Indian cryptocurrency exchanges face regulatory upgrade: 49 officially registered, compliance costs significantly increased

India is significantly strengthening its regulation of digital assets. According to the latest statistics for the 2024-25 fiscal year, 49 cryptocurrency exchanges have been officially registered with the Financial Intelligence Unit (FIU) in India, marking the country’s move to include the crypto sector within a strict anti-money laundering (AML) regulatory framework. This initiative reflects the Indian government’s new balance between promoting innovation and managing risks.

FIU Cracks Down on High-Risk Activities; Crypto Exchanges Must Strengthen Compliance

According to the latest report from the FIU, these registered crypto exchanges are approved based on suspicious transaction report (STR) reviews. The FIU has found that crypto funds are repeatedly used for scams, fraud, gambling networks, unreported transfers, and other high-risk activities. More concerning is that some cases involve dark web services, terrorist financing, and child exploitation materials.

Of the 49 registered crypto exchanges, 45 are based in India, and 4 operate overseas. Unlike many countries where multiple agencies oversee the sector jointly, India’s crypto regulation is centralized under the FIU, a department under the Ministry of Finance. This centralized oversight grants the FIU strong enforcement powers.

In the 2024-25 fiscal year, platforms that failed to comply with AML obligations were fined a total of 28 million rupees. This scale of penalties demonstrates that Indian regulators are actively pushing for compliance through tangible actions.

Multi-Layered Regulatory Framework: AML Requirements for Exchanges

Under the Prevention of Money Laundering Act (PMLA), all crypto exchanges providing virtual digital asset (VDA) services recognized by law must meet strict requirements.

First, exchanges are required to submit suspicious transaction reports and identify wallet holders, tracking token fundraising activities similar to IPOs. More importantly, they must monitor transfers between custodial and non-custodial wallets to prevent funds from flowing into unknown destinations.

After registration, crypto exchanges face additional compliance responsibilities: disclosing banking relationships, appointing dedicated compliance officers, conducting internal audits, performing customer due diligence (KYC) based on risk levels, screening all transactions against sanctions lists, and conducting periodic risk assessments. All this information must be shared with the FIU, creating a transparent regulatory ecosystem.

These requirements mean crypto exchanges need to invest substantial resources into compliance infrastructure, including technology upgrades, staff training, and process restructuring. For small and medium-sized exchanges, these costs can be significant.

Healthy Competition Drives Innovation; Indian Crypto Exchanges Show Resilience

Despite strict regulations, the Indian crypto market remains vibrant. CoinDCX CEO Sumit Gupta recently stated, “India’s crypto market is much more competitive than most people imagine. Healthy competition benefits the ecosystem and drives innovation.” This perspective reflects a positive industry outlook on the regulatory environment.

Notably, beyond the 49 officially registered exchanges, hundreds of unregistered crypto platforms are still operating. This indicates a highly complex competitive landscape in India, with a significant gap between regulatory compliance and market participation.

The Indian government has adopted a relatively balanced approach to regulation. On one hand, it recognizes the transformative potential of cryptocurrencies for financial innovation and wealth creation; on the other, it remains cautious about the risks posed by rapid trading, global reach, and pseudo-anonymity. In addition to AML measures, the government enhances oversight through tax regulations and withholding tax provisions under income tax laws, forming a multi-layered regulatory system.

This policy mix suggests India is exploring a middle path that protects investors and combats illegal activities while allowing compliant crypto exchanges to operate normally. As more exchanges complete registration and adapt to new rules, India’s crypto market may enter a more regulated and systematic development phase.