Crypto Exchange Restrictions for Indian Citizens in 2025: What You Can and Can't Do

Indian citizens can still trade cryptocurrency - but not where they used to. If you’ve tried to open Binance, KuCoin, or Bybit on your phone lately, you might’ve seen an error message. That’s not a glitch. It’s the government blocking them. Since October 1, 2025, crypto exchange restrictions for Indian citizens have tightened again, with 25 offshore platforms ordered to shut down access in India. This isn’t a ban on crypto itself - it’s a crackdown on unregistered platforms serving Indian users.

What’s Actually Banned?

No one in India is illegal for owning Bitcoin or Ethereum. The government hasn’t outlawed cryptocurrency. What’s banned are offshore exchanges that refuse to follow Indian financial rules. The Financial Intelligence Unit - India (FIU-IND) sent notices to 25 platforms, including Huione, Paxful, CEX.IO, BitMex, BingX, and CoinCola, demanding they register under the Prevention of Money Laundering Act (PMLA). When they didn’t comply, the government ordered app stores and internet providers to block their websites and mobile apps.

This isn’t the first time. Two years ago, nine major exchanges were targeted. Now, the list has grown. The message is clear: if you want to serve Indian customers, you register with FIU-IND. No exceptions. No loopholes. No VPNs as a workaround - using them to access blocked platforms could technically violate local laws.

Who’s Still Allowed to Operate?

There are about 50 Virtual Digital Asset Service Providers (VDA SPs) currently registered with FIU-IND as of October 2025. These include Indian-based exchanges like CoinDCX, WazirX, ZebPay, and Bitbns - platforms that have completed the registration process, set up KYC systems, and agreed to report all transactions to authorities.

These registered exchanges are the only legal way for Indian citizens to trade crypto right now. They follow strict rules: they collect your ID, track every trade, and report suspicious activity. They also deduct 1% tax at source (TDS) on every crypto sale or transfer - whether you made a profit or not.

That 1% TDS hits hard. If you’re an active trader making five trades a week, you’re paying 1% on each one. That’s 5% a month just in TDS, even if your trades break even. It’s not a profit tax - it’s a transaction tax. And it’s one of the highest in the world.

The 30% Crypto Tax - How It Works

India doesn’t just regulate exchanges - it taxes every crypto gain. The Ministry of Finance slapped a 30% flat tax on all profits from virtual digital assets. No deductions. No offsets. If you bought Bitcoin for ₹5 lakh and sold it for ₹7 lakh, you owe ₹60,000 in taxes - even if you lost money on stocks or crypto elsewhere that year.

And here’s the kicker: you can’t use losses to reduce your tax bill. Losses from crypto trades can’t be carried forward or offset against other income. That’s unlike stocks or real estate. If you’re trading crypto as a side hustle, this rule alone can wipe out your profits.

Plus, gifts of crypto are taxable too. If someone sends you 0.1 BTC as a birthday gift, you owe 30% tax on its market value at the time you received it. No one told you that, right? Most users don’t realize this until they file their returns.

Why Is the Government Doing This?

India’s approach isn’t about stopping crypto. It’s about controlling it. The Reserve Bank of India (RBI) has always warned that crypto is risky - a threat to financial stability. But the Ministry of Finance sees it differently. They want to tax it, track it, and bring it into the formal economy.

The FIU-IND crackdown targets offshore platforms because they were operating like ghost businesses. They had millions of Indian users, but no legal presence. No KYC. No reporting. No accountability. That’s a money laundering nightmare. By forcing exchanges to register, the government can see who’s trading, how much, and when.

SEBI, India’s securities regulator, has even suggested that crypto should be treated like other financial assets - with proper oversight, not bans. That’s why the government hasn’t outlawed crypto. It’s trying to build a system where crypto exists, but under strict supervision.

What Happens If You Use a Blocked Exchange?

You won’t go to jail for holding crypto. But if you use a blocked exchange, you’re on shaky ground. The government doesn’t prosecute individual traders - yet. But if you deposit ₹10 lakh into a platform like Bybit and then withdraw it to your bank account, that transaction will raise red flags. Your bank may freeze your account for suspicious activity. You could be asked to prove the source of funds.

And if you use a VPN to access blocked sites, you’re technically violating the Information Technology Act. It’s not commonly enforced for individuals - but it’s still against the rules. Most people who use VPNs do it for privacy, not legality. But in a regulatory environment this strict, even a technical violation can become a problem.

What Are Your Real Options?

Right now, you have three choices:

1. Use a registered Indian exchange (CoinDCX, ZebPay, WazirX). Safe, legal, but limited liquidity and higher fees.
2. Use an offshore exchange via VPN. Risky. Could trigger tax audits or bank freezes. Not recommended.
3. Wait for new platforms to register. A few international exchanges are reportedly in talks with FIU-IND. They may come back online in 2026.

Most serious traders stick with registered platforms. They accept the 1% TDS and 30% tax because they know the alternative is worse. The liquidity on Indian exchanges is lower than on Binance or Coinbase, but it’s growing. Trading volumes on CoinDCX and ZebPay have doubled since the crackdown.

What’s Next?

A bill to ban private cryptocurrencies has been in the works since 2022. But it hasn’t been introduced in Parliament. That’s telling. The government isn’t ready to kill crypto - it’s trying to control it. Expect more enforcement in 2026. More platforms will be blocked. More exchanges will register. More users will get tax notices.

The future of crypto in India isn’t about whether it’s legal. It’s about whether you can trade it without getting flagged by the system. If you’re holding crypto, make sure it’s on a registered exchange. If you’re trading, track every transaction. Keep records. Save your tax receipts. The government is watching - and they’re keeping a ledger.

Is There a Way Out?

Not yet. But the door isn’t closed. If you’re a trader or investor, your best move is to stay compliant. Use registered platforms. Pay your taxes. Don’t gamble on unregulated exchanges. The rules are harsh, but they’re clear. And in India’s crypto space, clarity is more valuable than freedom right now.