FIU Notices and Indian Cryptocurrency Exchanges.

FIU Notices and Indian Cryptocurrency Exchanges

The world of cryptocurrencies is on a roller coaster, and regulators are trying to find a balance between innovation and financial security. In a recent development, India’s Financial Intelligence Unit (FIU) has issued notices to leading cryptocurrency exchanges, including Binance, for allegedly operating illegally through offshore entities. The move is part of a broader initiative to bring Virtual Digital Asset Service Providers (VDASPs) under the Anti-Money Laundering/Counter Financing of Terrorism (AML-CFT) framework, highlighting the importance of compliance in the cryptocurrency ecosystem.

Regulatory landscape

The FIU, operating under the Treasury Department of the Treasury, plays a key role in maintaining the integrity of financial systems. In March 2023, cryptocurrency services were officially brought under the AML-CFT framework through an amendment to the Prevention of Money Laundering Act (PMLA) 2002. The move was aimed at curbing illicit financial activities and promoting transparency in the cryptocurrency sector.

Notices were issued under Section 13 of the PMLA, emphasizing the importance of compliance with reporting obligations. Cryptocurrency firms, regardless of their physical presence in India, were expected to report suspicious activities similar to traditional banking institutions. While 31 cryptocurrency firms have met these requirements, the FIU pointed out that several offshore entities that cater to a significant portion of Indian users have failed to register and comply with the AML-CFT framework.

The importance of compliance in Crypto Exchange

Cryptocurrency exchanges operating within a regulatory framework offer a level of security and accountability that offshore entities may lack. Compliance ensures that these platforms adhere to established standards, quickly report suspicious activity and contribute to the overarching goal of preventing money laundering and combating the financing of terrorism.

Advantages of Indian Cryptocurrency Exchanges

  1. Legal protection for users:

Operating within a regulatory framework, Indian cryptocurrency exchanges provide legal protection to users. In the event of disputes or unforeseen circumstances, users have a legal remedy that may not be readily available when dealing with offshore entities.

2. Enhanced security measures:

AML-CFT compliance often requires robust security measures. In compliance with regulatory standards, Indian Crypto exchanges prioritize the security of user funds and personal information and offer a safer trading environment.

3. Government Recognition:

Cryptocurrency exchanges operating in compliance with Indian regulations enjoy some recognition from the government. This recognition can contribute to a more stable and predictable operating environment for both exchanges and their users.

4. User-friendly reporting mechanisms:

Indian Crypto exchanges are implementing user-friendly suspicious activity reporting mechanisms as part of the regulatory framework. This not only meets legal requirements but also creates a transparent and accountable system for users.

5. Integration with traditional banking:

Compliance often involves working with traditional banking institutions. Being compliant with the regulatory framework, Indian Crypto exchanges facilitate seamless integration with banking services and ease the process of depositing and withdrawing funds for users.

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Possible risks of using offshore platforms

  1. Legal ambiguities:

Offshore cryptocurrency exchanges can operate in legal gray areas, posing a risk to users who could find themselves without adequate legal recourse in the event of disputes or fraud.

2. Security Concerns:

Some offshore platforms may not adhere to the same strict security standards as those in the Indian regulatory framework, exposing users to the potential risk of hacking and fraud.

3. Lack of regulatory oversight:

Users on offshore platforms may not benefit from the protective umbrella of regulatory oversight, leaving them vulnerable to market manipulation and other illegal activities.

4. Limited support and remedy:

Offshore exchanges may lack a local presence, making it challenging for users to seek timely support or problem resolution.


Recent announcements issued by the FIU highlight the growing importance of cryptocurrency compliance. Operating within a regulatory framework, Indian Crypto exchanges offer users a safer and more responsible environment. Benefits range from legal protection and enhanced security measures to government recognition and user-friendly reporting mechanisms.

While the cryptocurrency landscape is rapidly evolving, users should carefully consider the regulatory status of the platforms they choose. Choosing Indian Crypto exchanges not only complies with legal requirements but also ensures a safer and more transparent trading experience. As the industry continues to mature, the emphasis on compliance is likely to play a critical role in shaping the future of cryptocurrency in India.


Disclaimer: Crypto products are unregulated as of this date in India. They could be highly volatile. At Unocoin, we understand that there is a need to protect consumer interests as this form of trading and investment has risks that consumers may not be aware of. To ensure that consumers who deal in crypto products are not misled, they are advised to DYOR (Do Your Own Research).