FIU Compliance & Indian Crypto Exchanges: All You Need to Know

FIU Compliance & Indian Crypto Exchanges: All You Need to Know

Author: Admin

15-May-2025

“FIU-registered” and “FIU-compliant” are titles multiple cryptocurrency exchanges in India have been flaunting in the past few months. It has become a guiding star for those looking for a trusted crypto trading platform for their journey with digital assets. With so much importance given to this title, it is essential that you understand its significance, meaning and details.

This guide does exactly that with no jargon and only clarity. Here’s what you’ll find inside:

What is FIU?
What is FIU Compliance for Crypto Exchanges in India?
Why is FIU Compliance Important for Indian Crypto Exchanges?
How Does FIU Compliance Affect Indian Crypto Exchange Users?
Consequences of Non-Compliance for Indian Crypto Exchanges and Users
How to Choose FIU-Compliant Crypto Exchanges in India?
List of FIU-Complaint Exchanges in India

What is FIU?

FIU stands for Financial Intelligence Unit. It is a national agency that monitors information related to suspicious financial transactions within the country. This information helps identify and prevent money laundering and other financial crimes. In India, this unit is called FIU-IND.

It was set up by the Indian Government on November 18, 2004, to coordinate and strengthen efforts of national and international intelligence agencies to run global efforts against money laundering and terror funding. It reports directly to the Economic Intelligence Council (EIC), which the Finance Minister governs.

Here are some key functions of FIU-IND:

Obtain suspicious transaction reports, such as Cash Transaction Reports (CTRs), Nonprofit Organisation Transaction Reports (NTRs), Cross-Border Wire Transfer Reports (CBWTRs), Suspicious Transaction Reports (STRs), and more, to analyze and transfer valuable financial information to the relevant intelligence/ enforcement agencies and authorities.

Uncover patterns of transactions that suggest suspicion of money laundering and similar crimes.

Maintain a national database of transactions on the basis of reports received from multiple reporting entities.

Monitor the strategic areas associated with money laundering and new developments around it.

On March 07, 2023, the Indian Government brought Virtual Digital asset (VDA) service providers like cryptocurrency exchanges, wallets and other related platforms under the purview of the Prevention of Money Laundering Act (PMLA). This step made it mandatory for Cryptocurrency exchanges to register with FIU-IND and comply with the set standards to continue operating legally in India.

What is FIU Compliance for Crypto Exchanges in India?

FIU compliance for crypto exchanges in India means following regulations set by the FIU-IND to prevent money laundering and other financial crimes. This setup involves reporting suspicious transactions, keeping detailed records, and adhering to strong Know Your Customer (KYC) procedures.

The key aspects of Crypto Exchanges in India and their FIU compliance are:

Indian and international cryptocurrency exchanges are required to register with the FIU-IND to operate legally in India.

Once they register, they must report suspicious transactions to FIU-IND and maintain records of their customer transactions.

The FIU-registered Crypto Exchanges must implement efficient KYC processes. This includes verifying user identities and updating that information promptly as per the directions followed by FIU-IND. It has now also mandated that crypto exchanges improve their KYC processes by June 30, which involves updating user details and performing fresh KYC for older accounts.

FIU-compliant Crypto Exchanges like Flitpay should operate only within the legal framework for AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism), preventing the use of their platforms for illicit activities.

Crypto exchanges bear penalties and operational disruptions due to noncompliance with regulations, inspections, and audits.

Why is FIU Compliance Important for Indian Crypto Exchanges?

There are several reasons why FIU compliance is essential for Indian crypto exchanges. Here are some of the most crucial ones:

Combat Financial Crimes

Being FIU-compliant helps Indian crypto exchanges prevent the use of cryptocurrencies for money laundering, terrorism funding, and other illegal activities. By mandating KYC and AML procedures, FIU-compliance aids exchanges in identifying high-risk accounts and suspicious money movements that might be associated with illicit monetary transactions.

Improve Overall Transparency

FIU compliance further improves transparency in the crypto space by requiring necessary registration and reporting. This makes it difficult for illicit actors to hide their felonious actions, making the entire crypto space more legitimate and reputable.

Introduce Uniform Regulatory Standards

The introduction of uniform AML guidelines and procedures for all cryptocurrency exchanges functioning in India creates a level playing field. They have the same roadmap and rules to follow, which avoids confusion, delays, and discrepancies.

Foster Trust among Participants

Looking at cryptocurrency exchanges operating within the legal framework slowly fosters trust among the crypto enthusiasts and buyers who get assurance of an illegal activity-free environment to trade their digital assets.

Reduces Risks of Enforcement Action

The Indian Government has cracked down on multiple non-FIU registered crypto trading platforms in the past two years. It even banned several foreign exchanges from operating in India and blocked their websites. Such scenarios led many Indian users of these platforms to withdraw funds under uncertainty. Thus, FIU-compliance helps cryptocurrency exchanges avoid such sudden halts and disruptions.

In short, FIU compliance is no longer an option but a necessity to shield against legal uncertainty, enhance user credibility, and ensure a money laundering-free ecosystem.

How Does FIU Compliance Affect Indian Crypto Exchange Users?

FIU compliance simply ensures crypto exchange users a secure and regulated trading environment, while reducing the risks of being indirectly involved in money laundering and other illicit financial transactions. However, it also limits their choices.

Here's a more detailed description of how FIU-compliance affects Indian crypto exchange users:

Pros

FIU compliance improves the fund legitimacy of crypto exchanges, strengthening user trust in crypto trading activities. Strict KYC and AML rules make it harder for scammers and criminals to misuse the platform. For instance, suppose a bad actor tries to sign up in an FIU-compliant exchange for unlawful practices. In that case, the enhanced KYC and AML practices help the exchange filter out them, which reduces the chances of other users falling for scams or other potential frauds.
FIU registration also filters out which exchange is operating legally in India, helping users choose the right one. They can easily avoid non-FIU registered platforms that can be suddenly banned or blocked for their illegal operations.
Banks and other financial partners are likely to work with FIU-compliant exchanges to make INR transactions smoother. Banks must abide by FIU-IND guidelines under the Prevention of Money Laundering Act, 2002.
Compliant exchanges report suspicious transactions, maintain clear logs and follow robust KYC standards. This improves the overall user experience and peace of mind, by improving the entire money trail involved with the cryptocurrency exchange.

Cons

The users of FIU-registered crypto exchanges may require more documentation during their onboarding process. They must submit valid KYC documents, and sometimes even video verifications, which takes more time and effort. Some users may find such longer verifications a little inconvenient due to the multiple steps involved.

The FIU-compliant exchanges are required to share all the relevant data to authorities, making it harder for their users to evade taxes. Under current Indian tax laws, a 30% tax on crypto profits and 1% TDS on crypto transactions is applicable, with no allowance to offset losses. While the FIU-compliant exchanges deduct TDS automatically, the users are still required to pay 30% tax on their crypto profits to avoid any tax liability.

In conclusion, FIU compliance is important for establishing a safe and regulated crypto market in India. However, it may also lead to potential challenges, like stricter verifications and option limitations. Thus, Indian crypto users should be aware of these potential trade-offs when choosing their trading platform.

Consequences of Non-Compliance with FIU for Indian Crypto Exchanges and Users

Let’s discuss the consequences on not complying with FIU for Indian Crypto Exchanges and users one by one:

For Indian Crypto Exchanges

Penalties are the key consequence for Cryptocurrency exchanges (both Indian and International) for not following FIU guidelines. FIU has already imposed multiple penalties on non-registered crypto exchanges operating in India. This majorly includes international exchanges like Binance and Bybit, which had to pay millions of dollars in penalties for their non-compliance.

They can also face investigations from Indian authorities like ED for possible money laundering and other illegal financial transactions. In such cases, the lack of FIU-adhering can cost them huge legal troubles and even permanent closures.

Non-FIU compliant crypto exchanges may also struggle to secure partnerships with Indian banks and payment gateways. Without regulatory backing, banks view these platforms as high-risk, leading to blocked INR deposits, failed transfers, and frozen accounts.

For Crypto Users

When users trade on non-compliant platforms, they have little upper hand in cases of fraud, hacking, or account freezes. Indian authorities may not intervene or assist if the platform isn't recognized under Indian financial laws. This may leave these users entirely vulnerable in disputes or emergencies.

Non-compliant crypto exchanges may also not provide proper transaction summaries or tax reports aligned with Indian laws. This puts the burden entirely on users to calculate and file crypto taxes manually.

Exchanges without FIU registration may not follow consumer grievance protocols. If they freeze your account due to internal issues, there may be no timeline for resolution or clear communication.

How to Choose FIU-Compliant Crypto Exchanges in India?

Here’s a detailed guide on how to choose FIU-compliant crypto exchanges in India to help you make informed decisions:

Look for the FIU Compliance Badge

Most FIU-registered Indian cryptocurrency exchanges like Flitpay proudly display their FIU compliance badge on their websites, social media and applications. You can find such information on their official landing pages or in news or feature update pages. If you can’t find any mention of compliance, that’s a warning sign.

Verify KYC & AML Standards

FIU compliance requires strict KYC (Know Your Customer) and AML (Anti-Money Laundering) processes. Thus, a legit platform will ask for Aadhaar/PAN verification and wouldn’t allow trading without KYC. Strict verification measures are another identity of FIU-registered platforms. Thus, if an exchange lets you trade without KYC, it’s likely not compliant.

Search for News or Government Warnings

Do a quick news search like “FIU notice + [exchange name]” or “ban + [exchange name]”. If the platform has been served a show-cause notice or banned recently, it's likely non-compliant or under scrutiny.

List of FIU-Complaint Exchanges in India

As of May 2025, FIU-IND has not released a single PDF or list of cryptocurrency exchanges listed under it. However, we have researched to give you a list of exchanges that abide by AML rules and regulations.

Notable FIU-registered exchanges include:

Flitpay
Binance
Coinbase
Bybit
CoinDCX
WazirX
CoinSwitch
ZebPay
Unocoin
Mudrex
Kucoin

Please refer to the official FIU-India website for the most up-to-date and comprehensive list of FIU-registered Virtual Digital Asset Service Providers (VDA SPs).

Final Words

In the current world of complex financial instruments and risks, regulations like FIU compliance are not just technicalities, they are trust signals. As an Indian investor, choosing an FIU-registered exchange like Flitpay ensures you are trading in a secure, transparent, and legally recognized environment.