India Tightens Crypto Rules with Enhanced KYC Measures
India’s Financial Intelligence Unit (FIU) has introduced stricter identity verification rules for cryptocurrency exchanges to curb money laundering and terrorist financing, the Press Trust of India reported.
Under the updated guidelines, effective Jan. 8, exchanges must verify users with a live selfie showing blinking, and record their location, date, time, and IP address. In addition to the mandatory Permanent Account Number (PAN), users must provide government-issued IDs—such as passports, driver’s licenses, Aadhaar cards, or voter IDs—and confirm mobile numbers and emails via one-time passwords (OTPs).
Bank account ownership is validated through the “penny-drop” method, which charges a refundable 1 rupee (INR). High-risk users—including those connected to tax havens, FATF-listed jurisdictions, politically exposed persons, or certain non-profits—undergo enhanced due diligence every six months.
Exchanges are barred from supporting initial coin offerings (ICOs) or token offerings (ITOs) and from using tools like tumblers that obscure transactions. All platforms must register with the FIU, report suspicious trades, and retain user data for five years. The FIU noted ICOs and ITOs carry “heightened and complex” risks.
India treats cryptocurrencies as virtual digital assets (VDAs) under the Income Tax Act, 1961. Citizens can buy and sell VDAs on FIU-registered platforms but cannot use them as legal tender for goods or services.
