In a written response to a question in the Lok Sabha on action taken against illegal offshore crypto trading platforms, the Finance Ministry stated, “At present, crypto/virtual assets are not regulated in India. Consequently, the question of the legality or illegality of specific crypto platforms does not arise as on date.”
Despite the absence of formal regulation, the government underlined that Virtual Asset Service Providers (VASPs), including offshore exchanges that cater to Indian users, are required to register with the Financial Intelligence Unit–India (FIU-IND) under the Prevention of Money Laundering Act (PMLA).
The Ministry said the FIU maintains a dynamic list of VASPs operating in India without registration, suggesting ongoing monitoring of unregistered platforms.
Additionally, it pointed to Section 194S of the Income Tax Act, introduced via the Finance Act, 2022, which mandates a 1% Tax Deducted at Source (TDS) on the transfer of virtual digital assets (VDAs). This provision applies to all transactions, including those involving offshore entities, if the income is chargeable to tax in India.
The Ministry also highlighted that the Reserve Bank of India (RBI) has issued multiple advisories cautioning users, holders, and traders of crypto assets about the risks involved, including economic, financial, operational, legal, and cybersecurity concerns. These advisories, however, are sector-wide and do not single out individual platforms.
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