India tightens oversight of large OTC trades

TLDR

Indias anti-money laundering authority is forcing major crypto exchanges to report large over-the-counter (OTC) crypto trades, sharply increasing oversight of big private deals.

1. Indias Financial Intelligence Unit (FIU-IND) has asked at least three major exchanges to submit records for OTC crypto trades above 10,000 dollars, including information on ultimate beneficial owners.
2. The change targets OTC markets because large off-book trades via companies and intermediaries are harder to KYC than retail exchange activity and are seen as blind spots for money laundering controls.
3. Big traders and OTC desks should expect heavier documentation, slower settlement, and higher compliance risk, with potential spillover into on-chain behavior and venue choice over time.

Deep Dive

1. What India Has Changed

FIU-IND has instructed at least three major exchanges to provide detailed records of OTC crypto transactions above 10,000 dollars, starting from January 2026, following consultations in late May link.

Exchanges must preserve data on each qualifying OTC deal and share it with FIU-IND, with particular emphasis on identifying directors, controlling parties, and ultimate beneficial owners behind the entities involved.

This sits on top of existing rules that already require exchanges to keep transaction records and file suspicious transaction reports for on-exchange activity.

2. Why OTC Trades Are In The Crosshairs

OTC crypto deals happen off the public order book and are widely used for large tickets to avoid slippage and signaling, often via private companies or intermediaries rather than named individuals.

Regulators see these channels as prone to shell companies, proxy accounts, and layered ownership that obscure who truly controls the funds, which makes traditional KYC checks harder than for normal retail accounts link.

At the same time, India has already tightened KYC on regular users, including live selfie verification, IP and geolocation checks, and, in some cases, full sender and recipient identity collection on every transfer, which aligns domestic rules with the global FATF Travel Rule framework.

3. Impact On Traders, Desks, And Markets

OTC desks and their corporate clients will likely face heavier documentation around ownership structures, transaction purpose, source of funds, and destination wallets, which can slow large trades and increase legal and operational costs.

Some high net worth or corporate users may react by shifting activity to offshore platforms, unregistered desks, or fully on-chain venues, though these routes carry their own regulatory and counterparty risks.

Going forward, the key signals will be how aggressively FIU-IND enforces these requirements, whether more exchanges are brought under the same regime, and whether the reporting threshold or scope widens beyond OTC into other private channels.

Conclusion

India is not banning large OTC crypto trades but is pushing them into a bank-like AML framework, with a clear focus on transparency of beneficial ownership.

If enforcement is sustained, large private flows in and out of India could become more traceable, raising compliance costs but also reducing regulatory uncertainty for regulated venues and institutional users.