India crypto exchanges face FEMA probe over alleged cross-border trades

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India crypto exchanges FEMA probe

Highlights

Enforcement Directorate searched three Bengaluru premises linked to CoinDCX and Delta Exchange India on Nov. 4-5 for suspected FEMA violations involving unauthorized cross-border derivatives and tokenized asset trades.
CoinDCX and Delta Exchange India stated operations and customer funds remain unaffected, asserting compliance with Indian law, KYC, and AML requirements despite the ongoing inquiry.
The probe increases regulatory pressure on India's crypto sector, especially regarding overseas products, with CoinDCX recording about $700,000 in reported 24-hour trading volume and Delta Exchange India remaining smaller.

Bengaluru searches and compliance responses

As reported by CoinDesk, citing the Enforcement Directorate, officials searched three premises in Bengaluru on Nov. 4 and Nov. 5 linked to Neblio Technologies, which operates CoinDCX, and Excelium Technologies, which operates Delta Exchange India, under Section 37 of the Foreign Exchange Management Act, the 1999 law governing money flows into and out of India.

The agency alleges both platforms routed customer funds abroad to trade derivatives and tokenized shares of foreign companies without authorization. The action centers on suspected illegal cross-border flows that the ED says violate FEMA rules.

CoinDCX says ED officials visited its Bengaluru office on Nov. 4 as part of a routine inquiry and that it cooperated fully. The exchange says it operates in compliance with Indian law, including FEMA, and follows KYC, AML and reporting obligations, while trading, deposits and withdrawals remain fully operational.

Delta Exchange India also acknowledges the ED visits and says operations continue as normal, with user funds remaining in Indian banks. The company says its business does not involve any cross-border transfer of virtual digital assets and notes it has been registered with India's Financial Intelligence Unit as a reporting entity since 2023.

Implications for India's crypto market

The probe adds regulatory pressure to India's digital asset sector, where exchanges continue to navigate tight oversight on compliance, reporting and cross-border financial activity. Allegations tied to overseas derivatives and tokenized foreign equities could sharpen scrutiny of how local platforms structure access to products linked to assets outside India.

CoinDCX remains India's largest crypto exchange by trading volume, although its reported 24-hour volume of about $700,000 is small relative to major global rivals. Delta Exchange India's trading activity is smaller, underscoring the relatively limited scale of the domestic market even as enforcement attention on the sector remains high.

In earlier coverage, we examined the RBI FX buffer deployed to support the rupee amid external market pressures.

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