India’s Financial Intelligence Unit has asked three major cryptocurrency exchanges to submit detailed records of over-the-counter transactions exceeding $10,000. The request focuses on who ultimately controls the private companies and intermediaries executing these trades. Exchanges must trace and retain information dating back to January 2026, in an effort to close transparency gaps that have allowed large crypto transfers to bypass public exchange order books. The original report indicates that the FIU is particularly focused on identifying the ultimate beneficial owners behind layered corporate structures.
This move extends a regulatory path that began with India’s crypto tax rules and mandatory FIU registration for virtual asset service providers. The anti-money laundering watchdog is now examining how off-exchange trading works. OTC desks often handle institutional-sized blocks and high-net-worth flows without the real-time surveillance used by centralized limit order books.
The $10,000 threshold is low enough to cover a wide range of trades. Exchanges must therefore reconsider how they record and report OTC activity that may previously have occupied a grey area.
OTC Surveillance Tightens in India
OTC desks have long been a preferred way to move large amounts of crypto without causing slippage or revealing a trader’s intentions on public markets. That privacy has increasingly attracted regulators’ attention worldwide.
India’s FIU is now requiring exchanges to identify the people or entities behind shell companies and intermediary firms that often appear in OTC settlement layers. Exchanges must review existing client data and may need to request new disclosures from corporate account holders.
Compliance will be costly. Exchanges must strengthen their know-your-business and know-your-transaction systems and link each OTC trade to verified beneficial ownership.
International platforms serving Indian clients must decide whether to adapt their global systems to meet the new Indian requirement or avoid the market to limit regulatory risk. This follows the pressure created by the FIU’s earlier registration mandate, when several offshore exchanges had to register locally or face access restrictions.
Global Pattern of Closing Off-Exchange Loopholes
India’s action is not isolated. Regulators in Hong Kong, the European Union, and South Korea have increased scrutiny of OTC crypto trading over the past year. They have often linked large, unmonitored transfers to money laundering, sanctions evasion, and tax avoidance.
The Financial Action Task Force’s travel rule has already required exchanges to share originator and beneficiary information for transactions above certain thresholds. Regulators are now moving beyond basic transaction data and examining corporate control chains that can hide true ownership. The US is fighting its own battle over a comprehensive crypto bill that banks are trying to reshape just days before a Senate vote.
Public exchanges have become accustomed to stricter identity checks, but the OTC segment remains inconsistent. Some desks operate like traditional broker-dealers and use rigorous client-intake procedures. Others rely on lighter processes that sit outside the exchange’s main compliance system.
India’s FIU appears determined to bring those desks under the same strict framework. The request for records dating back to January 2026 suggests the regulator wants a historical audit, not only a forward-looking change.
What Exchanges and Traders Face Next
Several questions remain unanswered. It is unclear which three exchanges received the FIU request and whether they are domestic or offshore.
Major international exchanges that already meet similar requirements in other jurisdictions may adapt quickly. Smaller platforms and exchanges without a strong compliance presence in India could struggle. Producing the records may also be difficult if beneficial ownership information was not collected when the trades took place.
For traders and institutions, the order changes the risks of using OTC channels connected to Indian entities. Large crypto flows that once moved quietly through broker networks may now face the same transparency requirements as traditional financial transfers.
Some participants may shift to truly peer-to-peer arrangements outside the exchange umbrella. That could make tracking even harder. At the same time, the regulated tokenization market is growing: real-world assets have crossed $20 billion on-chain, as covered in a recent institutional tokenization roundup. This shows that large players are also moving toward compliant, transparent infrastructure.
The FIU’s move shows that India considers OTC crypto a serious anti-money laundering vulnerability, not merely a niche market feature. Exchanges that treat the request as a one-time reporting task could face deeper audits and potential penalties later.
The coming months will show how quickly exchanges can restructure their compliance workflows and whether the move leads to broader regulatory action across other Asian markets.
