Evaluate the effectiveness of bringing VDA service providers under the PMLA in curbing money laundering, especially by offshore platforms.

Virtual Digital Asset Service Providers (VDA SPs) were made reporting entities under the PMLA, 2002 in 2023. They must register with FIU-IND, verify customers (KYC) and report suspicious transactions [1]. This has given India legal jurisdiction and better compliance. But its hold over offshore platforms is still only partial.

Effectiveness: where the PMLA route has worked

• Activity-based jurisdiction: the duties apply to any platform serving Indian users, whether or not it is physically present in India. This brings offshore exchanges within reach [1].
• Rising compliance: registered VDA SPs grew from 31 in December 2023 [1] to 50 in October 2025 [2].
• Enforcement teeth: FIU-IND issued Section 13 notices to 9, then 25, then 15 platforms that did not comply [1][2][3]. It also had their apps and URLs taken down under Section 79(3)(b) of the IT Act [3].
• Deterrent penalties: Bybit was fined ₹9.27 crore for expanding in India without registering [4].
• Global alignment: India now follows the FATF AML/CFT standards, which the IMF treats as essential [5].

Limitations: where it falls short

• Whack-a-mole: each round of notices names new offshore platforms [1][2][3]. Blocking deters some players but not all new entrants.
• Easy bypass: URL blocks can be avoided through VPNs, peer-to-peer trades, decentralised exchanges and self-hosted wallets. All of these sit outside the reporting-entity net.
• Limited cross-border reach: platforms with no assets in India are hard to penalise. The IMF stresses international collaboration because crypto works across borders [5].
• AML-only coverage: FIU registration tracks money flows. It does not check custody, reserves or investor protection. India still has no comprehensive VDA law, which the IMF prefers over piecemeal curbs [5].

Verdict The PMLA route is moderately effective. It has set up jurisdiction and raised onshore compliance, but offshore leakage continues.

Bringing VDA SPs under the PMLA was the right first step. It gave India legal reach and a reporting trail. India should now pass a comprehensive VDA law with licensing and custody rules. It should also deepen FATF-based cross-border cooperation and carry out the G20 Crypto-asset Policy Implementation Roadmap it backed during its 2023 G20 presidency [6]. This would turn the PMLA route into a lasting safeguard for financial integrity, consistent with SDG target 16.4 on curbing illicit financial flows.