India’s financial watchdogs are turning a close eye on a growing corner of the crypto-payments market: offshore prepaid cards that let residents convert crypto into rupees at the point of sale. What’s happening - According to The Economic Times, the Reserve Bank of India (RBI) and the Financial Intelligence Unit–India (FIU-IND) are scrutinizing overseas crypto card programs — including RedotPay — that let Indian users spend crypto domestically in rupee transactions. - Regulators are reportedly probing how these cards interact with India’s payment rails, and whether they sidestep foreign-exchange and domestic payment-system rules. No public ban or formal enforcement action against RedotPay has been announced. How the cards work - Offshore providers issue virtual or physical prepaid cards that are funded with crypto held at foreign custodians. - At checkout, the provider converts the crypto into local currency and routes payment through conventional card networks (Visa or Mastercard), so merchants receive a standard card payment even though the user originally used Bitcoin, stablecoins (USDT, USDC), Ethereum, etc. - Some programs advertise light customer verification and low friction, which regulators say raises questions about customer ID, transaction monitoring and cross-border compliance. Disruptions and reporting - Users began reporting card deactivations and blocked access to provider websites on social media from late October. Some said physical cards had even been used to withdraw rupees at major Indian-bank ATMs before services stopped. - Sources told the ET that card networks may have started restricting transactions involving such offshore crypto cards. Visa, Mastercard and the RBI did not respond to the paper’s requests for comment. Catalyst for scrutiny - Bengaluru-based blockchain research group Digital South Trust shared findings with authorities after obtaining a virtual, Visa-backed RedotPay card in August and completing domestic transactions. Its founder flagged what his group saw as weak identity checks and monitoring on some offshore offerings. Legal and compliance questions - India’s Foreign Exchange Management Act (FEMA) governs foreign-currency dealings, cross-border payments and related reporting. Legal experts quoted in the report warned that crypto-funded offshore cards create “cross-border” exposures that customers and some providers may not fully appreciate. - Lawyers and tax specialists also questioned whether such cards comply with India’s prepaid payment instrument rules and settlement frameworks — and whether providers meet anti-money-laundering (AML) obligations. Regulatory context - FIU-IND sent notices in September to 15 offshore cryptocurrency platforms over alleged AML lapses and the government has stressed that virtual-asset businesses serving Indian customers must meet domestic reporting and compliance obligations regardless of location. - India has already tightened other crypto-related rules, including recommendations on bank exposure and limits on privately issued stablecoins. RedotPay’s position and growth - RedotPay’s materials describe virtual and physical cards that convert crypto to local currencies during processing and support Bitcoin, Ethereum, USDT and USDC. Features listed include merchant payments and ATM withdrawals where available. - The company has been expanding internationally and completed financial and AML reviews in September as part of pre-IPO preparations. It reportedly had around 8.5 million users by July and was seeking a valuation above $5 billion. - Stablecoin card usage is growing: cumulative stablecoin card payments topped $10.9 billion by August 2026, with July 2026 alone seeing more than $1 billion in monthly spending in some datasets cited by RedotPay. What to watch next - Whether payment networks impose formal restrictions on these card products, and whether the RBI or FIU-IND issue guidance or enforcement actions, will shape the future of offshore card access for Indian customers. - For users, key issues are AML and KYC robustness, FEMA compliance, and whether service interruptions will continue — plus the broader question of how regulators will balance innovation with cross-border financial safeguards. Read more AI-generated news on: https://app.chaingpt.org/news