India Investigates Offshore Crypto-to-Gift Card Platforms
The Indian government is investigating offshore crypto-to-gift card platforms that allow Indians to convert digital assets into vouchers for everyday spending. These channels have raised concerns about tax reporting, anti-money laundering monitoring (AML), and gaps in tracking crypto-funded transactions.
Digital South Trust, a Vellore-based blockchain research and policy organisation, raised the alarm on this mechanism to the Ministry of Finance and the Ministry of Home Affairs. The central issue is that these channels enable residents to convert virtual digital assets into real-world purchasing power within India without transacting through domestic banking rails or Indian crypto exchanges.
The tax issue is whether purchasing gift cards is a crypto disposal event, which would be taxed at a flat 30% under Section 115BBH of the Income-tax Act. The AML monitoring is also complicated by offshore platforms, as they are not required to enroll in FIU IND and establish KYC and AML measures.
Indian authorities are scrutinizing these channels because they enable crypto users to transfer stablecoins like USDT from their wallets to foreign platforms, which issue Indian gift cards or digital vouchers. These vouchers can be redeemed for everyday goods and services, including groceries, fuel, food, mobile recharges, and gold.