India is ramping up efforts to monitor unregistered offshore cryptocurrency platforms. The country is developing an indigenous Virtual Asset Lab aimed at identifying high-risk offshore virtual asset service providers (oVASPs) using advanced analytics and web surveillance tools.
According to a Financial Action Task Force (FATF) report, India is actively working to stop money laundering through unregulated crypto platforms. To do this, the Financial Intelligence Unit (FIU)-India and the Home Ministry are teaming up with social media sites, web hosts, and internet service providers to take down illegal or unauthorized crypto websites.
When platforms raise multiple red flags, FIU-India issues notices directing them to comply or cease operations under relevant money laundering regulations.
Offshore VASPs often onboard Indian customers with minimal or no KYC, accept deposits via domestic payment channels like UPI, and allow withdrawals routed through local intermediaries. Hence, many Indian clients now use offshore platforms that escape Indian anti-money laundering, tax, and KYC obligations. This trend followed India’s 2022 virtual asset tax regime, including a 1% tax on transfers deducted at the source.
In addition, India has better coordination of various government agencies. In fact, in 2023, the Department of Revenue established a Virtual Assets Contact Sub-Group, which comprises law enforcement agencies, intelligence agencies, and regulatory agencies.
At the same time, FIU-India formed a special team with local crypto exchanges, banks, and payment systems to develop Red Flag Indicators (RFI) for the identification of suspicious transactions.
(adsbygoogle = window.adsbygoogle || []).push({});The FATF warned that peer-to-peer crypto transfers using self-managed wallets carry big money-laundering risks because they bypass regulated exchanges. Around the world, including in the United States, regulators are rethinking how offshore crypto platforms should operate. The US Commodity Futures Trading Commission is even considering applying its rules for foreign trading platforms to international crypto exchanges.
In a separate report last week, FATF also urged countries to watch stablecoins closely, enforce anti-money-laundering rules, and monitor self-custody wallets more strictly. Through the Virtual Asset Lab and boosting inter-agency coordination, India wants to stop offshore platforms from dodging regulations and ensure crypto trading remains safer for local users.
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