India’s anti-money-laundering (AML) framework for cryptocurrency platforms has tightened significantly. This brings Virtual Digital Asset Service Providers (VDA SPs) into the financial-monitoring system applied to reporting entities under the Prevention of Money Laundering Act (PMLA).

Since March 2023, businesses carrying out specified VDA activities for customers have fallen within the PMLA framework. Covered activities include exchanging VDAs for fiat currency, exchanging one VDA for another, transferring VDAs, safeguarding or administering VDAs, and providing financial services linked to an issuer’s offer or sale of a VDA.

Registration and Risk-Based Compliance

Crypto platforms operating in India must register with the Financial Intelligence Unit-India (FIU-IND) as reporting entities. Importantly, these obligations are activity-based. FIU-IND says they apply to both offshore and onshore providers serving the Indian market, regardless of whether the company has a physical presence in India.

FIU-IND’s AML/CFT guidelines for VDA service providers were updated on January 8, 2026. Its registration process has also become more operationally demanding. FIU-IND requires applicants to demonstrate systems covering KYC, transaction monitoring, blockchain analysis, Travel Rule compliance, and sanctions screening.

KYC and Customer Due Diligence

AML compliance requirements start with customer identification and verification. Platforms must determine the purpose and nature of the customer relationship and can identify the beneficial owners if needed.

Compliance processes do not end once the customer is on board. Ongoing due diligence requires the platform to analyze transactions performed by its customers in order to determine whether they meet its risk and money source limits. Some higher-risk customers may need extra investigation.

Transaction Monitoring and Reporting

Systems capable of detecting suspicious transactions are required for VDA platforms. PMLA mandates that any suspicious activity must be identified and notified through the necessary channels.

This makes blockchain analytics important for cryptocurrency companies. These platforms can use a combination of on-chain wallet screening processes, transaction history, customer details, reliability databases, and other indicators of risk in the process of identifying suspicious flows of money.

It is important to keep records, as they may be used to provide information about transactions and customers to the corresponding authorities. The framework that has been developed by FIU-IND says that VDA providers are obliged to comply with the reporting and recordkeeping requirements.

Enforcement is Increasing

The consequences of non-compliance became clearer on September 9, 2026, when FIU-IND issued notices under Section 13 of the PMLA to 15 VDA service providers. The list included Weex, Blofin, Bitunix, DigiFinex, Toobit, XT.com, WOO X, Pionex, ChangeNow and WhiteBIT.

Authorities also issued notices seeking takedown of the applications or URLs of the identified entities for public access in India. The action reinforces that offshore status does not exempt a platform serving Indian users from AML obligations.

Final Thoughts

India now treats crypto AML controls as core compliance infrastructure. VDA platforms need FIU registration, effective KYC, ongoing monitoring, recordkeeping, and suspicious-transaction reporting. With enforcement extending to offshore providers, compliance is becoming essential for maintaining access to the Indian market.

Also Read: Crypto Compliance: What are KYC, AML, Travel Rule Requirements?

FAQs:

1. Do crypto platforms need to register with FIU-IND in India?

Yes. VDA service providers carrying out activities covered under the PMLA must register with FIU-IND as reporting entities and comply with applicable AML requirements.

2. What KYC requirements apply to crypto platforms in India?

Platforms must identify and verify customers and, where applicable, beneficial owners. They must also conduct ongoing due diligence based on customer activity and risk profiles.

3. What transactions must crypto platforms monitor?

VDA platforms must monitor customer and transaction activity for suspicious patterns. Potentially suspicious transactions must be identified and reported through the prescribed channels.

4. Do India’s AML requirements apply to offshore crypto exchanges?

Yes. The requirements are activity-based, meaning offshore platforms serving Indian users can fall within the AML framework even without a physical presence in India.

5. What happens if a crypto platform does not comply with FIU-IND requirements?

Non-compliant platforms can face regulatory action under the PMLA. Recent enforcement has included notices to VDA providers and action seeking restrictions on their apps and URLs in India.