India has moved to further tighten oversight of crypto platforms, introducing stricter know-your-customer rules that require live selfie verification, location tracking, and deeper identity checks as regulators step up enforcement around taxation and financial crime.
New onboarding rules raise the bar for exchanges
India’s Financial Intelligence Unit, the agency responsible for enforcing anti-money laundering standards, has issued updated guidelines for crypto exchanges operating in the country. The rules significantly expand what platforms must collect and verify before allowing users to trade.
Under the new framework, exchanges must verify users through live selfie checks that track eye and head movement, a measure designed to prevent AI-generated deepfakes. Platforms are also required to capture geolocation data, IP addresses, and timestamps during account creation, according to local reports.
More identity checks for crypto users
The guidelines go beyond facial verification. Exchanges must now confirm user bank accounts by sending a small test transaction, a standard AML practice aimed at linking crypto activity to real-world financial identities.
Users will also need to submit additional government-issued photo identification and verify both email addresses and mobile numbers before opening accounts. The changes apply to registered crypto exchanges regulated under India’s existing compliance framework.
Tax authorities flag crypto as an enforcement challenge
The tighter KYC rules come as India’s tax authorities raise concerns about crypto’s impact on tax collection. Officials from the Income Tax Department recently told lawmakers that decentralized exchanges, anonymous wallets, and cross-border transactions make enforcement difficult.
India currently taxes gains from crypto sales at a flat 30%, allowing deductions only for the original purchase cost. Losses from crypto trades cannot be used to offset gains, a policy that has drawn criticism from market participants but remains firmly in place.