accessible in India. The action has been taken under the Prevention of Money Laundering Act, 2002 (PMLA).
The latest move shows that India’s regulatory requirements can apply to crypto platforms even when those companies are based outside the country.
Why Has the Government Taken Action?
The FIU-IND said the concerned platforms were operating in India without complying with applicable requirements under the country’s anti-money laundering framework.
VDA service providers carrying out specified crypto-related activities for users in India are required to register with the FIU-IND as reporting entities and follow obligations prescribed under the PMLA and related rules.
These requirements include maintaining appropriate records, reporting relevant transactions and following other measures intended to prevent financial crimes.
Importantly, the regulatory requirement is based on the activities performed by a platform rather than simply on whether the company has a physical office in India.
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Which Crypto Platforms Are Named?
The 15 VDA service providers facing the latest compliance action are:
- Weex
- Blofin
- Rezorex
- Bitunix
- DigiFinex
- Toobit
- XT.com
- Latoken
- WOO X
- Pionex
- ChangeNow
- SimpleSwap
- FixedFloat
- WhiteBIT
- Guardarian
The FIU-IND notices relate to these entities under Section 13 of the PMLA. Separate action has also been initiated to seek the removal of their applications and URLs from public access in India.
What Does the PMLA Require From Crypto Platforms?
India brought certain Virtual Digital Asset service providers within its anti-money laundering and counter-financing of terrorism framework in March 2023.
Under this framework, platforms involved in specified activities must register with FIU-IND and comply with reporting and record-keeping requirements.
The activities covered include exchanging virtual digital assets for traditional currencies, transferring digital assets and providing custody or administration services related to such assets.
The rules apply to both Indian and overseas entities when their activities fall within the Indian regulatory framework.
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Overseas Platforms Are Also Covered
One important aspect of the government’s latest action is its emphasis that a company does not escape Indian compliance requirements simply because it operates from another country.
The FIU-IND framework is activity-based. Therefore, an offshore platform providing covered services to the Indian market may still have to meet India’s AML obligations.
This approach is aimed at preventing companies from using their overseas location to avoid regulatory responsibilities while continuing to provide services to Indian users.
Why Were Apps and Websites Targeted?
Along with issuing notices under the PMLA, the FIU-IND has sought the takedown of applications and URLs connected with the identified service providers.
The action has been initiated in the capacity of the FIU-IND Director as the designated nodal officer under Section 79(3)(b) of the Information Technology Act, 2000.
The objective is to restrict public access in India to platforms that, according to the authorities, were providing covered services without fulfilling the applicable legal requirements.
What Does This Mean for Crypto Users?
The development is significant for people who use offshore or international crypto platforms.
Users should not assume that a platform is permitted to operate in India merely because its website or mobile application is accessible from the country.
The government’s latest action also highlights the importance of checking whether a crypto service provider has completed the required registration and compliance process before using its services.
Users should also understand that regulatory action against a platform can affect its availability and access within India.
Government Warns About Crypto and NFTs
The Ministry of Finance has again cautioned the public about the risks associated with crypto products and non-fungible tokens (NFTs).
The government has stated that crypto products and NFTs remain unregulated in India and can involve significant risks. Investors may also have limited or no regulatory recourse if they suffer losses through such transactions.
This warning is particularly relevant when users consider platforms operating outside India’s established compliance framework.
India’s Crypto Regulation Is Becoming More Focused on Compliance
The latest action does not represent a blanket prohibition on every cryptocurrency platform. Instead, it reflects the government’s continuing effort to bring crypto-related service providers within India’s anti-money laundering system.
Earlier government responses have also clarified that crypto and virtual assets are not comprehensively regulated as conventional financial products in India, while FIU-IND registration is used to monitor the sector from an AML and counter-terror financing perspective.
The action against these 15 platforms therefore reinforces an important point: companies providing specified virtual digital asset services to Indian users are expected to comply with applicable AML requirements, regardless of where they are headquartered.
What Should Crypto Investors Do?
Crypto users should exercise caution when selecting a trading or digital asset platform.
Before depositing money or transferring digital assets, users should check the platform’s regulatory status and understand the risks associated with offshore services.
They should also keep proper records of transactions and avoid assuming that access to a website automatically means that the service has regulatory approval in India.
The latest FIU-IND action sends a clear message that compliance with India’s anti-money laundering framework is becoming an increasingly important requirement for crypto businesses serving the Indian market.