Crypto Exchanges to Avoid in India - Risks & Red Flags

When you trade crypto in India, the platform you pick can be the difference between a smooth profit and a nightmare. A handful of exchanges have run into serious compliance issues, security breaches, or both, leaving Indian users exposed to blocked deposits, frozen accounts, and even legal trouble. Below we break down the most dangerous exchanges for Indian traders, explain why they’re risky, and give you a quick checklist to stay safe.

What makes an exchange risky for Indian users?

Crypto exchange is a digital platform that allows users to buy, sell, and trade cryptocurrencies. In India, risk usually stems from three sources: non‑compliance with the Financial Intelligence Unit of India (FIU‑IND), weak security architecture, and inadequate consumer‑protection mechanisms.

FIU‑IND is the watchdog that enforces anti‑money‑laundering (AML) rules on crypto firms. If an exchange ignores FIU guidelines, Indian banks often refuse to process INR deposits, and the government can slap hefty penalties. Security failures, like hacks or compromised wallets, can wipe out user funds in an instant. Finally, without clear grievance procedures, users have little recourse when accounts are frozen or funds disappear.

Top red‑flag exchanges for Indians (May2025)

• Binance the world’s largest crypto exchange, known for low fees and a huge token list. In early2025 the FIU imposed a multi‑million‑dollar penalty for failing to integrate KYC/AML protocols required in India. The breach has led to blocked INR deposits for many Indian users and heightened scrutiny from Indian banks.
• Bybit a fast‑growing international exchange focused on derivatives. Bybit received a similar FIU fine in March2025 for not reporting suspicious transactions, and several Indian payment gateways stopped supporting its INR deposits.
• WazirX India’s biggest home‑grown exchange, with over 6million users and $5.4billion monthly turnover. In July2024 a hack on a multi‑signature wallet stole $230million. The platform still holds user funds in a single pool, and its promised reimbursements have not materialised, raising serious trust concerns.

All three platforms share the same red flags: FIU non‑compliance, banking relationships in jeopardy, and weak post‑incident user protection.

Why non‑FIU compliant exchanges hurt you

When an exchange isn’t on the FIU’s compliance radar, Indian banks treat it as a high‑risk entity. The most common fallout includes:

1. Blocked INR deposits - users see “failed transfer” messages while trying to fund their accounts.
2. Frozen accounts - if a bank flags suspicious activity, the exchange may lock the user out without warning.
3. No legal recourse - Indian authorities typically won’t intervene in disputes with non‑registered platforms.

Adding to the headache, non‑compliant exchanges rarely supply tax‑reporting statements that line up with India’s 30% capital‑gains tax and the 1% TDS on crypto sales above ₹50,000 per FY. That means you have to manually calculate every gain, a time‑consuming and error‑prone process.

Security lapses you can’t ignore

Security is a make‑or‑break factor. The WazirX breach showed how a single compromised wallet can erase hundreds of millions in user funds. Look for these warning signs before you deposit:

• Absence of multi‑factor authentication (MFA) for withdrawals.
• Limited information about cold‑storage practices.
• No public security audit reports or bug‑bounty programs.

If an exchange can’t prove it’s safeguarding assets, treat it as a “crypto lottery” - you might win, but the odds are stacked against you.

Safer Indian‑friendly alternatives

Not all platforms are risky. The following exchanges generally keep a cleaner compliance record and have stronger ties to Indian banks:

• CoinDCX - actively works with FIU, offers a built‑in tax calculator.
• CoinSwitch - aggregates liquidity from multiple partners, making INR deposits smoother.
• ZebPay - one of the oldest Indian exchanges, known for solid KYC procedures.
• Unocoin - focuses on simple buying/selling, partnered with several Indian banks.
• Bitbns - provides extensive crypto pairs and claims compliance with RBI guidelines.

Even these platforms can face regulatory shifts, so keep monitoring their compliance status.

Quick checklist before you trust an exchange

• Is the exchange listed as FIU‑compliant? Check the FIU‑IND website or official press releases.
• Does it have a partnership with at least one Indian bank or a recognized payment gateway?
• Are security features like MFA, withdrawal whitelist, and cold‑storage disclosed?
• Does it provide downloadable tax reports that match Indian tax law?
• Is there a clear grievance redressal policy with specified timelines?

Failing any of these items should raise a red flag.

Risk comparison table

These data points illustrate why the first three exchanges should be approached with caution, while the latter two score better on compliance and security.

Potential legal fallout

Choosing a non‑compliant exchange can attract the attention of India’s Enforcement Directorate (ED). Even if you’re not intentionally laundering money, the ED may open investigations if they see large, unexplained crypto flows on platforms that lack AML reporting. Penalties can include asset freezes, travel bans, and hefty fines. In extreme cases, users have been summoned for questioning simply because their exchange was on a watch‑list.

Staying on a compliant platform dramatically reduces the chance of being dragged into such legal mazes.

How to keep your crypto safe in a shifting regulatory climate

Regulation in India is still evolving. Here’s a practical routine you can adopt:

1. Every quarter, Google the exchange name + “FIU compliance” to catch any new penalties.
2. Enable all available security settings - especially hardware‑wallet withdrawals for large balances.
3. Maintain a separate cold‑storage wallet for any crypto you don’t actively trade.
4. Export monthly transaction statements and store them in a secure cloud folder for tax filing.
5. Subscribe to a reputable Indian crypto news outlet to stay aware of regulatory announcements.

By treating your exchange choice as a living decision rather than a set‑and‑forget step, you’ll stay ahead of both regulators and hackers.