The Indian cryptocurrency landscape has evolved rapidly over recent years, especially following regulatory developments introduced in the Union Budget 2022. While there is no explicit legal framework for a crypto license in India yet, the government has taken definitive steps toward regulating digital asset businesses through taxation and anti-money laundering compliance. This guide provides a comprehensive overview of how to legally establish and operate a crypto trading or exchange company in India, including registration procedures, compliance requirements, and risk management strategies.
Understanding the Regulatory Environment
India does not currently have a dedicated crypto license, but virtual digital asset (VDA) service providers must comply with several mandatory regulations. The absence of a formal licensing system doesn't imply a free-for-all—on the contrary, regulatory scrutiny has intensified. The Ministry of Finance has brought crypto businesses under the ambit of the Prevention of Money Laundering Act (PMLA), making registration with the Financial Intelligence Unit - India (FIU-IND) compulsory.
This means that while you can start a crypto business in India, it must adhere to strict compliance protocols from day one. The goal is to ensure transparency, prevent illicit financial activity, and protect investor interests.
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How to Register a Crypto Trading Company in India
To legally operate a crypto exchange or trading firm, you must first incorporate your business as a Private Limited Company under the Companies Act, 2013. This structure offers limited liability protection and is widely accepted by financial institutions and regulators.
Step-by-Step Registration Process
1. Obtain a Digital Signature Certificate (DSC)
All filings with the Ministry of Corporate Affairs (MCA) are done online and require a valid DSC for authentication. Directors must obtain their DSCs from government-approved certifying agencies.
2. Apply for Director Identification Number (DIN)
Every proposed director must have a DIN, which is obtained during the incorporation process using the SPICe+ (INC-32) form. Only individuals without an existing DIN are eligible to apply.
3. Choose a Unique Company Name
The name should be distinctive and not resemble any existing registered entity. It must end with “Private Limited” and avoid restricted words like "Bank" or "Insurance" unless authorized.
4. File SPICe+ Forms for Incorporation
The SPICe+ form streamlines multiple processes:
- DIN allotment
- Name reservation (RUN service)
- Company incorporation
- PAN and TAN application
Alongside this, you'll also submit:
- Memorandum of Association (MoA) – Defines the company’s objectives and scope.
- Articles of Association (AoA) – Outlines internal governance rules.
5. Apply for PAN and TAN
These tax identifiers are essential for all financial operations. They can be applied for simultaneously via the SPICe+ form (Form 49A for PAN, Form 49B for TAN).
Required Documents for Registration
For Indian Nationals:
- Identity proof: PAN, Aadhaar, Passport, Voter ID, or Driving License
- Address proof: Latest utility bill or rent agreement
- Passport-sized photographs
- Email and mobile number of directors/shareholders
- Self-declaration affidavit on stamp paper
For Foreign Nationals:
- Notarized copy of passport
- Proof of foreign address (utility bill or bank statement)
- Email and mobile contact details
All foreign documents must be apostilled or consularized as per MCA guidelines.
Additional Registrations for Crypto Businesses
Incorporation is just the beginning. To function as a compliant crypto exchange or trading platform, you must complete additional registrations:
- Permanent Account Number (PAN)
- Tax Deduction and Collection Account Number (TAN)
- Goods and Services Tax Identification Number (GSTIN)
- FIU-IND Registration – Mandatory for all VDA service providers
- Legal Entity Identifier (LEI) – Required for high-value transactions
FIU-IND Registration: A Core Requirement
As per the July 4, 2024 notification by the Ministry of Finance, all Virtual Digital Asset service providers must register with FIU-IND under PMLA. This applies regardless of whether the business is based in India or serves Indian users.
Why FIU Registration Matters
- Ensures compliance with Know Your Customer (KYC) norms
- Mandates reporting of suspicious transactions
- Helps prevent money laundering and terrorist financing
- Non-compliance may lead to penalties or website/app blocking by MeitY
Documents Required by Entity Type
Company:
- Certificate of Incorporation (COI)
- MoA & AoA
- Board resolution authorizing principal officer
- Proof of authority (POA) for signatories
Partnership Firm:
- Partnership Deed
- Registration Certificate (if applicable)
- Authorized person’s identity proof
Trust:
- Trust Deed
- Registration Certificate
- Authorized representative’s valid ID
Registration Procedure
- Reporting Entity Registration: Submit application with required documents.
- Principal Officer Registration: Appoint a designated officer responsible for compliance; registration follows after entity approval.
- Certificate Issuance: Upon verification, FIU-IND issues a registration certificate.
Failure to register can result in:
- Monetary penalties
- Warnings or directives
- Blocking of apps/websites by MeitY
- Legal action under Section 13(2) of PMLA
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Monthly Reporting Requirements Under FIU-IND
Registered entities must file regular reports:
| Report Type | Threshold | Due Date |
|---|---|---|
| Cash Transaction Report (CTR) | ₹10 lakh+ | 15th of next month |
| Cross-Border Wire Transfer Report (CBWTR) | ₹5 lakh+ | 15th of next month |
| Suspicious Transaction Report (STR) | Any suspicious activity | Within 7 working days |
| Immovable Property Report (IPR) | ₹50 lakh+ | 15th after quarter-end |
These reports help FIU monitor financial flows and detect potential fraud or illicit activity.
Legal Entity Identifier (LEI): What You Need to Know
An LEI is a 20-digit alphanumeric code that uniquely identifies legal entities in financial transactions globally. In India, Legal Entity Identifier India Ltd. (LEIL) issues LEIs under RBI recognition.
When Is LEI Required?
- For all NEFT/RTGS transactions above ₹50 crore involving non-individuals
- Applicable to both remitter and beneficiary
- Not required if both parties are individuals
Banks must capture LEI data; while transactions won’t be rejected for missing LEI, they must maintain verified records post-transfer.
Building Internal Compliance Infrastructure
A successful crypto business needs robust internal departments to manage legal, operational, and security risks.
Key Departments to Establish:
Accounting & Compliance Department
- Handles GST, income tax, ROC filings
- Manages KYC, AML, and FIU reporting
Legal & Regulatory Department
- Tracks evolving crypto laws and court rulings
- Manages litigation and regulatory engagement
Operations Department
- Oversees daily trading, deposits, withdrawals
- Ensures smooth customer experience
Cybersecurity & Risk Assessment Team
- Conducts threat modeling and vulnerability assessments
- Implements multi-factor authentication (MFA), encryption, IDPS
- Runs regular penetration testing and employee training
Risk Management in Crypto Trading Platforms
Digital assets come with unique risks—market volatility, hacking threats, regulatory shifts. A proactive risk strategy includes:
- Risk Assessment: Identify threats like phishing, insider attacks, system failures.
- Security Controls: Deploy cold wallets, encrypted databases, access controls.
- Incident Response Plan: Define protocols for breaches or outages.
- Regular Audits: Third-party audits enhance trust and uncover gaps.
- Backup Systems: Ensure quick recovery from data loss events.
Best Practices When Launching a Crypto Exchange
To build user trust and ensure regulatory alignment:
- Draft clear terms and conditions for user agreements
- Implement Aadhaar-based OTP verification for KYC
- Use live video verification for enhanced identity checks
- Introduce an escrow system for secure fund handling during trades
Frequently Asked Questions (FAQs)
Q: Is there a specific crypto license in India?
A: No formal crypto license exists yet. However, registration with FIU-IND is mandatory under PMLA for all VDA service providers.
Q: Can foreign nationals start a crypto company in India?
A: Yes, but they must comply with FDI norms and provide notarized/apostilled documents during registration.
Q: What happens if I don’t register with FIU-IND?
A: Non-compliance may result in fines, warnings, or even blocking of your platform by MeitY.
Q: Do I need an LEI for small transactions?
A: No. LEI is only required for NEFT/RTGS transactions exceeding ₹50 crore between non-individuals.
Q: How long does company registration take?
A: Typically 10–15 days, depending on document accuracy and government processing times.
Q: Are crypto exchanges taxed in India?
A: Yes. A 30% tax on profits plus 1% TDS on every transaction applies to VDA transfers.
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By understanding these foundational steps—from incorporation to FIU registration and beyond—entrepreneurs can build compliant, secure, and scalable crypto businesses in India. As regulations continue to evolve, staying ahead of compliance requirements will be key to long-term success in this dynamic industry.