India tightens crypto onboarding for new users to combat money laundering and terror financing. Under the new norms, crypto exchanges are required to collect a live selfie, geographic location, and bank account verification with a test transaction, along with other mandatory details.
India’s FIU Tightens Onboarding for New Crypto Users
India’s Financial Intelligence Unit (FIU) has set new rules for crypto providers, increasing oversight to fight money laundering, fraud, terror financing, and other illegal activities.
The updated guidelines aim to strengthen anti-money laundering (AML) and know your customer (KYC) rules for all registered crypto exchanges, according to news agency PTI report.
Key checks now include taking a live selfie, tracking location with geo-tagging and IP address, and verifying bank accounts using the ‘penny drop’ method, which uses a refundable 1 rupee charge. High-risk clients will be checked every six months.
These checks are in addition to the required permanent account number (PAN) and address verification. Crypto exchanges must also collect extra documents like a passport, driver’s license, and Aadhaar card.
Users must also confirm their mobile numbers and email addresses using OTP verifications. The FIU will enforce the Travel Rule more strictly for transactions and will pay closer attention to unhosted wallets and peer-to-peer transfers.
These measures are meant to close loopholes used in scams, gambling, darknet activities, and other risky uses of crypto. Earlier, CoinGape reported that the FIU blocked several crypto exchanges and fined Binance.
Higher Crypto Tax Pushes Users Offshore, Raising Challenges
The Indian government remains strict and cautious about crypto, classifying them as virtual digital assets (VDAs). Crypto assets are taxed under income tax laws, with a 30% flat tax and 1% TDS on transfers. Indian tax officials say crypto and DeFi make tax tracking difficult. Moreover, anonymous wallets and cross-border transfers raise additional challenges.
Recent enforcement data highlights the FIU’s regulatory efforts. In the 2024–25 financial year, 49 crypto exchanges registered with the FIU, including four major global offshore exchanges. Platforms that did not comply faced heavy penalties.
The guidelines also strongly discourage high-risk activities like initial coin offerings (ICOs) and initial token offerings (ITOs). Crypto exchanges are required to keep client records for at least five years, submit suspicious activity reports, monitor transfers, and conduct regular audits.
Meanwhile, the government is inviting ideas and suggestions for the 2026-27 Budget. Crypto exchanges are encouraging the Indian crypto community to submit suggestions.
Source: https://coingape.com/india-fiu-tightens-crypto-oversight-mandates-live-selfies-geo-tagging-stricter-kyc/
