Crypto Cards Enter RBI’s Radar as Indians Use Offshore Wallets for Everyday Payments

Offshore cryptocurrency-linked cards are drawing scrutiny from India’s financial regulators after some residents reportedly began using them to make routine purchases, recharge mobile phones and book flights. The cards allow users to spend cryptocurrencies held in overseas wallets while Indian merchants receive payments in rupees through familiar international card networks.

The Reserve Bank of India (RBI) and the Financial Intelligence Unit-India (FIU-IND) are examining how these products operate and whether they comply with India’s payment and foreign exchange regulations, according to a November 2 report by The Economic Times. The development highlights a growing regulatory challenge: digital assets held overseas can increasingly be used through conventional payment infrastructure without appearing to merchants like cryptocurrency transactions.

How Offshore Crypto Cards Work

Crypto cards function much like prepaid debit cards, but their funding comes from cryptocurrency wallets rather than conventional bank accounts. Users deposit digital assets, including dollar-backed stablecoins, into designated wallets operated by overseas fintech companies.

When a customer makes a purchase, the service provider converts the required amount of cryptocurrency into local currency. The payment is then processed through an established card network such as Visa or Mastercard, allowing the merchant to receive rupees through its normal payment arrangement.

For example, an Indian customer could use a crypto-funded card to pay for an online purchase. The merchant would see what appears to be a regular card transaction, while the underlying payment would be funded by digital assets held with an offshore provider.

Companies such as RedotPay offer these services through international payment infrastructure. According to the Economic Times report, some cards cost approximately $40–$50, have a validity period of three years and offer relatively high daily transaction limits.

The products have reportedly been used for online shopping, mobile recharges, flight bookings and, in some cases, cash withdrawals from Indian bank ATMs using physical cards.

RBI and FIU Examine Potential Regulatory Gaps

The RBI and FIU-IND are understood to be examining the use of offshore crypto cards by Indian residents. Sources cited by the Economic Times said authorities were also understood to be in contact with Visa and Mastercard about the issue.

However, neither the RBI nor the payment networks publicly confirmed the discussions in response to the newspaper’s queries. The reported scrutiny should therefore not be interpreted as a formally announced nationwide enforcement order.

The issue came into focus after Bengaluru-based blockchain research organisation Digital South Trust examined offshore crypto-card programmes. The organisation reportedly obtained a virtual Visa-backed RedotPay card in August, conducted several domestic online transactions and shared its findings with Indian authorities.

Its founder, Sudhakar Lakshmanaraja, said some offshore programmes advertise limited or no KYC requirements. Such arrangements could make it harder for regulators and financial institutions to establish who is funding transactions and where the money originated.

The FIU-IND monitors suspicious financial activity and works to identify potential money laundering and other financial crimes. Offshore payment products that combine cryptocurrency wallets with conventional card networks can create additional monitoring challenges when the underlying funding source is not immediately visible to domestic merchants.

Crypto Card Deactivations Raise Questions

The regulatory attention has coincided with reports of service disruptions. Several Indian users reportedly complained on social media that their prepaid crypto cards had stopped working for domestic transactions in late October. Some also reported difficulties accessing the websites of service providers.

Sources cited by the Economic Times did not rule out the possibility that payment networks had begun restricting transactions involving these cards in or from India.

However, there has been no clear public confirmation identifying which companies initiated the reported restrictions, how many users were affected or whether all offshore crypto-card programmes face the same limitations.

This distinction matters because a reported card failure does not automatically establish that a regulator has issued a formal ban or that every provider has been blocked. The situation may involve payment-network decisions, provider-level restrictions or regulatory compliance reviews.

Why FEMA and Payment Regulations Matter

The central regulatory concern involves how offshore crypto balances are converted into rupees and used for domestic or international payments.

India’s Foreign Exchange Management Act (FEMA) governs foreign exchange transactions and certain cross-border financial activities. Legal experts quoted by the Economic Times said that holding cryptocurrency through a foreign custodian and automatically converting it into fiat currency for payments could raise questions under FEMA.

The cards may also create issues under India’s prepaid payment instrument and payment-and-settlement systems frameworks. Harshal Bhuta, co-founder and country co-head for international tax and FEMA at Ascentium India, said foreign crypto debit cards could effectively bypass parts of these regulatory arrangements.

The concern is not limited to the use of cryptocurrency itself. Regulators may also examine where the wallet is held, how funds enter the system, who controls the assets, how currency conversion takes place and whether the transaction meets applicable reporting and compliance requirements.

Manavendra Mishra, a white-collar crime and investigations partner at Khaitan & Co, also highlighted the risks surrounding the source and beneficial ownership of digital tokens. He noted that blockchain analysis can help investigators trace transactions and follow the movement of assets, even when users assume that offshore wallets provide anonymity.

Stablecoins Are Connecting Crypto With Traditional Payments

The growing popularity of crypto cards is closely linked to stablecoins, digital assets designed to maintain a relatively stable value against currencies such as the US dollar.

Stablecoins can make crypto-funded payments more practical because users do not necessarily need to sell volatile assets such as Bitcoin every time they make a purchase. A dollar-backed stablecoin can instead serve as the funding balance, with the provider converting the required amount into local currency during payment processing.

This model is increasingly connecting blockchain-based assets with traditional financial infrastructure. Visa has disclosed more than 150% growth in stablecoin-related payment volume across five million cards, while its stablecoin settlement activity has crossed an annualised run rate of $25 billion, according to figures cited by Vedang Ratan Vatsa, founder of Hashtag Web3.

These figures indicate growing international activity, but they do not establish how widely crypto cards are being used in India. The domestic regulatory question is whether offshore providers can offer crypto-funded payment services to Indian residents without meeting the requirements applicable to authorised payment products and cross-border transactions.

The Bigger Picture

The emergence of crypto cards illustrates how digital assets are moving beyond trading platforms and investment portfolios into everyday financial activity. By combining offshore wallets with established card networks, providers can make cryptocurrency spending appear similar to conventional debit-card payments.

For India, this creates a challenge that extends beyond deciding how cryptocurrencies should be taxed or regulated as investments. Authorities must also consider payment-system oversight, foreign exchange compliance, customer verification, the origin of funds and the responsibilities of international payment networks.

A regulatory response could influence how global fintech companies serve Indian customers and whether stablecoin-based payment products can operate through authorised channels. It may also encourage providers to strengthen identity verification, transaction monitoring and reporting procedures.

Looking Ahead

The immediate focus will be on whether the RBI and FIU-IND move from preliminary scrutiny towards formal regulatory action. Any clarification from the central bank, FIU-IND, Visa, Mastercard or offshore card providers could help establish which services are affected and what compliance requirements apply to Indian residents. Until then, reported card deactivations should be treated separately from an officially announced regulatory prohibition.

The longer-term question is whether India develops a clearer framework for cryptocurrency-funded payment products or continues to rely on existing foreign exchange and payment-system rules to address them. As stablecoins become more integrated with conventional financial networks, regulators will face increasing pressure to ensure that innovation does not weaken transaction monitoring, consumer protection and oversight of cross-border money flows.