In a sweeping move that underscores India’s intensifying scrutiny of the cryptocurrency sector, the Financial Intelligence Unit (FIU) has targeted 25 offshore crypto exchanges for alleged non-compliance with the country’s anti-money laundering regulations. Platforms such as BingX, LBank, and CoinW are among those facing show-cause notices, with the government signaling potential blocks on their URLs if they fail to register under the Prevention of Money Laundering Act (PMLA). This action, announced on October 2, 2025, builds on a pattern of enforcement that began in earnest in 2023, when similar measures were taken against giants like Binance and Kraken.

The crackdown highlights the FIU’s mandate to ensure that virtual digital asset service providers (VDASPs) adhere to strict know-your-customer (KYC) and transaction reporting standards. Of the 25 exchanges, 14 collectively manage over $9 billion in assets, raising concerns about potential illicit flows into India’s economy. Sources indicate that these platforms have operated without the required FIU registration, a requirement imposed since March 2023 to curb money laundering and terror financing risks associated with crypto trades.

Escalating Regulatory Pressures and Historical Precedents

This latest enforcement echoes earlier actions, such as the 2023 directives that led to URL blocks for nine exchanges, including Binance, as reported by Bloomberg. Back then, the FIU issued notices for non-compliance with PMLA, prompting some platforms to suspend services or seek compliance pathways. Fast-forward to 2025, and the scope has widened significantly, encompassing lesser-known but asset-heavy exchanges like Huione and CEX.IO, according to details from The Economic Times.

Industry insiders note that India’s approach reflects a broader global trend toward tighter crypto oversight, yet it carries unique challenges in a market where domestic exchanges like CoinDCX and WazirX have faced their own hurdles, including hacks and regulatory fines. The FIU’s notices demand explanations within 45 days, after which non-compliant entities could face outright bans, potentially disrupting access for millions of Indian users who rely on these platforms for trading and remittances.

Market Implications and User Sentiments

The immediate fallout has been palpable on social platforms, with posts on X (formerly Twitter) expressing frustration and uncertainty among traders. Users have highlighted past incidents, such as the 2024 WazirX hack, contrasting it with quicker recoveries by international exchanges like BingX, which resumed operations within 24 hours after its own breach. This sentiment underscores a growing divide: while offshore platforms offer lower fees and broader asset access, their regulatory lapses expose users to risks, as evidenced by complaints of sudden liquidations on non-compliant exchanges.

Economically, the crackdown could accelerate the shift toward registered domestic players, but it also risks stifling innovation in a sector that has seen explosive growth. Finance Minister Nirmala Sitharaman has previously emphasized a balanced approach, as noted in a 2022 interaction reported by BingX’s news portal, warning against rushed regulations that might hinder technological progress. Yet, with crypto adoption surging—India ranks high in global chain analysis reports—the government appears committed to prioritizing compliance over convenience.

Compliance Pathways and Future Outlook

For the targeted exchanges, pathways to redemption exist. Precedents like Bybit, which resumed full operations in India after paying a $1 million fine and securing compliance in September 2025, as detailed by CoinDesk, suggest that registration and penalties could pave the way back. Exchanges must now implement robust KYC frameworks and report suspicious transactions to the FIU, aligning with international standards like those from the Financial Action Task Force (FATF).

Looking ahead, this enforcement could catalyze clearer crypto legislation in India, potentially integrating digital assets into the formal economy while addressing tax and security concerns. Analysts predict that as more exchanges comply, the market might stabilize, but persistent non-compliance could lead to further isolations, mirroring actions in jurisdictions like Nigeria and Pakistan. For industry players, the message is clear: adapt to India’s rigorous framework or face exclusion from one of the world’s largest untapped crypto markets.

Broader Global Context and Strategic Responses

Globally, this fits into a pattern of regulatory crackdowns, with the U.S. Securities and Exchange Commission pursuing similar actions against unregistered platforms. In India, the FIU’s data-driven approach—leveraging transaction monitoring—has exposed vulnerabilities, such as unreported high-value trades that could facilitate evasion of the 30% crypto tax imposed in 2022. Exchanges like LBank and CoinW, known for their spot and futures trading, now face the dilemma of either withdrawing from India or investing in compliance infrastructure.

Strategic responses are already emerging. Some platforms are exploring partnerships with local entities to navigate regulations, while others might challenge the notices legally. Posts on X reflect trader strategies, with many advising diversification to compliant exchanges to mitigate risks. As the 45-day window ticks down, the outcome will not only shape India’s crypto ecosystem but also influence how emerging markets balance innovation with oversight in the volatile world of digital assets.