RBI and FIU Probe Offshore Crypto Card Issuer RedotPay as Indian Users Face Abrupt Deactivations — November 2, 2026

The Reserve Bank of India (RBI) and the Financial Intelligence Unit-India (FIU-IND) have initiated regulatory scrutiny into offshore cryptocurrency cards, including those provided by international fintech provider RedotPay, following widespread user reports of sudden service deactivations.

Starting in late October 2026, multiple Indian users reported on social media that their crypto-to-rupee payment services had ceased functioning at domestic merchants and point-of-sale terminals. The investigation targets arrangements where offshore prepaid cards, linked to global payment processors such as Visa and Mastercard, allow Indian residents to spend digital asset balances in Indian rupees while circumventing local banking scrutiny.

Regulatory Scrutiny and Enforcement Mechanics

Offshore crypto payment cards allow users to fund their accounts with cryptocurrencies or dollar-pegged stablecoins such as USDT. When swiped at an Indian merchant terminal or used online, backend systems convert the digital tokens into fiat currency, enabling seamless settlements that look like standard debit card charges to local merchants and automated teller machines (ATMs).

Authorities are examining several key regulatory and compliance violations:

• Payment and Settlement Systems Act, 2007: Non-bank issuers must obtain prior authorisation from the RBI before launching prepaid payment instruments within India.
• Foreign Exchange Management Act (FEMA): Sourcing overseas debit-like instruments backed by offshore digital assets to fund domestic rupee transactions poses serious cross-border capital flow compliance concerns.
• Tax Evasion and KYC Norms: Indian tax laws mandate a 1% Tax Deducted at Source (TDS) on virtual digital asset (VDA) transfers alongside a 30% flat tax on gains. Offshore cards advertising minimal customer verification make it possible for individuals to bypass both direct taxes and mandatory reporting frameworks.

Sources indicate that regulators are communicating with payment network operators like Visa and Mastercard, which may have led to card suspensions for rupee settlements originated from or executed within India. Neither the RBI, Visa, nor RedotPay has issued a formal public decree regarding an outright ban.

Triggered by Research and Testing Dossier

The heightened regulatory attention follows findings submitted by the Digital South Trust, a Bengaluru-based non-profit blockchain research organisation. In August 2026, the organisation procured a virtual Visa-backed RedotPay card—typically costing between $40 and $50 with a three-year validity—and executed routine domestic online transactions to assess compliance loopholes.

Digital South Trust subsequently compiled transaction records, ATM withdrawal demonstrations, and verification logs, submitting the evidence directly to Indian authorities. Sudhakar Lakshmanaraja, founder of the research body, noted that offshore programmes could enable routine transactions via global payment networks funded by stablecoins under little to no Know-Your-Customer (KYC) documentation, obscuring the beneficial ownership of underlying crypto holdings.

Market Implications for Indian Investors

The crackdown arrives amidst persistent regulatory pressure on offshore crypto entities operating without local registration. In September 2026, FIU-IND issued non-compliance notices to 15 offshore virtual asset service providers to ensure adherence to India's Prevention of Money Laundering Act (PMLA).

For Indian market participants, the inquiry highlights significant operational hazards:

• Capital Lock-In Risks: Users relying on offshore fintech cards face sudden balance freeze or network deactivations without domestic grievance redressal mechanisms.
• Heightened Enforcement Audits: As transaction logs from card payment gateways are audited, residents conducting untracked off-ramping risk retroactive notices under FEMA and direct tax guidelines.
• Closing Grey-Market Channels: The RBI continues to maintain a strict stance regarding crypto integration into the sovereign banking framework, signalling that circumvention tools through overseas card schemes will face immediate network disruption.