India Crypto Licence. FIU-IND VDA SP Registration

Overview

India has no dedicated crypto-asset licensing regime. Virtual Digital Asset Service Providers (VDA SPs) are regulated through three overlapping frameworks: PMLA Reporting Entity registration with FIU-IND, the punitive VDA tax regime under the Income-tax Act, and contingent SEBI or RBI oversight when securities or banking are touched. The Cryptocurrency and Regulation of Official Digital Currency Bill listed in 2021–2022 was never tabled and has effectively been withdrawn. The 2026 Asset Tokenisation (Regulation) Bill in the Rajya Sabha is a private member's bill, unlikely to pass in current form.

The practical entry path is therefore narrow: register with FIU-IND, comply with PMLA AML duties, and run the 30% / 1% TDS tax stack. Capital is unconstrained by statute, but the Tax Deducted at Source on every transfer compresses working-capital cycles for high-frequency exchanges.

Regulators

FIU-IND (Financial Intelligence Unit – India) sits within the Ministry of Finance Department of Revenue and supervises AML/CFT compliance. The Central Board of Direct Taxes and the Central Board of Indirect Taxes and Customs handle VDA tax and GST respectively. The Department of Economic Affairs in the Ministry of Finance is the policy lead. SEBI applies only where a token meets the SCRA 1956 definition of securities, rare for pure exchange tokens. The Reserve Bank of India retains a hostile stance on private crypto and has no crypto-licensing role; it does operate the Digital Rupee (e₹) wholesale pilot since 1 November 2022 and the retail pilot since 1 December 2022.

Track 1. PMLA Reporting Entity registration with FIU-IND

The Ministry of Finance gazette S.O. 1072(E), issued under section 2(1)(sa)(vi) of the PMLA on 7 March 2023, classified VDA-related activities as Reporting Entities under PMLA. Activities in scope:

• Exchange between VDAs and fiat;
• Exchange between VDA and VDA;
• Transfer of VDAs;
• Safekeeping or administration of VDAs or instruments enabling control over VDAs;
• Participation in and provision of financial services related to VDA issuer offers and sales.

The notification is activity-based, not presence-based: an offshore exchange serving Indian users is captured regardless of physical presence in India. Registration is filed on the FIU-IND FINgate 2.0 portal; no government fee is publicly disclosed.

Core obligations

• Appointment of a Principal Officer (PO) at senior-management level responsible for AML compliance.
• Appointment of a Designated Director (DD) at board level, with PMLA accountability.
• KYC and client due diligence under PMLA Rules 2005.
• Transaction monitoring; STR, CTR, NTR and CBWTR filings.
• Record-keeping for a minimum of five years.
• Annual AML/CFT compliance confirmations and independent audits.

Track 2. VDA tax regime under the Income-tax Act

The Finance Act 2022 introduced a punitive flat-rate regime for VDAs, retained without change in the Union Budget 2026.

India is also progressively bringing VDA providers into the FATCA / CRS / CARF international reporting framework.

Track 3. SEBI and RBI

SEBI applies only where a token meets the SCRA 1956 definition of securities, which is rare for pure exchange tokens. RBI runs the Digital Rupee CBDC and periodically reiterates a preference for banning private crypto, but operates no crypto licence. There is currently no government-sponsored bill to create one.

High-level checklist (FIU-IND Reporting Entity)

1. Indian private limited company under the Companies Act 2013 or registered branch of a foreign company. Pure offshore entities can also register as Reporting Entities on an activity basis without a local subsidiary.
2. Appoint a Principal Officer and a Designated Director.
3. Draft an AML/CFT programme aligned with PMLA Rules 2005 and FIU-IND AML/CFT guidelines 2026.
4. Build KYC, EDD, transaction-monitoring and reporting workflows for STR, CTR, NTR and CBWTR.
5. Implement record-keeping for five years (encrypted at rest, India-resident or RE-controlled).
6. File on FINgate 2.0 with company documents, principals' KYC and AML programme.
7. Respond to FIU-IND clarification rounds and KYC of principals.
8. Post-registration: annual independent audit, ongoing reporting.

Process and timeline

Offshore applicants face longer timelines with additional undertakings and, where applicable, penalty-settlement workstreams.

Enforcement record

• December 2023. FIU-IND issued show-cause notices to nine offshore exchanges (Binance, Kraken, KuCoin, Huobi, Gate.io, Bittrex, Bitfinex, MEXC, Bitstamp); MeitY IP-blocked non-compliant sites.
• 2024. Binance and KuCoin re-registered after penalty settlement.
• March 2025, 49 VDA SPs registered with FIU-IND (45 onshore, 4 offshore).
• Late 2025. FIU-IND issued section 13 PMLA notices to a further 25 offshore VDA SPs for non-compliance.
• 1 February 2026. Union Budget 2026 retained the VDA tax framework unchanged.

FIU-registered crypto exchanges in India (2026)

As of March 2025 FIU-IND lists 49 Virtual Digital Asset Service Providers on its Reporting Entity register, 45 onshore and 4 offshore. The register is the operational proxy for what, in other jurisdictions, would be a licence: a crypto exchange serving Indian users is expected to be on it, full stop. Below is a snapshot of notable platforms a 2026 operator benchmarks against when planning market entry.

The 2024 re-registrations of Binance and KuCoin establish a usable precedent for offshore exchanges that previously operated without FIU-IND status, settlement of the PMLA penalty, written undertakings, and onboarding to FINgate 2.0 can restore market access. The 2025 section 13 notices to a further 25 offshore VDA SPs signal that the window for unregistered offshore service to Indian users is closing.

How to launch a crypto exchange in India in 2026

There is no single "crypto exchange licence" in India. The operational launch sequence below combines corporate set-up, FIU-IND Reporting Entity registration, tax registration and bank onboarding, the four pillars every operator must stand up in parallel.

1. Choose the entity path. Indian private limited company under the Companies Act 2013 for full market presence, or a pure offshore entity registered with FIU-IND on an activity basis. Offshore is faster to start but carries heavier scrutiny and no domestic bank rails.
2. Appoint the Principal Officer and Designated Director. Senior-management PO and board-level DD with PAN, DIN (for Indian entity), and PMLA accountability documented in the corporate minute book.
3. Draft the AML/CFT programme. Align with PMLA Rules 2005 and the FIU-IND AML/CFT guidelines 2026. Risk assessment, CDD/EDD, transaction monitoring, sanctions screening, Travel-Rule workflow, record-keeping, and independent-audit cadence.
4. Configure reporting pipelines. Automated STR, CTR, NTR and CBWTR generation into the FIU-IND FINnet / FINgate formats; tested against sample datasets before go-live.
5. File on FINgate 2.0. Upload entity documents, KYC of PO/DD, AML programme and risk assessment. Expect 6–12 weeks of FIU-IND review and a KYC round on principals.
6. Set up the tax stack. TAN registration for 1% TDS under section 194S; 18% GST registration in each state of operation; Schedule-VDA reporting for the exchange's own book; CARF readiness for cross-border accounts.
7. Secure bank rails. Indian banks operate under risk-based discretion post-2020 IAMAI ruling, there is no regulatory entitlement. Expect multiple bank pitches, a dedicated nodal account for customer funds, and ongoing compliance reviews.
8. Launch and audit. Go-live with full KYC gating, Travel-Rule enforcement, and annual independent AML audit aligned with the FIU-IND guidelines.

The realistic end-to-end window is three to five months for a domestic applicant and six to nine months for an offshore applicant with no prior Indian nexus. Operators with a pre-existing enforcement history should plan for twelve months plus penalty settlement.

Operator risk triggers in the Indian market

Three categories of risk shape the 2026 operating calculus for a new Indian crypto exchange:

• Enforcement risk. FIU-IND issued show-cause notices to nine offshore exchanges in December 2023, section 13 PMLA notices to 25 more in late 2025, and INR 28 crore of penalties in FY24–25. MeitY IP-blocks non-compliant sites on request. Operating without FIU-IND registration is no longer a grey area.
• Tax-drag risk. The 30% flat rate on VDA transfers under section 115BBH plus 1% TDS under section 194S plus 18% GST on service fees plus no loss set-off makes the Indian book structurally margin-compressed. Price curves and working-capital models must be redesigned around the TDS withhold, especially for high-frequency and market-making books.
• Policy-uncertainty risk. The DEA crypto discussion paper has been delayed and, as of April 2026, shelved again following RBI opposition. The Ministry of Finance told Parliament in December 2024 that no timeline is anticipated for comprehensive VDA guidelines. Operators therefore plan against the current PMLA-plus-tax framework, not against a future bill; any single-market dependency on India should be pressure-tested against a sudden tightening of the 2023 gazette perimeter.

Official sources

• FIU-IND. Financial Intelligence Unit India. VDA SP Reporting Entity registration and FINgate 2.0.
• PMLA portal. Enforcement Directorate. Prevention of Money Laundering Act 2002.
• Reserve Bank of India. Digital Rupee CBDC and bank-access policy posture.
• Securities and Exchange Board of India (SEBI), securities-token perimeter under SCRA 1956.
• Ministry of Finance. S.O. 1072(E) gazette notification (7 March 2023).
• Income Tax Department. Section 115BBH 30% VDA tax and Section 194S 1% TDS.
• Ministry of Corporate Affairs (MCA). Companies Registry for Indian Pvt Ltd incorporation.

FAQ