49 crypto exchanges register with FIU in FY 2024-25; focus on curbing money laundering, terror funding: Report

49 Crypto Exchanges, majority based in India, registered with financial intelligence unit (FIU) which works under ministry of finance, in fiscal year 2024-2025. Such a move comes as part of the country’s efforts to combat money laundering and prevent terrorist financing risks in the digital currency sector. It comes as a strategic analysis of suspicious transaction reports (STRs), submitted by crypto exchanges to a federal agency found “exploitation” of crypto funds for “serious” criminal activities, including hawala-unaccounted transactions, gambling, scams, fraud, and even an instance involving an illegal adult content website.Cryptocurrency is legally termed a Virtual Digital Asset, and the exchanges are referred to as VDA Service Providers. These exchanges were brought under India’s anti-money laundering framework, the Prevention of Money Laundering Act, through a linked reporting system in 2023. As reporting entities under the PMLA, VDA SPs are required to submit STRs to the Financial Intelligence Unit (FIU), the federal agency tasked with preventing, deterring and detecting misuse of India’s financial system.The exchanges must also identify and report beneficial ownership of wallets, monitor crowdfunding activities by blockchain projects, similar to IPOs and referred to as initial coin offerings or initial token offerings, and track transfers between hosted and un-hosted wallets.According to the FIU report for the 2024–25 financial year accessed by PTI, the cryptocurrency ecosystem in India has been “rapidly” evolving and attracting “significant” attention in recent years due to its potential to “transform” the financial sector and create opportunities for wealth generation.“However, VDAs, VDA SPs have certain potential money laundering and terror financing risks, owing to their global reach, capacity for rapid settlement, ability to enable peer-to-peer transactions, and potential for increased anonymity and obfuscation of transaction flows and counterparties,” the report said.Unlike several countries where multiple agencies oversee crypto exchanges, India has designated the FIU under the Union finance ministry as the single-point authority responsible for registering and monitoring VDA SPs for money laundering and terrorist financing risks.As of March 2025, the report said, 49 VDA SPs were registered with the FIU as reporting entities. Of these, 45 exchanges were based in India, while four operated offshore.STRs filed by these exchanges during the last fiscal were selected for strategic analysis and categorised under “well defined” and “high-risk” segments such as scam and fraud, gambling, and peer-to-peer scams.Some STRs also carried red flags linked to child sexual abuse material (CSAM), terror financing, dark net services and proceeds of crime, highlighting the “growing exploitation” of crypto assets for “serious criminal activity,” the report said.The geographic analysis of these reports revealed a “significant regional concentration of suspicious activities” and also identified the “commonly used digital asset for these illegal activities.”During FY 2024–25, the FIU imposed penalties totalling Rs 28 crore on certain “non-compliant” crypto exchanges, the report added.Post-registration, exchanges are required to disclose bank and financial institution accounts, appoint a designated director and principal officer, and provide complete platform contact details to the FIU.They must also conduct internal audits, adopt risk-based customer due diligence and enhanced due diligence (CDD/EDD), carry out sanctions screening, and undertake periodic risk assessments to be shared with the federal agency.As per the FIU report, India has addressed risks arising from cryptocurrencies and exchanges through legislative measures, including the introduction of taxation on crypto income and withholding taxes under the Income-Tax Act.