Crypto Exchange Restrictions for Indian Citizens: Current Rules and Impact in 2026
Feb, 4 2026
Despite widespread rumors of a ban, cryptocurrency isn't illegal in India. But the government's recent crackdown on offshore exchanges has made it harder for Indian users to access certain platforms. Here's what you need to know about the current restrictions.
Recent Crackdown on Offshore Exchanges
FIU-INDThe Financial Intelligence Unit - India is the national agency responsible for monitoring financial transactions related to money laundering and terrorist financing under the Prevention of Money Laundering Act (PMLA). issued notices to 25 offshore cryptocurrency exchanges on October 1, 2025, for failing to comply with India's anti-money laundering laws. This action targeted platforms like Huione, Paxful, CEX.IO, and BingX, among others. The government ordered these exchanges to remove their apps and websites from public access in India. This is the second major crackdown in two years, following earlier actions against Binance, KuCoin, OKX, and Bybit.
Legal Status of Cryptocurrency in India
Many people mistakenly believe India banned cryptocurrency entirely. That's not true. Cryptocurrency isn't illegal, but it operates in a regulatory grey area. The Reserve Bank of India (RBI) imposed a banking ban in 2018, blocking financial institutions from supporting crypto transactions. The Supreme Court overturned this ban in 2020, but no comprehensive law governs cryptocurrencies yet. The Ministry of Finance has proposed a bill to ban private cryptocurrencies, but it hasn't been introduced in Parliament. This uncertainty leaves users and businesses navigating unclear rules.
Compliance Requirements for Exchanges
All cryptocurrency platforms serving Indian users must register as Virtual Digital Asset Service Providers (VDA SPs) with FIU-IND. This includes exchanges that handle fiat-to-crypto trades, asset transfers, or wallet services. The rules apply regardless of where the exchange is based. Only about 50 VDA SPs are currently registered with FIU-IND as of October 2025. Offshore platforms that don't register face blocking orders and legal action. The Prevention of Money Laundering Act (PMLA) mandates strict reporting and record-keeping for registered entities.
Tax Rules for Indian Crypto Users
India has some of the world's strictest crypto tax rules. All income from virtual digital assets faces a flat 30% tax rate. Additionally, a 1% tax deducted at source (TDS) applies to every crypto transfer. For example, if you sell Bitcoin for ₹100,000, ₹1,000 is automatically withheld as tax. This impacts active traders significantly. Unlike some countries, India doesn't allow losses to offset gains. The Ministry of Finance introduced these rules in 2022, and they remain unchanged in 2026.
Which Exchanges Are Affected?
As of October 2025, the FIU-IND's takedown orders cover these platforms:
- Huione
- Paxful
- CEX.IO
- Coinex
- BitMex
- Bitrue
- CoinCola
- Changelly
- BingX
These exchanges were specifically named in the October 2025 notices. Some, like Bybit and Binance, were targeted in earlier actions. Only registered VDA SPs can legally operate in India. Major global exchanges that comply with Indian regulations include CoinDCX, WazirX, and CoinSwitch Kuber.
Impact on Indian Crypto Users
These restrictions limit access to popular international platforms. Users trying to reach blocked exchanges may resort to VPNs, but this violates local regulations and could lead to legal issues. Registered exchanges have lower liquidity than global giants, making trading harder for large orders. The 1% TDS also reduces profits for frequent traders. A study by the Indian Institute of Management showed that 68% of Indian crypto users now avoid trading on non-compliant platforms due to fear of penalties. This creates a fragmented market where compliant platforms dominate but struggle to match global liquidity.
Role of Regulatory Agencies
Different agencies have conflicting approaches. The RBI consistently warns about crypto risks, calling them "highly speculative" and planning its own digital currency. The Ministry of Finance enforces tax rules and proposed the private cryptocurrency ban bill. Meanwhile, the Securities and Exchange Board of India (SEBI) suggests a more flexible approach, proposing multiple regulators oversee crypto trading. This lack of unified policy creates confusion. Industry experts say India's strategy aims to control crypto without banning it outright-similar to how the EU and Singapore regulate digital assets.
What's Next for Indian Crypto Regulation?
The government is still developing comprehensive legislation. The proposed bill to ban private cryptocurrencies remains pending, though it may be revised to allow regulated crypto trading. FIU-IND has signaled plans to expand enforcement against non-compliant exchanges. In 2026, more offshore platforms could face takedown orders if they don't register. Experts predict stricter KYC (Know Your Customer) rules for registered exchanges and potential integration of crypto transactions into India's tax tracking systems. For now, Indian users should stick to registered VDA SPs and stay updated on regulatory changes.
Is cryptocurrency banned in India?
No, cryptocurrency isn't banned in India. The government hasn't passed a law prohibiting it, but it operates in a regulatory grey area. The Reserve Bank of India's 2018 banking ban was overturned by the Supreme Court in 2020. Current rules focus on regulating exchanges and taxing transactions rather than an outright ban.
Which exchanges can Indian users access legally?
Only exchanges registered as Virtual Digital Asset Service Providers (VDA SPs) with FIU-IND are legal. Major compliant platforms include CoinDCX, WazirX, CoinSwitch Kuber, and Bitbns. Offshore exchanges like Binance and KuCoin are blocked unless they complete registration, which most haven't done yet.
What happens if I use a VPN to access blocked exchanges?
Using a VPN to bypass government blocks violates Indian regulations. FIU-IND and law enforcement agencies actively monitor such activity. Users caught doing this could face fines or legal action under the Prevention of Money Laundering Act. It's safer to stick with registered VDA SPs that follow Indian rules.
How does the 30% crypto tax work?
All profits from cryptocurrency transactions are taxed at 30% flat rate. Additionally, a 1% tax deducted at source (TDS) is automatically withheld on every transfer. For example, selling ₹50,000 worth of Ethereum means ₹500 is withheld as TDS, and the remaining profit is taxed at 30% when filing returns. Losses can't offset gains, making this one of the strictest tax regimes globally.
Can I trade crypto without registering as a VDA SP?
Individual users don't need to register as VDA SPs. Only exchanges and service providers handling crypto transactions for others must register. As a user, you can trade on registered platforms without personal registration. However, you must report crypto income in your tax returns and pay the applicable 30% tax.