Summary of this article
49 crypto exchanges registered as VDA SPs with FIU.
STRs reveal scams, gambling, terror financing, and illegal activities.
India enforces PMLA compliance, audits, CDD, and taxation rules.
A total of 49 crypto currency exchanges, a majority of them based in India, were registered with the Financial Intelligence Unit (FIU) during the 2024-25 fiscal as part of the country's legal regime to mitigate anti-money laundering and terrorist financing risks emerging from this sector, according to a report.
Also, a "strategic analysis" of suspicious transaction reports (STRs) generated and furnished by these exchanges to the federal agency found "exploitation" of crypto funds for "serious" criminal activities like hawala (unaccounted) transactions, gambling, scam, fraud and an instance of operating an illegal adult content website.
In legal parlance, crypto currency is called Virtual Digital Asset (VDA) and the exchanges that trade them are called VDA Service Providers (VDA SPs). These exchanges were brought under India's anti-money laundering regime (Prevention of Money Laundering Act PMLA) linked reporting system in 2023.
Being reporting entities under the PMLA, these exchanges are supposed to furnish STRs to the FIU, a federal agency that works to prevent, deter and detect any misuse or abuse of the Indian financial system.
The VDA SPs also have to determine and report beneficial ownership of wallets, monitor crowdfunding instances aimed to raise capital by Blockchain projects (similar to IPO and called initial coin offering/initial token offering) and track transfers between hosted and un-hosted wallets by being reporting entities.
The report for the 2024-25 financial year accessed by PTI said the crypto currency landscape in India has been "rapidly" evolving and gaining "significant" attention in recent years due to its potential to "transform" the financial sector and provide opportunities for wealth creation.
"However, VDAs, VDA SPs have certain potential money laundering and terror financing risks, owing to their global reach, capacity for rapid settlement, ability to enable peer-to-peer transactions, and potential for increased anonymity and obfuscation of transaction flows and counterparties," it said.
Unlike many countries where more than one government agency handles and supervises crypto currency exchanges, India has designated its FIU (under the Union finance ministry) as the single-point authority for registering and monitoring VDA SPs against money laundering and terrorist financing risks.
The report said, as of March 2025, 49 VDA SPs were registered as reporting entities to FIU, of which 45 exchanges were onshore (based in India) while the rest four were located offshore.
It said the STRs filed by these exchanges during the last fiscal were picked for a strategic analysis and were tagged with "well defined" and "high-risk" categories like scam and fraud, gambling, peer-to-peer scam.
Some STRs were also associated with red flags related to child sexual abuse material (CSAM), terror financing, dark net services and proceeds of crime which highlight the "growing exploitation" of crypto assets for "serious criminal activity", it said.
The report added that the geographic analysis of these STRs found "significant regional concentration of suspicious activities" and also identified the "commonly used digital asset for these illegal activities." It said the agency slapped a total penalty amount of Rs 28 crore during FY 2024-25 against certain "non-compliant" crypto exchanges.
Following the registration as a reporting entity, the crypto exchanges also are required to disclose bank and FI (financial institution) accounts, appoint a designated director and principal officer and provide the required contact details of their platform to the FIU.
The exchanges are also required to implement internal audits, adopt risk-based CDD/EDD (customer due diligence and enhanced due diligence) and sanctions screening and undertake periodic risk assessments for sharing with the federal agency.
The report said India has responded to risks emanating from crypto currency and their exchanges in the form of several legislative actions like the introduction of taxation of income on crypto transactions and withholding taxes under the provisions of the Income-Tax Act.
