India's Financial Intelligence Unit has issued a significant directive to major cryptocurrency exchanges, requesting comprehensive data on over-the-counter crypto transactions above $10,000 (₹9.44 lakh). According to reports from The Economic Times, the FIU has specifically asked at least three major crypto exchanges to share detailed records covering these substantial off-exchange trades. The request, which followed a meeting in late May 2026, covers records that exchanges must trace and preserve from January 2026 onward, marking a significant escalation in India's regulatory oversight of cryptocurrency markets. The $10,000 threshold aligns with the Financial Action Task Force (FATF) benchmark for flagging significant transactions, ensuring India's regulatory framework remains internationally compliant.
The directive specifically targets beneficial ownership data for private companies, intermediaries and entities behind OTC deals, as reported by The Economic Times. An official at a crypto intermediary explained that OTC players are primarily private companies where KYC procedures can be more challenging compared to retail investors. The regulatory concern centers on the need to verify directors, controllers and ultimate beneficial owners when buyers are private companies, trusts or intermediaries, which requires more extensive verification processes than standard retail user identification checks. Shell companies and layered corporate structures can obscure the ultimate beneficial owner (UBO), enabling illicit funds to move through transactions that appear legitimate. The agency's specific focus includes verifying beneficial ownership, particularly when private entities are involved, making it trivial to move illicit funds through what looks like a legitimate trade.
The latest directive represents a significant shift in India's approach to cryptocurrency regulation, building on the country's wider push to bring crypto platforms under anti-money laundering rules. As previously reported by crypto.news, India's FIU issued new guidance in January requiring tougher KYC checks for crypto users, including live selfie checks, geolocation and IP tracking during onboarding. The framework also mandates that exchanges update customer records every 6-12 months based on risk assessments. For exchanges, the OTC directive means OTC desks may need stronger checks before and after settlement, potentially requiring more extensive documentation on beneficial owners, transaction purposes, source of funds and destination wallets. The immediate impact is expected to be limited for most retail traders using standard exchange order books, while the scrutiny is aimed at institutional desks, high-net-worth individuals, and intermediaries arranging large private trades. The practical impact for retail traders who stick to standard exchange order books is likely minimal, as this directive specifically targets the institutional segment.
India has already demonstrated its enforcement capabilities in the cryptocurrency sector, with Binance paying a $2.25 million penalty in India for AML-related violations, as reported by crypto.news. The country has also issued notices to offshore virtual digital asset service providers that serve Indian users without FIU registration. The Finance Ministry has clarified that virtual digital asset service providers fall under India's Prevention of Money Laundering framework, requiring reporting entities to keep records, file suspicious transaction reports and comply with FIU-IND obligations when serving Indian users. For large clients, the process may become slower and more document-heavy, with private companies and intermediaries facing more questions before completing large crypto purchases or moving funds to external wallets. The expanded OTC reporting could push privacy-focused activity offshore while strengthening institutional confidence through clearer, enforced compliance. No specific exchanges or tokens have been publicly named in connection with the directive, as reported by multiple sources.
