India targets large OTC crypto transactions

TLDR

India is tightening oversight of large over the counter (OTC) crypto trades to reduce money laundering and tax evasion risks.

1. Indias Financial Intelligence Unit has asked major exchanges for detailed data on OTC crypto trades above 10,000 dollars and mandated record-keeping until early 2026.
2. The focus is on complex corporate and private equity structures that obscure the real owner of funds, on top of an already strict 30 percent crypto tax regime.
3. Large Indian OTC users and exchanges should expect heavier compliance checks, with possible spillovers into stricter reporting and surveillance of big crypto flows more broadly.

Deep Dive

1. What India Is Doing Now

Indias Financial Intelligence Unit (FIU) has requested detailed information from three major crypto exchanges on OTC crypto transactions over 10,000 dollars, following a meeting in late May that focused on opaque large deals. These are trades negotiated directly with desks, outside public order books, typically for high value clients.

The FIUs directive requires more granular data on such large OTC deals and obliges exchanges to keep OTC transaction records until January 2026, with the power to demand additional information if suspicious activity reports look insufficient during investigations. This push targets trades where standard on-exchange reporting has not been enough to see who actually controls the money behind a transaction.

2. Why Large OTC Trades Are Under Scrutiny

OTC channels are popular with high income clients, corporates and funds because they avoid visible slippage on public order books and allow quick moves into private wallets, including cross border. That same opacity makes it harder to identify the true beneficial owner, especially when trades involve closely held companies, trusts or layered intermediaries using potentially fake documents.

Regulators are particularly sensitive because India already taxes crypto gains at a flat 30 percent plus cess (effective base rate about 31.2 percent, rising over 40 percent for top brackets), with 1 percent TDS on transfers and mandated exchange level reporting from 2026. This combination makes large unreported flows via OTC desks a clear enforcement target.

3. What To Watch Next

You can expect:

1. Tougher KYC and beneficial ownership checks for corporate OTC clients, including deeper documentation and ongoing monitoring.
2. More frequent FIU follow up requests if current disclosures do not satisfy investigations, potentially widening beyond the initial three exchanges.
3. Possible lowering of thresholds or extension of similar reporting expectations to other high value channels, in line with global moves to tighten identity and record keeping around large crypto transfers.

For large Indian OTC users, the practical effect is that anonymity and structural complexity are becoming liabilities rather than advantages.

Conclusion

Indias targeting of large OTC crypto transactions fits a broader pattern of pairing strict taxation with tighter AML and transparency rules. For crypto users, the direction is clear: big flows that rely on opacity, corporate wrappers or cross border complexity are increasingly likely to trigger regulatory attention, while compliant, well documented activity becomes the default expectation.