The remit of ED’s recent searches are platforms that let users deposit rupees, convert those rupees into crypto, and transfer that value to a recipient overseas, thereby operating an alternate cross-border payment rail. Historically, most ED actions against crypto companies have been anchored in the Prevention of Money Laundering Act (PMLA), typically arising from an underlying offence like fraud, betting, or loan app abuse. This action is different because the ED is acting purely under FEMA, targeting the method of fund transfer rather than any underlying illegality. It is narrower and more focused enforcement because it does not require proving fraud.
Background
On 17 June 2026, the Enforcement Directorate (ED), Bengaluru Zonal Office, conducted searches under Section 37 of the Foreign Exchange Management Act, 1999 (FEMA) across premises of six platforms in Bengaluru: (i) Transak (Transak Technology India Private Limited); (ii) Carret (Carretx Technologies Private Limited); (iii) Xpat (Mokshagna Technologies Private Limited, formerly Remit2Any); (iv) Onramp.money (Buyhatke Internet Private Limited) and (v) Onmeta (Abhibha Technologies Private Limited).
ED sounded the alarm because these platforms were using virtual digital assets (VDAs) to offer an alternative rail for cross-border transfers as a substitute to the existing RBI-regulated settlement rail. The fact that these platforms were publicly advertising themselves as crypto payment rails and cross-border remittance solutions has not helped them.
The issue with a VDA-powered settlement rail for cross-border transfers
The reason for ED coming down heavily on this modus operandi of cross-border fund movement might be the same reason why FEMA exists – to protect the RBI's ability to manage India's foreign exchange market. This sits within a wider policy concern around conserving foreign exchange, recently echoed by both the Prime Minister and the Finance Minister. Each time someone converts INR into a foreign currency, they sell rupees and buy foreign exchange. Hundreds of such isolated transactions could compound and create systemic risks - demand for foreign currency rises, the rupee can weaken, and imports become more expensive. These risks may be perceived to be sharper at a time when oil prices, geopolitical volatility and pressure on the rupee have put foreign exchange conservation a live policy concern for the Indian government. For instance, in the present search ED seized approximately INR 6 crore in bank balances and alleged that in total, these platforms processed over INR 2,500 crore in cross-border transactions.
Regular VDA trading may not be in the crosshairs
A fair concern is whether this enforcement measure casts a shadow over compliant VDA exchanges operating with FIU-Ind registration. That concern needs to be answered at the level of the transaction. The ED action is not targeted at VDA trading as such, but the use of VDAs to operate an alternate cross-border payment rail. Let’s take an example to contextualise this.
Rudra in Bengaluru wants to buy 1 BTC on an Indian exchange. If another user in India is willing to sell 1 BTC, the exchange simply matches the two orders. But if there are not enough sellers in India, the exchange may purchase the BTC from a global exchange or another overseas liquidity provider to complete Rudra’s trade. Although the trade may ultimately involve offshore liquidity, Rudra is not trying to send money to a specific person abroad. His objective is simply to buy BTC as an investment. This is a recognised VDA activity when carried out through an FIU-registered VDASP, subject to tax compliance and AML/CFT reporting under the PMLA framework. Any cross-border movement that occurs is incidental to how the exchange sources liquidity and executes trades, not the purpose of the transaction itself. And it appears that such activity is not within the ED’s purview at the moment.
That said, the distinction is not absolute. There is one more sensitive touchpoint: crypto withdrawals, where the user moves the VDA out of the exchange to another wallet or exchange. If that destination is overseas, the user may effectively be moving INR value abroad through VDAs. Many FIU-registered VDASPs do not allow crypto withdrawals, while others allow them, subject to KYC, wallet checks or additional beneficiary information. It is worth noting that shortly after the ED press release, Binance announced restrictions on crypto withdrawals for Indian users. Binance has not publicly linked this to the ED action, but the timing suggests growing sensitivity around withdrawal-enabled models.
The next few months should give us a clearer picture of whether the ED stays focused on the specific payment and remittance model targeted here, or whether enforcement extends further into the crypto ecosystem. For builders and investors in this space, it is pertinent to acknowledge that the risk profile of businesses operating cross-border payment models using crypto is materially higher than it was a month ago, and the question of the degree of risk depends on how enforcement develops.
Author credits: Authored by Meghna Bhaskar, Associate with inputs from Anirudh Rastogi, Managing Partner at Ikigai Law.
Image credits: Unsplash.
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