India Once Shut Crypto Out of Banking. Now Its ED Is Tracing the Trades

Analysis. In 2018, India’s central bank told the institutions it regulated to stop providing services that enabled cryptocurrency transactions. Eight years later, a financial-enforcement agency is describing how rupees allegedly become USDT, how domestic derivatives positions are mirrored offshore, and how products marketed as tokenized stocks connect to overseas trading venues.

The Enforcement Directorate’s November 6 statement on CoinDCX and Delta Exchange India is striking for that level of detail. Its allegations remain contested and under investigation. But the document offers a revealing contrast with the banking restrictions that once threatened the sector’s access to India’s financial system: this scrutiny reaches into how individual products and transactions work.

What happened at CoinDCX and Delta Exchange?

The ED said it searched three premises in Bengaluru on November 4 and 5 under Section 37 of the Foreign Exchange Management Act, 1999, or FEMA. The searches concerned Neblio Technologies Private Limited, which operates CoinDCX, and Excelium Technologies Private Limited, the operator of Delta Exchange India.

The agency alleges unauthorized cross-border transactions involving crypto derivatives and tokenized real-world assets. Those are investigative allegations, not a court determination that either company broke the law. Both exchanges say they cooperated with officials, and Delta disputes the allegation that it conducts cross-border transfers of virtual digital assets.

From a banking restriction to scrutiny of transaction flows

The historical distinction matters. The Reserve Bank of India’s April 6, 2018 circular barred regulated entities from dealing in virtual currencies or providing services that facilitated them. It covered banking accounts, settlement, lending and transfers connected to purchases or sales, with three months to end existing relationships.

That was a restriction on RBI-regulated financial services, not a law criminalizing all cryptocurrency ownership. The Supreme Court set the circular aside on March 4, 2020. In its May 31, 2021 clarification, the RBI told banks they could no longer cite it, while expressly retaining customer-due-diligence requirements and compliance with FEMA for overseas remittances.

The RBI and ED have different mandates. Still, reading these documents together shows why the current case is more specific than another broad argument about whether crypto should exist. The question is how an Indian-facing service executes transactions and whether the arrangements comply with applicable financial rules.

The ED’s vocabulary: USDT, APIs and mirrored positions

The ED describes several mechanisms. For spot trading, it alleges that customer rupees were converted into USDT and used to execute orders on overseas exchanges through accounts associated with a Costa Rica-based entity. It names Binance, KuCoin and Gate.io and discusses application programming interfaces, the software connections used to send trading instructions.

For futures and options, the agency alleges that positions opened on CoinDCX were matched by corresponding positions on foreign platforms and settled there when closed. It also describes foreign-stock-linked products referencing companies including Apple, Google and Tesla, alleging that these involved matching derivatives positions on Hyperliquid rather than purchases of the underlying shares.

For Delta, the ED alleges that a substantial share of derivatives and tokenized-stock transactions went through CoinDCX before execution offshore. It also says transfers to overseas associates remain under examination. Delta’s denial of cross-border virtual-digital-asset transfers therefore sits at the center of a dispute about how the business operates.

These are different activities. A token’s price exposure, the location of trade execution and ownership of an underlying asset cannot be treated as interchangeable. The significance of the release is that the agency attempts to distinguish them. Whether its reconstruction is complete and legally sustainable remains a separate question.

USDT’s alleged role also places the settlement asset inside the regulatory analysis. Readers unfamiliar with dollar-linked tokens can consult our guide to stablecoin reserves, redemption and risk.

The exchanges’ response belongs in the same picture

In its public response, CoinDCX described the November 4 visit as a routine enquiry and said it supplied the information and assistance requested. It cited its registration with India’s Financial Intelligence Unit and said it complies with applicable laws, including FEMA. CoinDCX also said trading, deposits and withdrawals remained fully operational.

Delta Exchange’s response said its platform is INR-settled and denied cross-border virtual-digital-asset transfers. It said trading, deposits and withdrawals continued normally and customer funds remained in Indian bank accounts. These operational assurances are the companies’ statements, not an independent audit by The Token Press. Moneycontrol’s reporting also records the exchanges’ responses.

FIU registration and anti-money-laundering reporting do not, by themselves, resolve the separate foreign-exchange questions raised by the ED. Conversely, a search does not establish customer losses or prove the agency’s allegations.

Why the case matters beyond India

For international exchanges, stablecoin businesses and tokenization platforms, the broader issue is the gap between a local customer interface and the infrastructure behind it. A service can display balances in domestic currency while raising separate questions about the legal entity executing a trade, the venue carrying the exposure and the place where settlement occurs.

Our earlier reporting on CoinDCX’s futures-service changes and liquidity-provider exposure covers a separate operational episode. It is relevant background on exchange dependencies, not evidence for the ED’s legal allegations.

The distinctive signal here is narrower than either a victory for crypto or a verdict against it. The ED is publicly engaging with the industry’s transaction mechanics. For businesses operating across borders, explaining those mechanics may now be as important as explaining the product offered to the customer.