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When cryptocurrencies become a risk instrument

Cryptocurrencies, originally conceived as decentralized and independent financial instruments from states, are increasingly attracting the attention of regulators worldwide. In India, where the number of digital asset users exceeds 100 million (according to Chainalysis estimates for 2024), authorities are determined not to allow the anonymity of blockchain to be used for money laundering, tax evasion, or financing illegal activities.

In this context, India's Financial Intelligence Unit (FIU) has initiated unprecedented measures: 25 foreign cryptocurrency exchanges have been officially recognized as violators of the law and blocked in the country.

What did the platforms violate?

Since March 2023, a mandatory regulatory regime has come into force in India for all service providers with virtual digital assets (VDA). According to the Prevention of Money Laundering Act (PMLA) of 2002, any platform serving Indian clients—even if registered abroad—must:

• register with the FIU;
• implement strict KYC procedures ('Know Your Customer');
• maintain complete transaction reporting;
• immediately report suspicious activity.

However, 25 foreign exchanges, including well-known names like Binance (which was previously fined in 2024), Paxful, CEX.IO, Poloniex, BitMEX, PrimeXBT, CoinEx, Phemex, HitBTC, and others, continued to operate with Indian users without complying with these requirements.

Blocking as a response to threats

Authorities ordered the blocking of access to the websites and mobile applications of these platforms through all major internet providers and app stores. This means that even if Indian users wish to, they will not be able to legally access such exchanges through standard channels.

This step is not accidental. According to the FIU, unregistered offshore platforms create 'gray zones' where it is impossible to trace the origin of funds. Given that the volume of cryptocurrency transactions in India in 2024 exceeded $200 billion (according to CryptoQuant), even a small percentage of illegal operations can pose a serious threat to the financial system.

The crypto market under scrutiny: not just India

India is not the first country to tighten control over digital assets. The European Union has been applying the MiCA regulation since 2024, which establishes uniform rules for all crypto operators. The USA actively pursues unregistered exchanges through the SEC, as happened with Kraken and Coinbase.

However, the Indian approach is particularly strict: instead of gradually implementing regulations, the regulator prefers operational blockages. This is also related to internal politics—after introducing a 30% tax on cryptocurrency income in 2022, the state aims to maximize the legalization of the sector and extract budgetary benefits from it.

Why is this important for ordinary users?

Many Indians perceive cryptocurrencies as an alternative to traditional investments. Bitcoin, Ethereum, and even new meme coins like Dogecoin or Shiba Inu are popular. However, without KYC and regulation, users remain vulnerable to fraud, hacking attacks, and loss of funds—as happened with the collapse of FTX in 2022, when millions of people worldwide lost their savings.

Blocking illegal exchanges is not only a measure against crime but also a step towards protecting investors. Legal Indian platforms like CoinDCX, WazirX, and ZebPay have already adapted to the new rules and ensure transparency of operations.

What’s next?

Experts suggest that the list of blocked platforms may expand. The FIU has already stated its intention to monitor not only obvious violations but also circumvention schemes—such as the use of decentralized exchanges (DEX) or P2P platforms without verification.

At the same time, India does not ban cryptocurrencies as such. On the contrary, the country is actively exploring the possibilities of CBDC—the digital rupee, the pilot launch of which started back in 2023. This shows that the future lies with regulated, not anonymous financial instruments.

Conclusion:

The blocking of 25 offshore cryptocurrency exchanges is not an act of censorship but part of a global trend towards the legalization of digital finance. India is betting on security, transparency, and control, understanding that in an era when the market capitalization of crypto assets exceeds $2.5 trillion, chaos in this space cannot be allowed.