Crypto exchanges to avoid if you are Indian

If you're trading crypto in India, picking the wrong exchange could cost you more than just money-it could land you in legal trouble, freeze your funds for months, or leave you with no way to prove your taxes. It’s not about being paranoid. It’s about knowing which platforms have already failed Indian users-and why.

Why compliance isn’t optional

India doesn’t ban crypto. But it doesn’t protect you either. The Financial Intelligence Unit of India (FIU-IND) sets the rules for crypto exchanges operating here. If an exchange doesn’t follow FIU-IND’s anti-money laundering (AML) and know-your-customer (KYC) rules, it’s not just breaking guidelines-it’s operating illegally in the eyes of Indian authorities.

That means no legal recourse if your account gets frozen. No help from Indian regulators if the exchange vanishes. And no tax reports that match what the Income Tax Department expects. Even if you’re doing everything right, using a non-compliant exchange makes you a target for investigation by the Enforcement Directorate (ED) for suspected money laundering. You didn’t break the law-but your exchange did, and now you’re caught in the fallout.

Binance: Global giant, local problem

Binance is the world’s biggest crypto exchange. But in India, it’s been fined over $10 million by FIU-IND for failing to register as a reporting entity. The penalty wasn’t small. It was a warning: if you don’t comply, you won’t be allowed to operate here.

Indian users still access Binance through third-party payment processors or offshore accounts. But here’s the catch: those methods are now blocked by Indian banks. Your INR deposit might fail. Your withdrawal might get reversed. Your account could be flagged for suspicious activity-even if you’re just buying Bitcoin.

And if something goes wrong? Good luck getting support. Binance’s customer service doesn’t have a local office in India. No Indian phone number. No physical address. No legal responsibility under Indian law. You’re on your own.

Bybit: Same story, different name

Bybit is another global exchange that got hit with a multi-million-dollar penalty from FIU-IND in early 2025. Like Binance, it ignored India’s reporting requirements. It didn’t submit transaction data. It didn’t verify user identities properly. It didn’t appoint a local compliance officer.

Indian users report frequent deposit failures. Many say their INR transfers vanish into a black hole. Some have waited over six months for customer service to respond. Others got locked out of their accounts with no explanation. When they reached out to Indian authorities, they were told: “This exchange isn’t registered. We can’t help.”

Bybit doesn’t offer tax reports for Indian users. That means you’re manually tracking every trade, every swap, every staking reward-just to file your 30% capital gains tax and 1% TDS. One mistake, and you risk an audit.

WazirX: The Indian exchange that broke

WazirX was supposed to be the safe choice. It was India’s biggest local exchange-with 6 million users, $5.4 billion in monthly volume, and ties to Binance. It even had backing from the Blockchain India Fund.

Then, in July 2024, it got hacked.

Over $230 million in user funds disappeared. The hackers exploited a flaw in the multi-signature wallet system. The exchange didn’t have insurance. It didn’t have a recovery plan. And instead of returning funds, it announced a “restructuring.”

Two years later, users still can’t withdraw their money. WazirX says it’s working on a solution. But there’s no timeline. No transparency. No official communication. Meanwhile, the platform still lets people trade. It still takes deposits. But withdrawals? Frozen. Locked. Blocked.

Even worse-WazirX still doesn’t provide tax-ready reports. You’re stuck exporting raw transaction logs and trying to make sense of them in Excel. And if you file your taxes based on incomplete data? You could be flagged for underreporting.

What happens when you use a non-compliant exchange

It’s not just about losing money. It’s about losing control.

• Bank blocks: Indian banks like HDFC, ICICI, and Axis now automatically flag transactions to non-FIU exchanges. Your UPI or NEFT transfer might vanish without a trace.
• No customer support: Time zones don’t matter when your support team doesn’t exist in India. Emails go unanswered. Tickets stay open for months.
• No tax help: No 1099-style reports. No auto-calculation of capital gains. You’re on your own to track every trade, every coin swap, every airdrop.
• Legal risk: The Enforcement Directorate has started tracing crypto flows through non-compliant exchanges. Even if you didn’t know the exchange was illegal, you can still be questioned-sometimes for months.
• Account freezes: Exchanges like Binance and Bybit can freeze your account without warning. No appeal. No explanation. Just “violation of terms.”

What to look for instead

You don’t need to stop trading. You just need to pick the right platform.

These exchanges have shown better compliance with Indian rules:

• CoinDCX: Registered with FIU-IND. Offers INR deposits via UPI and bank transfers. Provides tax reports for Indian users.
• CoinSwitch: Works with Indian banks. Has a dedicated compliance team in Mumbai. Offers tax summaries aligned with Indian law.
• ZebPay: One of the oldest Indian exchanges. Has a physical office in Bangalore. Offers tax reports and supports TDS calculations.
• Unocoin: Compliant since 2018. Offers INR on-ramps and tax documentation. Has never suffered a major hack.
• Bitbns: FIU-IND registered. Provides monthly tax reports. Supports Indian KYC and bank integrations.

These platforms still aren’t perfect. But they have local teams. They report to Indian authorities. They give you receipts you can use for taxes. And if something goes wrong, you have a real person to call.

How to check if an exchange is safe

You can’t trust marketing. You can’t trust user reviews. Here’s how to verify:

1. Go to the FIU-IND website and search for the exchange’s name in their registered reporting entities list. (As of May 2025, only a handful are listed.)
2. Check if the exchange accepts UPI or NEFT deposits from Indian banks. If it only takes crypto deposits, that’s a red flag.
3. Ask for a tax report. If they say “We don’t provide that,” walk away.
4. Look for a physical Indian address and local phone number. If they only have a PO box or a WhatsApp number, that’s not enough.
5. Search for news about penalties or hacks. If the exchange was fined by FIU-IND or lost millions in a breach, avoid it.

The bottom line

Crypto trading in India is legal. But the system isn’t built to protect you. The exchanges that ignore Indian rules are gambling with your money-and you’re the one who loses.

Don’t be fooled by low fees or high liquidity. If an exchange isn’t registered with FIU-IND, it’s not safe. Not today. Not tomorrow. Not ever.

Stick with platforms that have Indian offices, Indian compliance teams, and Indian tax reports. They’re not flashy. They don’t have flashy ads. But they’re the only ones that won’t leave you stranded when things go wrong.