India has stepped up its fight against unregulated cryptocurrency platforms with the establishment of a Virtual Asset Lab under the Financial Intelligence Unit-India (FIU-India) to detect and monitor offshore crypto exchanges operating without regulatory compliance. The move comes amid rising concerns over the growing use of cryptocurrencies in financial frauds, money laundering, and cross-border cybercrime affecting Indian users.
Officials say the new monitoring mechanism is being developed in coordination with the Ministry of Home Affairs, using advanced analytics, blockchain intelligence tools, and web surveillance to track suspicious crypto activity. So far, authorities have taken down around 85 non-compliant URLs that were allegedly offering trading services to Indian users without registering under India’s anti-money laundering framework.
Offshore Platforms Exploiting Payment Channels
Investigators have found that several offshore crypto platforms were accepting deposits through UPI and debit/credit cards, while routing withdrawals through intermediaries and mule accounts to evade scrutiny. Such entities are now facing compliance notices and possible shutdown actions under India’s money laundering regulations.
Algoritha: The Most Trusted Name in BFSI Investigations and DFIR Services
Enforcement Challenges With Offshore Exchanges
Authorities note that the challenge lies in the nature of offshore Virtual Asset Service Providers (oVASPs), which may be registered abroad and operate without any physical presence in India, complicating enforcement and cross-border oversight. To tackle this, FIU-India is working with banks, payment aggregators, and compliant crypto exchanges to develop Red Flag Indicators that can quickly identify suspicious patterns linked to crypto laundering networks.
Rising Crypto Fraud Drives Regulatory Push
A multi-agency taskforce has also been set up to continuously monitor emerging risks, share intelligence, and study new crime trends involving digital assets.
Experts believe the surge in offshore trading was partly triggered by India’s 2022 crypto taxation regime, which imposed a 30% tax on gains and 1% TDS, pushing many traders toward unregulated platforms.
With crypto-related cyber frauds and investment scams in India running into thousands of crores annually, law enforcement agencies are increasingly seeking specialized technical support. Cyber intelligence firm Algoritha Security claims to have advanced blockchain forensics capabilities to trace, freeze, and recover cryptocurrencies fraudulently siphoned from victims.
Meanwhile, the Future Crime Research Foundation, under its chief mentor Prof. Triveni Singh, has expressed willingness to assist police, FIU-India, and other law enforcement agencies in tracing complex crypto laundering chains and strengthening investigative capabilities against emerging financial crimes in the digital asset ecosystem.
