India Tightens Noose On Offshore Crypto Platforms, Virtual Asset Lab To Track Illegal Trading Networks

New Delhi – India is intensifying its fight against unregulated cryptocurrency platforms with the launch of a Virtual Asset Lab under the Financial Intelligence Unit-India (FIU-India). The lab is tasked with detecting and monitoring offshore crypto exchanges operating without regulatory approval, amid rising concerns about cryptocurrency-related financial fraud, money laundering, and cross-border cybercrime targeting Indian users.

Monitoring Offshore Crypto Platforms

Authorities report that several offshore crypto platforms were facilitating deposits through UPI, debit, and credit cards while routing withdrawals via intermediaries and mule accounts to evade regulatory oversight. In response, FIU-India has issued compliance notices and taken action to shut down around 85 non-compliant URLs offering trading services to Indian users without registration under India’s anti-money laundering framework.

Enforcement Challenges

Offshore Virtual Asset Service Providers (oVASPs) often operate without any physical presence in India, making enforcement and cross-border oversight difficult. To address this, FIU-India is collaborating with banks, payment aggregators, and compliant domestic crypto exchanges to develop Red Flag Indicators, enabling rapid detection of suspicious crypto transactions and laundering networks.

Regulatory Push Amid Rising Crypto Fraud

The crackdown comes in the backdrop of increasing offshore trading, partly driven by India’s 2022 crypto taxation rules, which imposed a 30% tax on gains and a 1% TDS on crypto transactions. Authorities have also established a multi-agency task force to monitor emerging risks, share intelligence, and study new trends in digital asset crimes.

Cyber intelligence firms, such as Algoritha Security, are reportedly providing advanced blockchain forensics to trace, freeze, and recover cryptocurrencies fraudulently siphoned from victims. Additionally, the Future Crime Research Foundation, under Prof. Triveni Singh, is assisting law enforcement agencies in tracking complex crypto laundering chains and enhancing investigative capabilities in the digital asset ecosystem.

This move underscores India’s commitment to curbing illegal crypto trading, safeguarding investors, and ensuring compliance with domestic and international anti-money laundering laws.