What You Need to Know About India’s New Crypto User Verification Rules
India’s Financial Intelligence Unit (FIU) has launched stricter compliance necessities for cryptocurrency platforms, considerably enhancing identification verification for customers nationwide.
Under the brand new guidelines, regulated crypto exchanges are required to confirm customers by way of reside selfie authentication and geographic location information through the onboarding course of.
India’s Enhanced Verification Standards Target Deepfakes and Static Images
The newest FIU guidelines take person verification additional than easy doc checks. Exchanges must use reside selfie verification that requires dynamic motion, comparable to eye-blinking or head turns, to affirm the person’s presence. This step goals to stop static photos or deepfake assaults from bypassing identification controls.
As famous by the Times of India, platforms must collect details at sign-up, together with latitude, longitude, date, timestamp, and IP tackle.
“The RE (crypto change) shall additionally be certain that the shopper whose credentials are being furnished on the time of onboarding is similar particular person who is definitely accessing the applying and personally initiating the account creation course of,” the guidelines learn.
The framework additionally expands documentation necessities. In addition to a Permanent Account Number (PAN), customers should submit a secondary type of identification. This might embrace a passport, Aadhaar card (a 12-digit distinctive identification quantity issued by the Indian authorities), or a voter ID.
Furthermore, e-mail addresses and cell numbers will endure one-time password (OTP) verification to guarantee accuracy. The penny-drop methodology, involving a small, sometimes refundable, financial institution transaction of 1 rupee, additional verifies that the person owns the submitted account.
Notably, customers flagged as high-risk will face enhanced and extra frequent compliance checks beneath the brand new FIU guidelines. This contains people with ties to tax havens, areas on the Financial Action Task Force (FATF) gray or blacklists, politically uncovered individuals (PEPs), or non-profit entities.
Specifically, these customers may have their KYC particulars up to date each six months, in contrast with an annual refresh for traditional customers. Exchanges are additionally required to apply enhanced due diligence.
Beyond onboarding, the FIU takes a troublesome stance on anonymity-enhancing instruments (mixers/tumblers and comparable merchandise) used to conceal transaction trails. Moreover, the steerage “strongly discourages” Initial Coin Offerings (ICOs) and Initial Token Offerings (ITOs).
According to the regulator, such actions current “heightened and sophisticated” dangers associated to cash laundering and terror financing. They are seen as missing a clearly justified economic rationale.
Strict Tax Regime Drives Users to Offshore Platforms
In addition to stricter oversight, India taxes crypto profits at a flat 30%. Each transaction additionally incurs a 1% tax deducted at supply (TDS). Analysts have acknowledged that this tax framework is “backfiring,” arguing that it discourages home buying and selling exercise and prompts customers to shift to offshore platforms.
“If we had been to summarise in a single line – the tax framework, applied and enforced non-uniformly throughout business contributors – has led to a marked migration of customers and liquidity in the direction of offshore platforms,” a report revealed.
According to the report’s estimates, Indian customers generated roughly ₹4,87,799 crore in buying and selling quantity on offshore exchanges between October 2024 and October 2025. This equals roughly $54.1 billion.
By comparability, offshore buying and selling exercise attributed to Indian nationals totaled ₹2,63,406 crore ($29.2 billion) within the earlier yr. This represents an 85% year-over-year enhance.
The report famous that 91.5% of Indian crypto buying and selling now happens offshore, whereas solely 8.5% stays on registered home exchanges.
“The uncollected TDS since October 2024 is ₹4,877 crore. If calculated from the date of introduction, this quantity goes up to ₹11,000 crores,” the analysts highlighted. “Talking about capital flight, and lack of capital acquire collections for the Government, we conservatively estimate the income loss to the exchequer at roughly ₹36,000 crores since introduction of the 30% tax.”
The rising compliance necessities and extreme taxation present a challenge for India’s crypto area. While new KYC guidelines goal to promote transparency and stop crime, high tax charges are driving customers overseas, thereby decreasing income. The stability between oversight and home engagement stays unsure, with the crypto business at a vital crossroads.
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