India’s rapid rise to the numero uno spot in the Global Crypto Adoption Index is a reflection of its gargantuan tech-savvy population. Industry analysts estimate about 20 million virtual digital assets users in India, mostly young.
Despite this surge, homegrown crypto exchanges face headwinds. India’s stringent tax regime, albeit to some extent, discourages trading, as small investors cannot offset losses, so they often withdraw funds to pay taxes out of pocket.
Domestic platforms also struggle with lack of banking support, as the Reserve Bank of India has discouraged banks from servicing crypto firms, forcing Indian exchanges to operate with limited payment channels. For example, a renowned crypto exchange was forced to disable its UPI payments option after banks declined to link accounts.
The above factors prompted the Indian customer pool to move to offshore exchanges. This led to global exchanges thriving initially, however, recent regulatory moves have put them on notice. In March 2023, India amended the Prevention of Money Laundering Act, 2002 to classify VDA service providers as “reporting entities”, thereby mandating registration with the Financial Intelligence Unit–India. By the end of 2023, FIU-IND began enforcing this by issuing show-cause notices to various overseas exchanges.
These crackdowns left Indian users with limited choice to access offshore platforms unless they complied. For example, a renowned crypto exchange was forced to remain inoperable for several months until it registered with the FIU-IND.
Even in 2025, there still remains a significant time lag between initiating the registration process and actually getting a licence to commence operations. This regulatory tug-of-war highlights the potential for brownfield solutions — mergers, acquisitions, partnerships and joint ventures between foreign and Indian players. Such alliances have the capability of infusing strength from both sides. For instance, an offshore exchange could acquire a struggling Indian platform that is already registered with the FIU-IND as a reporting entity.
This will enable the buyer to instantly inherit a legal Indian operating vehicle along with an established user base in a jurisdiction where VDA adoption remains at an all-time high. Similarly, the Indian platform would gain the foreign partner’s advanced technology, liquidity and global token listings. In addition to mergers and acquisitions, JVs offer similar benefits while letting each party retain its identity. Additionally, exchanges may also pool resources and split costs of compliance.
Some real-world examples illustrate these points. More recently, India’s CoinDCX bought the UAE-based BitOasis exchange, illustrating how crypto businesses are exploring M&A to expand internationally.
Strategic partnerships through M&As and JVs can serve multiple purposes. By acquiring or merging with an Indian reporting entity, a foreign platform obtains immediate market access, as the foreign partner inherits an existing customer base, rupee payment infrastructure and local banking relationships. In turn, the Indian side gains broader product offerings — including global VDA listings, derivative markets or decentralised finance services — and access to international capital and technology. Further, for a domestic exchange struggling under heavy taxation, being acquired offers financial runway and innovation. Similarly, a global exchange can gain a ready-made entry by teaming with a local partner, making corporate synergy a central advantage of these arrangements.
Given the benefits of M&As and JVs, there remain certain operational and regulatory hurdles. Many crypto exchanges are incorporated in jurisdictions with different compliance requirements. Therefore, merging such an entity with an Indian exchange may reveal contrasting practices in KYC/AML. Further, FIU-IND imposes strict record-keeping and customer verification for all reporting entities, creating potential AML/CFT concerns if lax standards abroad are suddenly subject to India’s more stringent regime.
Differences in auditing standards also pose challenges, as Indian law mandates annual financial audits by chartered accountants, while offshore exchanges may not follow similar norms. Under a JV, both parties must negotiate unified compliance controls, made more difficult if either side has a tarnished reputation or past regulatory fines that invite heightened scrutiny. Even though VDAs are not outright banned, authorities, such as the RBI or the Ministry of Finance, may intervene if a deal appears to circumvent proper approvals or tax obligations.
Furthermore, foreign ownership of an Indian reporting entity can require notifying multiple regulators. Given the lack of precedent in how FIU-IND will handle a crypto merger, all procedures — from updating FIU-IND registrations to harmonizing corporate structures — must be navigated with care to avoid penalties or reputational damage.
Amid these challenges, offshore crypto exchanges might still see India’s relatively untapped market as ripe for exploration. With the right regulatory clarity, they could tap into the country’s strong VDA enthusiasm. Admittedly, frameworks such as the PMLA and tax laws are evolving, and much remains untested. Yet, a carefully executed merger or joint venture — navigating Indian corporate law and staying in close dialogue with regulators — could open doors to exceptional benefits such as enhanced customer trust, expanded product offerings, and considerable market reach. The mathematics are compelling — India’s VDA potential could dwarf the regulatory headaches. And in this high-stakes game, the real winners are not just the companies making bold moves, but the millions of Indian consumers who stand to benefit from enhanced services and innovation.
So here is the million-dollar question: Will India’s VDA market soon explode into an M&A and JV feeding frenzy? The clock is ticking, the players are positioning, and the stage is set. Let us see when the storm arrives.
Pallavi Singh Rao is a partner; Shrish Gautam is a senior associate and Mainak Mukherjee is an associate at Cyril Amarchand Mangaldas.
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
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