India’s financial watchdog expands crypto oversight, enforcing strict AML rules while penalizing violations to strengthen transparency and compliance nationwide.
India’s Financial Intelligence Unit has tightened crypto oversight after registering 49 exchanges during FY 2024–25. Notably, user-facing enforcement increased as the penalty reached INR 2.8 billion previously. Meanwhile, the move indicates greater surveillance of digital asset activity at the national level.
FIU Brings 49 Crypto Exchanges Under AML Framework
According to the FY 2024 – 25 report, FIU-IND observed 49 registered crypto exchanges operating in a compliant environment. Importantly, 45 are domestic entities, and 4 are offshore operators. Therefore, authorities gained wider control over the burgeoning virtual digital asset market throughout India.
The report, viewed January 5, 2026, addressed tougher procedures for screening at registration. As a result, what the framework delivers is the development of a regulatory moat surrounding compliant exchanges. Moreover, all of the registered providers are required to actively report suspicious financial activity to the government agencies.
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FIU emphasized conducting a strategic analysis of Suspicious Transaction Reports submitted by these exchanges. However, crypto is still susceptible to grave criminal exploitation, authorities said. Specifically, red flags included hawala-linked transfers, illegal gambling proceeds, and complex fraud schemes.
Despite the risks, FIU recognized crypto’s role in financial innovation and wealth creation. Nevertheless, there needs to be oversight to prevent illicit use. Therefore, the regulators maintain the balance between innovation and enforcement in harnessing the digital finance sector throughout India.
Compliance Rules Expand as Penalties Hit INR 2.8 Billion
During the last financial year, FIU had totaled INR 2.8 billion in penalties against violators. As a result, enforcement efforts served to strengthen compliance expectations under the existing financial laws. Meanwhile, the supervision increased underthe Prevention of Money Laundering Act, 2002.
Under the PMLA rules, all the VDA service providers are required to register as a reporting entity. As a result, both domestic and offshore platforms must have the same compliance requirements. Moreover, failing to comply may result in financial penalties and operational restrictions.
Registered exchanges must adopt rigorous customer due diligence standards on a regular basis. It is therefore important that platforms undertake thorough know your customer (KYC) checks and enhanced due diligence. In addition, exchanges have to screen users for sanctions lists on a regular basis.
Transaction monitoring obligations became enhanced under FIU supervision as well. Specifically, exchanges are required to make Suspicious Transaction Reports and Cross-Border Wire Transfer Reports. Furthermore, all pertinent data must be shared in due course with authorities.
Record-keeping requirements dictate 5 years of storage of transactions and wallet ownership. Meanwhile, beneficial ownership transparency continues to be on the radar for investigators. Additionally, exchanges are required to keep detailed records of the identities of all users.
FIU to Intensify Crypto Oversight as Adoption Expands
Each registered entity must have designated compliance officers and responsible directors. As a result of the aforementioned importance, accountability has evolved to senior management levels. Moreover, periodic risk assessments are required on exposure to money laundering threats.
FIU said the move in regulation is to increase transparency and discourage criminal abuse. Therefore, compliant domestic platforms could have the effect of drawing more trader confidence. Meanwhile, enforcement promotes migration from unregistered offshore venues.
Officials believe improved oversight will be good for the long-term stability of India’s crypto ecosystem. Additionally, steady AML enforcement contributes to wider financial integrity objectives. As a result, India is positioned to grow regulated digital assets.
Industry observers say the framework could alter the competition to exchange across the country. However, the cost of compliance may pose a challenge to smaller operators. Nevertheless, regulators have enforcement powers to defend investors as well as nationwide security interests.
FIU concluded that the level of monitoring will increase as crypto adoption is further amplified. Meanwhile, authorities will develop the detection tools with the STR data. Ultimately, oversight is to integrate crypto in India’s financial system in a responsible manner.
Source: https://www.livebitcoinnews.com/india-fiu-tightens-crypto-oversight-with-49-registered-exchanges/
