Indian Authorities Scrutinize Offshore Crypto-Gift Card Exchange Channels

Indian regulatory authorities are reviewing offshore cryptocurrency exchange channels that allow Indian users to directly exchange cryptocurrencies for gift cards usable for daily consumption.

The mechanism involves exchanging crypto assets for vouchers covering various scenarios, including fresh groceries, fuel, dining, mobile phone top-ups, and even gold purchases, without going through traditional bank accounts or payment systems within India.

Concerns raised by this process focus on tax reporting, as it may evade India's 1% Tax Deducted at Source (TDS) and 30% capital gains tax reporting obligations; anti-money laundering, as the conversion path lacks identity verification (KYC) and suspicious transaction monitoring; and cross-border payments, as the gift card issuers and underlying settlement platforms are mostly located outside India.

This phenomenon reflects the arbitrage space between India's high-tax cryptocurrency regulatory environment and users' actual consumption needs. Indian crypto asset holders continue to seek paths to bypass traditional banks and tax reporting due to high tax rates on cryptocurrency transactions in India.