India introduces bank-level cybersecurity audits for crypto platforms, signalling a regulatory shift

India’s Financial Intelligence Unit mandates rigorous bank-grade cybersecurity audits for all cryptocurrency exchanges and intermediaries, marking a new era of regulatory oversight aimed at boosting investor confidence and securing the digital asset market amidst rising cyber threats.

On September 18, 2025, India’s Financial Intelligence Unit (FIU) introduced a pivotal regulatory directive mandating that all cryptocurrency exchanges, custodians, and intermediaries undergo rigorous cybersecurity audits. These audits are designed to meet the stringent compliance standards historically applied to banking institutions, signalling a firm commitment by the Indian government to secure its rapidly growing digital asset market and address the escalating risks of cyber threats.

India’s cryptocurrency ecosystem has witnessed explosive growth, attracting millions of investors and facilitating substantial trading volumes. However, this rapid expansion has raised serious concerns about security vulnerabilities and the potential exploitation of digital assets for illicit activities such as money laundering and fraud. The government’s move to enforce bank-grade compliance aims to enhance market integrity and protect consumer interests by ensuring that crypto platforms implement robust security measures and comply with existing financial regulations.

The newly mandated cybersecurity audits must be conducted by auditors registered with the Indian Computer Emergency Response Team (CERT-In), the government agency responsible for managing cybersecurity incidents in India. Passing a CERt-In registered audit has become a prerequisite for obtaining registration with the FIU, aligning virtual digital asset (VDA) service providers with banks under the Prevention of Money Laundering Act (PMLA). This alignment marks the elevated regulatory status of crypto platforms, indicating the government’s prioritisation of investor protection and market stability in this sector.

India’s directive comes amid a surge in cyber-related crimes within the cryptocurrency space, which now account for approximately 20-25% of all cybercrimes in the country. The audits will comprehensively evaluate security controls, identify vulnerabilities, and assess overall resilience against cyberattacks, aiming to curtail the rising tide of cyber thefts that have plagued the industry. Government sources emphasise that these standards will bolster confidence among investors, encouraging wider participation from more conservative institutional players previously wary of regulatory ambiguity.

However, the move has stimulated debate within the industry. Advocates argue that these security enhancements are essential for sustainable growth and will attract significant institutional investment, driving innovation under a more transparent and secure framework. Conversely, critics caution that imposing bank-level compliance requirements may disproportionately burden smaller startups, raising operational costs and potentially stifling innovation. There are also concerns that the financial strain from such thorough audits could force some companies out of the market or push them towards less regulated environments, possibly diminishing overall transparency.

Despite these challenges, the Indian government has maintained a firm stance, underscoring that the long-term benefits of improved security and regulatory oversight outweigh the initial compliance hurdles. Collaboration with industry stakeholders is reportedly underway to ease the transition and provide support, aiming to ensure that businesses, regardless of size, can adapt without facing undue hardship.

The implications of India’s regulatory shift extend beyond its borders. This move positions India as a potential forerunner in the global cryptocurrency regulatory arena, with its bank-level compliance approach potentially serving as a model for other nations contemplating similar frameworks. A harmonised regulatory environment, especially in Asia, could facilitate cross-border digital asset transactions and enhance regional cooperation, further strengthening the position of emerging markets in the global crypto ecosystem.

As the global cryptocurrency market continues to evolve, India’s decision to enforce stringent cybersecurity compliance marks a significant milestone. It reflects a broader international trend where governments balance the benefits of digital currency innovation with the imperative to secure user data, prevent financial crimes, and protect consumers. How this policy shapes the trajectory of India’s crypto market and influences international regulatory practices will be closely watched by industry participants and regulators worldwide.

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Source: Noah Wire Services