India Tightens Crypto KYC: Selfie, GPS and Penny-Drop Rules
India Tightens Crypto KYC: Selfie, GPS and Penny-Drop Rules
New AML/CFT guidelines require crypto exchanges to verify users with selfies, geolocation, and penny-drop bank checks, while banning mixers and ICOs.
India's Financial Intelligence Unit (FIU) has updated anti-money laundering and combating financing of terrorism guidelines for virtual digital assets, laying out mandatory new KYC measures for crypto exchanges onboarding users. Onboarding will require a PAN, a selfie with liveness detection, and the latitude and longitude of the onboarding location, with the date recorded. The so-called penny-drop method for bank account verification has also been mandated to strengthen identity checks and reduce risks associated with crypto assets.
Exchanges must register with the FIU as reporting entities and submit regular reports on suspicious transactions, while maintaining records of client identities, addresses, and transaction details to identify and mitigate money laundering, terrorist financing, and proliferation financing risks. The FIU acts as the single-point regulator for crypto exchanges operating in the country under the Prevention of Money Laundering Act.
The new guidelines also bar tumblers and mixers and any anonymity-enhancing token-linked transactions from being facilitated on exchange platforms. They explicitly discourage Initial Coin Offerings (ICOs) and Initial Token Offerings (ITOs), drawing a parallel to IPOs in traditional markets, to curb potential investor risk.
These updates come about three years after the guidelines were first published in March 2023 and reflect India’s ongoing effort to tighten oversight of crypto activity while clarifying that cryptocurrencies are not legal tender, though they are taxed under the Income-Tax framework. The FIU’s updated framework, announced on January 8, signals a stronger push toward formalizing oversight and ensuring that crypto exchanges operate with transparent customer verification and robust transaction monitoring. The guidelines also require exchanges to preserve client IDs, addresses, and transaction histories to support ongoing AML/CFT efforts, a move that could reshape onboarding processes and compliance costs for operators operating in India.
