Crypto Exchange Restrictions for Indian Citizens: What You Need to Know

Indian crypto enthusiasts have been hit with a fresh wave of exchange bans, and the headlines can feel overwhelming. The core issue? The Financial Intelligence Unit - India (FIU‑IND) has ordered a blanket takedown of dozens of offshore platforms that haven’t registered under India’s anti‑money‑laundering rules. If you’re wondering which apps are still usable, what taxes you owe, and how to stay on the right side of the law, this guide walks you through every practical step.

TL;DR

• FIU‑IND blocked 25 offshore crypto exchanges on Oct12025 for missing PMLA registration.
• Cryptocurrency isn’t banned in India, but every exchange serving Indian users must register as a VDA SP.
• Earned crypto income is taxed at a flat 30% plus 1% TDS on every transfer.
• Only about 50 exchanges are currently registered - use these to avoid legal trouble.
• VPN workarounds may violate Indian regulations and expose you to penalties.

Regulatory Landscape in 2025

Financial Intelligence Unit - India (FIU‑IND) is the agency tasked with enforcing the Prevention of Money Laundering Act (PMLA) on virtual digital asset service providers. On October1, 2025, FIU‑IND issued show‑cause notices to 25 offshore exchanges, ordering the removal of their apps and URLs from public access in India.

Contrary to popular belief, there is no blanket ban on Cryptocurrency. The Reserve Bank of India (RBI) continues to warn about crypto risks, while the Ministry of Finance drives tax policy and the registration framework.

The Securities and Exchange Board of India (SEBI) has signaled a more collaborative stance, suggesting multiple regulators could oversee crypto trading, but concrete rules remain pending.

Who Must Register? The VDA SP Requirement

Any Virtual Digital Asset Service Provider (VDA SP) that offers any of the following activities to Indian users must register with FIU‑IND:

• Exchange between crypto and fiat currencies.
• Transfer of crypto assets.
• Safekeeping or administration of crypto holdings.
• Providing tools that grant control over crypto assets.

Physical presence in India isn’t a prerequisite. The regulation is activity‑based, meaning an offshore platform that actively solicits Indian customers must still register. As of October2025, roughly 50 VDA SPs have complied.

Taxation Rules You Can’t Ignore

The Prevention of Money Laundering Act (PMLA) 2002 dovetails with the tax code. The Ministry of Finance imposes a flat 30% tax on any income derived from crypto, plus a 1% Tax Deducted at Source (TDS) on every transfer, regardless of profit or loss. This is one of the world’s highest crypto tax rates.

Key takeaways for traders:

• Every sale, swap, or receipt triggers the 30% levy.
• The 1% TDS is withheld by the exchange at the moment of transfer and can be claimed as a credit when filing annual returns.
• Failure to report crypto income can result in penalties exceeding 200% of the tax due.

How the Blockade Affects Everyday Users

When FIU‑IND orders a takedown, the exchange’s mobile apps disappear from app stores, and URLs become inaccessible via Indian ISPs. For users, this means:

• Limited access to high‑liquidity platforms like Binance, KuCoin, and Bybit.
• Potential liquidity gaps on registered Indian exchanges, leading to higher slippage.
• Increased reliance on compliance‑ready platforms such as WazirX, CoinDCX, and ZebPay.

Some traders resort to VPNs to bypass blocks, but doing so violates the PMLA and can attract enforcement action.

Blocked Exchanges (Oct2025 Notice)

Choosing a Compliant Exchange

When selecting a platform, verify the following:

1. FIU‑IND registration number (usually displayed in the “About” or compliance section).
2. Clear KYC/AML procedures - you’ll need to submit PAN, Aadhaar, and bank details.
3. Transparent fee schedule that includes the 1% TDS deduction.
4. Liquidity depth for the assets you trade - larger Indian exchanges may have lower order‑book depth than global giants.
5. Customer support in English/Hindi for quicker resolution of compliance queries.

Popular compliant options in 2025 include:

• WazirX - FIU‑IND registration #2023‑VDA‑001
• CoinDCX - FIU‑IND registration #2023‑VDA‑007
• ZebPay - FIU‑IND registration #2022‑VDA‑015

Future Outlook: What’s Next?

The government is still drafting a comprehensive crypto bill that could either tighten restrictions further or introduce a licensing framework for private tokens. Until that legislation passes, the status quo-strict AML registration and heavy taxation-will likely remain.

Expect additional offshore platforms to receive takedown notices if they continue to target Indian users without registration. Keep an eye on official FIU‑IND press releases and the RBI’s periodic advisories.