India's Financial Intelligence Unit (FIU) has issued stringent new Know Your Customer (KYC) guidelines for cryptocurrency exchanges, fundamentally altering the user onboarding process. The new rules mandate that regulated exchanges implement a multi-layered verification system.
The core requirements include real-time biometric checks via live selfie pictures, verified with software that tracks eye and head movements to prevent AI deepfakes. Exchanges must also collect and verify the user's geolocation and IP address at the time of account creation. Furthermore, users must authenticate their bank accounts by initiating a small, verified transfer to the exchange.
Additional mandates force users to submit government-issued photo ID and verify their email and mobile numbers. The regulatory push follows direct concerns from India's Income Tax Department (ITD), which recently told lawmakers that the pseudonymous nature of crypto and DeFi platforms undermines tax enforcement, making tracking transactions and capital gains difficult.
The move places India among jurisdictions with aggressive oversight, with a unique focus on real-time identity and financial linkage at onboarding. For exchanges, compliance necessitates rapid integration of liveness detection software, secure geolocation APIs, and automated bank transfer systems. Analysts view this as a shift from skepticism to structured oversight, bringing crypto service providers under traditional Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) frameworks.
