March 2023 was the inflection point: the Ministry of Finance brought VDA service providers under the Prevention of Money Laundering Act, requiring them to register with the Financial Intelligence Unit (FIU-IND). It's the closest thing India has to crypto-exchange licensing.
What FIU registration requires
Registered exchanges must: implement KYC and customer due diligence at PMLA standards; report suspicious transactions (STRs) to FIU; maintain transaction records for 5 years; and appoint a Principal Officer accountable for compliance.
It is not a license to operate per se — it's an AML/CFT compliance regime. There's no parallel SEBI-style market-conduct regulation yet.
What happened in 2024
In December 2023, FIU-IND issued show-cause notices to 9 foreign exchanges (Binance, Bybit, KuCoin, Huobi/HTX, Bitfinex, Kraken, MEXC, Gate.io, Bittrex) for operating in India without registration. Their websites were blocked in India in early 2024.
Most large exchanges responded by registering and paying penalties. Binance settled with a ₹18.82 crore penalty in mid-2024 and resumed Indian operations. KuCoin paid ₹35 lakh, Bybit followed shortly after.
What this means for traders
The exchanges you use are now in the AML reporting loop. Suspicious transactions get flagged to FIU. Large trades, frequent counterparty patterns, and sudden activity changes can trigger STRs.
The flip side: registered exchanges are operating with state visibility — that reduces the likelihood of sudden Indian-government enforcement against them and, indirectly, against you.
Key takeaways
- Since March 2023, VDA service providers must register with FIU-IND.
- Major exchanges registered through 2024 after a brief blocking period.
- Registered = your trades are visible to FIU; suspicious patterns get reported.
- Trade-off: more reporting, but more regulatory predictability.
