How to Setup a Crypto Exchange in India?

Cryptocurrency has emerged as one of the most transformative innovations of the 21st century, reshaping how people perceive money, transactions and investment. In India, despite regulatory uncertainty, interest in digital assets continues to grow rapidly. If you are looking to establish a cryptocurrency exchange in India, this guide provides a step-by-step overview covering the basics, applicable laws, documents, process, expenses and future outlook.

What is Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses the cryptography for security and operates on blockchain technology. Unlike the traditional fiat currencies issued by central banks, cryptocurrencies are decentralized, borderless and resistant to manipulation.

Some popular cryptocurrencies include Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Litecoin (LTC).

Key features of cryptocurrency:

• Decentralization –It is not controlled by any single authority.
• Transparency – The transactions are recorded on a public blockchain.
• Security – The cryptographic algorithms protect transactions.
• Global accessibility – Anyone with the internet access can participate.

In India, cryptocurrency is not legal tender, but it is legally tradable and taxed under specific provisions.

What is a Crypto Exchange?

A cryptocurrency exchange is a digital marketplace where users can buy, sell and trade cryptocurrencies using fiat currency (like INR) or other digital assets.

Types of crypto exchanges:

1. Centralized Exchanges (CEX) – It is run by companies, easy to use, but require user trust (e.g., WazirX, CoinDCX).
2. Decentralized Exchanges (DEX) – It’s peer-to-peer platforms, no central authority, higher privacy (e.g., Uniswap, PancakeSwap).
3. Hybrid Exchanges – It combine features of both CEX and DEX.

An exchange must ensure:

• KYC (Know Your Customer) compliance.
• AML/CFT monitoring under PMLA.
• Cybersecurity audits & risk management.
• Banking/payment integrations with RBI guideline.

In India, most startups focus on centralized exchanges since they allow fiat-to-crypto transactions, regulatory monitoring and user-friendly interfaces.

Applicable Laws in India

The legal environment for crypto in India has been evolving. While cryptocurrency itself is not banned, it is also not recognized as legal tender and there is no single, dedicated “Crypto Law” yet. However, exchanges must comply with several existing frameworks:

1. Companies Act, 2013 – Need to register your business as a Private Limited Company or LLP.

2. Prevention of Money Laundering Act (PMLA), 2002 – Since 2023, Virtual Digital Asset (VDA) service providers (including crypto exchanges) are “reporting entities” under PMLA. Registration with FIU-IND (Financial Intelligence Unit – India) is mandatory.

3. Income Tax Act, 1961 – 30% tax on profits from crypto transactions + 1% TDS on certain transfers (as per Union Budget 2022).

4. FIU-IND Circulars (2023-2025) – Updated requirements for registration, KYC re-verification, periodic reporting and cybersecurity audits.

5. Information Technology Act, 2000 – obligations relating to data protection, cybersecurity and IT compliance.

6. Foreign Exchange Management Act (FEMA), 1999 – applies if foreign investors or international transactions are involved.

7. RBI Guidelines on Digital Payments (2025) – Risk-based authentication and two-factor checks for UPI/cards from April 2026.

Note: The regulatory environment is fluid. India does not yet have a comprehensive crypto law, but compliance with FIU-IND and taxation rules is mandatory.

Documents and Information Required

To start a crypto exchange in India, you will need the following:

Company Setup Documents

• Certificate of Incorporation
• Memorandum of Association (MoA) & Articles of Association (AoA)
• Director Identification Number (DIN) and Digital Signature Certificates (DSC)
• PAN and TAN of the company
• GST Registration Certificate

Compliance & Operational Documents

• KYC policy, AML policy, Privacy policy, Terms of Service
• Cybersecurity audit report
• Data storage and server details (preferably hosted in India)
• FIU-IND registration proof
• Banking or payment partner agreements for fiat transactions

Personal KYC Documents (for founders/directors)

• PAN Card
• Aadhaar Card / Passport
• Passport-size photographs
• Address proof

Process to Setup a Crypto Exchange in India

Setting up a crypto exchange requires careful legal, technical and financial planning.

Step 1: Business Incorporation

• Register your company as a Private Limited Company under MCA.
• Obtain PAN, TAN and GST registration.
• Open a current bank account.

Step 2: Legal & Regulatory Compliance

• Draft KYC/AML policies as per PMLA.
• Register with FIU-IND as a reporting entity.
• Put in place systems for suspicious transaction reporting (STRs).
• Ensure compliance with IT and data protection rules.

Step 3: Technology Development

• Decide whether to build your own trading engine or use white-label crypto exchange software.
• Key features:
1. User-friendly trading interface
2. Liquidity management
3. Secure payment gateway
4. Multi-currency wallet integration
5. 2FA and strong security protocols

Step 4: Banking & Payment Gateway Integration

• Tie up with banks, NBFCs or payment service providers for deposits/withdrawals.
• Integrate UPI, NEFT/RTGS and IMPS systems (subject to partner bank approval).

Step 5: Security Implementation

• Use cold wallet storage for the majority of funds.
• End-to-end encryption and multi-sig authentication.
• DDoS protection, firewalls and regular cybersecurity audits.

Step 6: Launch & Marketing

• Beta test the platform with a closed group.
• Launch officially with promotional offers.
• Build user trust through transparency and customer support.

Overall Estimated Expenses

The cost of setting up a crypto exchange in India depends on scale, security and compliance requirements.

Estimated Breakdown:

• Company Incorporation & Legal Compliance – ₹2–5 lakhs
• Technology Development / White-label solution – ₹20–50 lakhs (custom-built may exceed ₹1 crore)
• Security Infrastructure & Audits – ₹10–15 lakhs
• FIU-IND registration & compliance costs – ₹5–8 lakhs
• Banking & Payment Integration – ₹5–10 lakhs
• Marketing & Operations – ₹15–25 lakhs

Total Estimated Cost: ₹50 lakhs – ₹1.5 crores (depending on scale and customization).

Note: Professional fees for legal, financial and technical advisory may apply in addition to the above costs.

Timeline

Setting up a crypto exchange involves multiple steps and compliance checks. Approximate timeline:

• Company Incorporation & Legal Setup – 1–2 months
• Compliance Documentation & FIU-IND registration – 2–3 months
• Technology Development & Testing – 4–6 months
• Banking & Payment Integration – 1–2 months
• Security Audits & Launch – 1–2 months

If you opt for a white-label solution, the timeline can reduce to 3–6 months.

Future of Crypto in India

The future of cryptocurrency in India is promising but highly dependent on regulatory clarity.

Key trends to watch:

1. Government Regulations – India may introduce a licensing regime for exchanges under SEBI or RBI supervision.
2. Institutional Adoption – More fintech’s and banks may cautiously partner with compliant crypto exchanges.
3. CBDC (Digital Rupee) – RBI’s digital currency rollout may boost blockchain adoption while restricting private crypto use as payment.
4. Enforcement Action – FIU-IND has already taken steps against non-compliant offshore exchanges; only registered entities will be allowed.
5. Innovation in Web3 & DeFi – Blockchain applications like NFTs, DeFi lending and metaverse projects are gaining traction.

Conclusion

Setting up a crypto exchange in India is challenging but potentially rewarding. It requires navigating evolving laws, ensuring strict compliance, building secure technology and gaining user trust. While costs and regulatory hurdles are significant, India’s large digital population makes it one of the most attractive crypto markets in the world. If you need professional help in fast track merger, contact Remind Legal, our experts will help you at every step.

As the government moves toward digital finance, entrepreneurs who take the right steps today could be the pioneers of tomorrow’s financial ecosystem.