COAI Experiences Sharp Decline in Share Value: Regulatory Oversight and Changing Investor Attitudes Impact India's Cryptocurrency Industry

India’s Crypto Industry Faces Regulatory Turbulence

In late 2025, India’s cryptocurrency landscape was shaken by a series of regulatory clampdowns, leading to a steep fall in the stock price of COAI, a major domestic crypto exchange. Investor anxiety has grown as authorities targeted both offshore trading platforms and unlicensed financial influencers, intensifying uncertainty across the market. This overview explores the evolving regulatory environment, its effects on investor confidence, and what it means for the future of digital assets in India.

Crackdown on Overseas Crypto Platforms

November 2025 saw India’s Financial Intelligence Unit (FIU-IND) ramp up its oversight by sending compliance directives to 25 foreign crypto exchanges—including Huione, BingX, and Paxful—for breaching anti-money laundering (AML) regulations under the Prevention of Money Laundering Act, 2002. These exchanges, which had been operating without official registration, were instructed to take down their apps and websites from public access. This move is part of India’s broader effort to bring all virtual digital asset (VDA) service providers—regardless of location—under a unified set of rules, requiring strict adherence to AML standards such as transaction reporting and record maintenance.

The authorities’ actions mark a shift toward regulating based on the type of financial service offered—such as custody or fiat on/off ramps—rather than the technical setup of the platform. This approach was reinforced by a 2025 Madras High Court decision that classified cryptocurrencies as property, hinting at a gradual move toward legal certainty. However, the immediate fallout has been disruptive: smaller exchanges are struggling with compliance expenses, while larger players like Bybit and Binance are navigating the registration process.

SEBI Targets Unregulated Financial Influencers

Alongside the crackdown on exchanges, the Securities and Exchange Board of India (SEBI) has taken decisive action against unauthorized financial influencers. In October 2025, SEBI barred Avadhut Sathe—a well-known “finfluencer”—and his trading academy from offering unregistered investment advice disguised as stock market education. Investigations revealed that Sathe’s academy had amassed over ₹601 crore from 337,000 investors by conducting live trading sessions with misleading recommendations and selective testimonials. SEBI ordered the recovery of ₹546.16 crore in illegal earnings and banned the use of live market data or performance advertising by the entities involved.

This case highlights SEBI’s increasing vigilance against deceptive practices in the financial advisory sector. According to SEBI’s 2025 Investor Survey, 62% of investors rely on advice from financial influencers, with 93% considering them trustworthy. The regulator’s actions have exposed not only individual misconduct but also broader risks, such as behavioral biases like fear of missing out (FOMO) and overconfidence, which can heighten market instability.

Investor Sentiment and Market Dynamics

The combined force of these regulatory measures has dramatically shifted market sentiment. Retail investors have grown wary of unregulated advice, while the removal of offshore exchanges has restricted access to familiar trading platforms. Institutional investors, meanwhile, remain cautious due to unclear licensing and tax policies. India’s 30% tax on crypto profits, 18% GST on exchange services, and a 1% tax deducted at source for transactions above ₹50,000 have further discouraged participation.

The sharp decline in COAI’s share price in November 2025 reflects these pressures, compounded by broader economic challenges. By October 2025, India’s foreign exchange reserves had dropped by $5.6 billion, with $3.8 billion of that attributed to gold holdings—a sign of wider financial vulnerability. The Reserve Bank of India’s continued focus on promoting the e-rupee over recognizing cryptocurrencies has also hindered institutional involvement.

Macroeconomic and Policy Uncertainty

Despite India’s top position in the 2025 Chainalysis Global Crypto Adoption Index, the sector remains hamstrung by regulatory ambiguity. The government’s slow rollout of a comprehensive crypto policy has stifled innovation and limited venture capital investment in Web3 startups. Experts like Zia ul Haque point out that while user adoption is high, India lacks a strong pool of blockchain developers and practical applications, reducing the urgency for political reform.

The upcoming adoption of the OECD’s Crypto-Asset Reporting Framework (CARF) by April 2027 could pave the way for global compliance, but it also raises concerns about increased reporting requirements. For platforms like COAI, the challenge will be to manage compliance costs while maintaining user trust in an environment where confidence is waning.

Expert Perspectives and the Road Ahead

Industry analysts emphasize that clear regulations—such as a regulatory sandbox for crypto or simplified tax rules—are essential for market stability. However, current enforcement trends suggest a tilt toward punitive actions rather than policies that encourage innovation. Groups like the Bharat Web3 Association warn that this approach could hinder growth without addressing the root causes of illicit activity.

For COAI, the future depends on how effectively it can adapt to these regulatory challenges and restore investor trust. The exchange’s efforts to comply with FIU-IND’s directives, especially regarding offshore operations, will be crucial. Meanwhile, the broader crypto sector must navigate a regulatory landscape that currently prioritizes risk reduction over fostering technological progress.

Conclusion

The decline in COAI’s stock price is emblematic of the wider struggles facing India’s crypto industry amid regulatory crackdowns, shifting investor sentiment, and economic headwinds. While government actions against offshore exchanges and financial influencers aim to protect the public, they have also created an atmosphere of uncertainty that discourages engagement. For the industry to flourish, policymakers must find a balance between robust oversight and encouraging innovation—a challenge that will shape the future of crypto in India.