The Indian government has reinforced its warning against unregulated offshore margin trading platforms, cautioning investors about the risks of trading on foreign forex, commodities, and cryptocurrency (virtual digital asset) platforms that operate outside the country’s regulatory framework.
Minister of State for Finance, Pankaj Chaudhary, addressed the Lok Sabha, emphasizing that the Reserve Bank of India (RBI) has repeatedly warned against engaging with unauthorized forex trading entities under the Foreign Exchange Management Act (FEMA), 1999.
Despite these warnings, the number of complaints regarding financial losses on such platforms remains relatively low. In the past three years, the RBI has received just 17 complaints—with two in 2022, eight in 2023, and seven in 2024. Additionally, the Directorate of Enforcement (ED) has received six complaints over the last three financial years, prompting investigations under FEMA and the Prevention of Money Laundering Act (PMLA).
Government’s Crackdown on Illegal Trading Platforms
To curb fraudulent activities, the RBI has published an ‘Alert List’ featuring unauthorized forex trading platforms, many of which falsely advertise trading and training services. Financial institutions regulated by the RBI have been instructed to implement stricter Know Your Customer (KYC) protocols, enhance Anti-Money Laundering (AML) measures, and strengthen Combating the Financing of Terrorism (CFT) compliance for virtual currency transactions.
Additionally, the Advertising Standards Council of India (ASCI) now mandates that all crypto and digital asset-related advertisements must carry disclaimers warning that these assets are unregulated and highly volatile, with no legal recourse for losses. This move aims to protect investors from misleading claims and deceptive marketing tactics.
Consumer Protection & Cyber Fraud Reporting
Recognizing the need for immediate action against financial fraud, the Ministry of Home Affairs (MHA) has set up the Indian Cyber Crime Coordination Centre (I4C) to assist law enforcement agencies in handling cybercrimes linked to financial fraud.
Additionally, the Citizen Financial Cyber Fraud Reporting and Management System has been launched to allow individuals to report fraudulent transactions in real time, including those tied to unauthorized trading platforms.
Despite the low number of complaints officially reported, authorities continue to urge Indian investors to stay away from offshore trading platforms, emphasizing that such transactions carry legal, financial, and security risks.
Shifting Stance on Crypto Regulation?
Interestingly, while the government maintains a hardline stance against unregulated trading, recent comments from RBI Governor Sanjay Malhotra suggest a potential shift in cryptocurrency regulations. Malhotra confirmed that a discussion paper on cryptocurrency is in the works, though he refrained from expressing an opinion until its publication.
His remarks follow the government’s decision to revisit its cryptocurrency framework, considering evolving global developments. While India has long been cautious about digital assets, growing international acceptance and regulatory advancements could influence a more structured approach in the near future.
For now, Indian authorities remain firm on their warning: stay away from offshore platforms that operate outside regulatory oversight, as they pose significant risks to investors and the financial ecosystem.
