Confirm FIU-IND Registration
The single most important check for any crypto exchange serving Indian users is its registration status with the Financial Intelligence Unit - India (FIU-IND). Since March 2023, all Virtual Digital Asset (VDA) service providers are required to register
with FIU-IND and comply with the Prevention of Money Laundering Act (PMLA). This isn't optional; it's a legal mandate. An FIU-registered exchange is obligated to perform KYC checks, monitor transactions, and report suspicious activities to the authorities. This framework provides a layer of accountability and helps filter out illicit operators. The government has previously blocked offshore exchanges that failed to register, so verifying this is your first line of defense.
Scrutinise Security Measures
A compliant exchange is a good start, but its technical security is what protects your assets from theft. Look for platforms that implement multi-layered security. Key features include two-factor authentication (2FA), which should be mandatory, not just an option. Enquire about their fund storage practices. A trustworthy exchange will store the vast majority of user funds (typically 85-95%) in cold wallets, which are offline and insulated from hacking attempts. Some exchanges also offer insurance on assets held in custody through partners like BitGo. Regular third-party security audits and certifications like ISO 27001 are also strong indicators of a secure platform.
Understand the KYC Process
If an exchange has lax or non-existent Know Your Customer (KYC) requirements, it's a major red flag. Under updated FIU guidelines from January 2026, the process has become more stringent. All legitimate exchanges in India must verify your PAN card, a second government-issued ID like Aadhaar, and perform a "penny drop" test to confirm your bank account. A crucial new requirement is a live selfie with liveness detection, meant to defeat impersonation attempts using static photos or deepfakes. The platform must also collect your IP address and geolocation data during onboarding. This robust process, while sometimes tedious, ensures the platform is compliant and makes the ecosystem safer.
Analyse the Complete Fee Structure
Advertised trading fees are just the tip of the iceberg. To understand the real cost, you need to look at the entire fee structure. This includes maker and taker fees, deposit and withdrawal fees, and any hidden costs. A significant hidden cost is the spread—the difference between the buy and sell price—which is a source of profit for the exchange but is rarely listed as a fee. Also, remember that in India, a 1% Tax Deducted at Source (TDS) is applied to every crypto sale or swap transaction. While this is a government mandate, you should check how transparently the exchange handles and reports these deductions for your tax filings. A complex or unclear fee structure can quickly erode your returns.
Check for Liquidity and Trading Volume
Liquidity refers to how easily an asset can be bought or sold without causing a significant price change. High liquidity is crucial for a good trading experience. On an exchange with low liquidity, you might struggle to fill large orders at a fair market price, and you may encounter wider spreads. High trading volume is a strong indicator of a liquid and active platform. It means many buyers and sellers are present, which leads to better price discovery and faster trade execution. You can usually find volume data on the exchange's website or on third-party crypto data aggregators.
Evaluate Customer Support and User Reviews
When something goes wrong—a deposit is delayed or a trade fails—responsive customer support is invaluable. Check what kind of support channels the exchange offers. Is there 24/7 live chat, a ticketing system, or a phone number? Reading user reviews and checking for a history of security breaches or major controversies can provide insight into the platform's reliability and how it handles crises. An exchange with consistently poor reviews regarding fund withdrawals or customer service should be approached with caution. Remember, good support is not a luxury; it is a necessity in the fast-moving crypto market.
