Chainalysis reports that just 0.7% of India's crypto exchange inflows reach local platforms. Most user funds are sent to offshore exchanges, a trend driven by tax rules and regulatory hurdles. Brazil, meanwhile, sees its domestic exchanges gain ground.
India's crypto market is huge, but almost none of that money stays with local exchanges. A new Chainalysis report says only 0.7% of the value Indian users send to centralized exchanges ends up on Indian platforms. The rest goes to offshore exchanges. Local operators are left with a shrinking share, even as the market keeps growing.
Offshore preference
Chainalysis tracked $88.4 billion in centralized exchange inflows from India-based users during its latest annual reporting period. That makes India the biggest market in Central and Southeast Asia and Oceania. But Indian exchanges have seen their share of this activity collapse-from about 7% to just 0.7%. The sharpest drop came in mid-2022. In contrast, Brazil's domestic exchanges grew their share of inflows from 1.5% to 12.5% over a similar period, according to the same research.
Despite $88.4 billion in centralized exchange inflows from Indian users in a year, only 0.7% reached domestic platforms by mid-2026.
This split is not just about user habits. It shows a deeper divide between where crypto activity is counted and which platforms actually get the business. Chainalysis assigns activity to user countries based on website traffic, adjusted for income, but how it calculates domestic exchange shares is not fully clear. The numbers are estimates. Chainalysis admits that filtering out VPN and bot traffic is not perfect, so these figures should be seen as rough guides, not exact counts.
Tax friction and payment rails
India's tax rules are one reason users look offshore. Section 393 of India's tax code puts a 1% withholding tax on payments for virtual digital asset transfers to residents, with some exemptions based on who pays and how much is traded each year. This tax is taken right when the payment or credit happens, cutting the cash traders can use right away. For example, if someone sells ₹100,000 in crypto to a resident, ₹1,000 is withheld, leaving only ₹99,000 for reinvestment. The withheld amount can be claimed as a tax credit, but the timing gap creates problems for active traders and platforms.
CoinSwitch co-founder Ashish Singhal told Chainalysis that this tax friction is a big reason Indian users prefer offshore exchanges, which may not always apply the deduction. Still, the report points out that foreign platforms are not automatically free from Indian tax rules, and it's not clear exactly how much the withholding tax has hurt local market share. Payment access also matters. Both Indian and international exchanges offer fiat on-ramps. In Brazil, Mercado Bitcoin connects with local payment systems like Pix. Indian platforms support UPI and net banking. Big international players like Binance also use local payment rails to draw in users.
By late September 2026, India's FIU-IND issued compliance notices to 15 offshore crypto platforms, demanding removal of their apps and URLs from the Indian market. The regulator emphasized that VDA providers serving Indian clients must register as reporting entities and comply with anti-money laundering rules under PMLA.
Market structure and regulatory clarity
Chainalysis says Brazil's domestic exchanges have gained from clear rules, investment, and stronger local products. India's market, on the other hand, is split by tax and compliance headaches. Industry voices in the report mention that using stablecoins for liquidity and cross-border transfers could help Indian platforms grow, but this is still just a theory, not a proven trend.
For exchange operators, the real question is not just how much crypto activity is linked to a country, but how much of it actually lands on local platforms. India's case shows that a big user base does not guarantee a strong local exchange sector if tax and regulatory rules push users abroad. Brazil's different path shows how policy and infrastructure can change market outcomes.
Chainalysis's annual reporting window for these numbers runs from July 2025 through June 2026, but it does not give exact dates for the share changes. Brazil's wider crypto economy saw $252.5 billion in activity in the year ending June 30, even after a 1.6% drop. But this figure covers many types of activity and can't be directly compared to exchange inflows. To line up domestic exchange market share, you'd need matching dates, samples, and definitions, which the current report does not provide.
India's approach to crypto rules and taxes is very different from other countries testing digital asset payments. For example, Japan lets tourists spend crypto at some offline stores through Binance Pay, as reported earlier, but blocks access for residents. These differences in rules and payment setups keep shaping where and how people use crypto platforms around the world.
Data limitations and competitive pressure
Chainalysis groups service activity by user country, but the method relies on website traffic and income tweaks, with known gaps in filtering VPN and bot use. The report does not say if the platform sample stayed the same over time, so it's hard to compare year to year. The exchange share numbers do not include executed trades, revenue, or customer counts. They only show one side of platform activity: the value received.
For Indian exchanges, tax friction, unclear rules, and tough global competition have left them with a shrinking share of a booming market. Unless local platforms can offer something better, or lawmakers fix the structural problems, this trend is likely to continue. The data points to policy design-not just user demand-as the deciding factor in which platforms win the fight for crypto inflows.
Chainalysis's data shows that during its annual reporting period, India-based users sent $88.4 billion in value to centralized exchanges. Brazil's broader crypto economy recorded $252.5 billion in activity for the year ending June 30. Indian domestic platforms' share of exchange value dropped from about 7% to 0.7%, with the steepest fall in mid-2022. Brazil-based exchanges, meanwhile, grew their share from 1.5% to 12.5% over a similar period. These numbers come from Chainalysis's exchange analysis and reflect value received, not trades or revenue.
Withholding tax means the payer must deduct a percentage of the transaction at payment or credit, cutting the funds traders can use right away. In India, the 1% withholding applies to most resident-to-resident crypto transfers above certain yearly limits. The deducted amount can be claimed as a tax credit when filing returns. This setup can squeeze liquidity for active traders and may push users to offshore exchanges that do not take the deduction at the time of the deal.
