- Many Indian crypto users are using offshore exchanges to bypass tax obligations.
- Crypto users convert digital assets to gift cards, which they use for local purchases.
- The trend highlights growing challenges for India’s tax enforcement and regulatory visibility.
Offshore crypto platforms are enabling Indian users to convert digital assets into gift cards for everyday spending, creating a potential gap between crypto taxation, AML oversight, and consumer payments.
The development highlights how Indian users could potentially use crypto for everyday purchases without directly converting their assets through domestic exchanges. By moving crypto through offshore platforms and converting it into vouchers, users may bypass some of the traditional points where transactions come under India’s tax, AML, and cross-border payment oversight.
Indian Crypto Traders Use a “Cross-Border Loop”
Offshore platforms serving Indian crypto traders use a “cross-border loop” to facilitate local crypto spending. The process converts digital assets into proxy money, enabling users to bypass standard domestic crypto payment hurdles. The system enables Indian residents to send crypto, mainly stablecoins like USDT, from private e-wallets incorporated abroad.
The offshore platforms pool and sell the crypto on international markets and use the fiat proceeds to pay Indian voucher aggregators with which they maintain B2B technology arrangements. The aggregators issue digital card codes for top local brands. Aggregators send the codes via email or SMS to users who subsequently load them onto local apps for purchases.
Complications for India’s Tax Framework
Using an offshore crypto-to-gift-card platform to convert cryptocurrency into everyday purchases creates several roadblocks for India’s Virtual Digital Asset (VDA) tax framework. That is because the Indian tax agency does not have access to the dealings of platforms not registered with the country’s Financial Intelligence Unit (FIU-IND).
Indian crypto users who rely on these offshore platforms may bypass the domestic banking network, reducing the visibility of such transactions to local authorities. This limited visibility could complicate the application of India’s 30% Virtual Digital Asset (VDA) tax framework, as regulators may find it harder to track offshore activity.
What This Means for Indian Crypto Users and Regulators
Many Indian crypto users initially saw crypto-to-gift-card platforms as a convenient loophole to bypass local tax obligations. However, as the FIU-IND ramps up efforts to clamp down on the practice, such users now face high-risk legal liability. The government has also initiated steps to take down the URLs and mobile apps of platforms involved in this practice, leaving users facing the risk of having access abruptly cut off and their assets frozen.
For the Indian government, this development represents a systemic threat to both national security and economic policy. It introduces the risk of capital flight and foreign exchange oversight, while exposing the limitations of not operating an infrastructure-layer enforcement. It has also pushed India to prioritize international cooperation, as the Central Board of Direct Taxes (CBDT) has finalized guidelines to integrate with the OECD’s Crypto-Asset Reporting Framework (CARF).
Related: India Crypto Tax: Experts Warn Missing Records Could Trigger Tax Notices
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