India Introduces Stricter Identification Rules for Crypto Platforms
In an assertive move to fortify its stance against financial crimes, India has mandated more stringent identification processes for cryptocurrency platforms. This regulatory enhancement is aimed at bolstering anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts. According to a recent report from Press Trust of India, these measures have been put forth by the Financial Intelligence Unit (FIU).

A New Era of Verification

The revised regulations necessitate crypto exchanges to implement enhanced user verification protocols. Users must now provide a “live selfie,” where blinking is required to authenticate their real-time presence and identity. In addition to this biometric evidence, platforms are tasked with collecting geographic coordinates, date, time, and IP address during the Know Your Customer (KYC) process.

Expanding Documentation Requirements

The standard Permanent Account Number (PAN) is no longer sufficient. Crypto exchanges must now collect additional documentation such as passports, driving licenses, Aadhaar cards, or voter IDs. To further verify identity details like mobile numbers and email addresses are confirmed through one-time passwords (OTPs). Ownership of bank accounts is verified using the “penny drop” method—a symbolic deduction of one Indian rupee.

Heightened Scrutiny for High-Risk Clients

For clients deemed high risk—those connected with tax havens or jurisdictions under Financial Action Task Force (FATF) scrutiny—India mandates enhanced checks at least biannually. This group also includes politically exposed persons or non-profit organizations.

Banning ICOs and Mixers

FIU has prohibited crypto platforms from engaging in Initial Coin Offerings (ICOs), Initial Token Offerings (ITOs), and utilizing tools like mixers that obscure transaction tracking. Such mechanisms are considered economically unjustifiable and pose complex risks for money laundering and terrorism financing.

The Wider Impact on India’s Crypto Landscape

All crypto exchanges must register with FIU, report suspicious activities promptly, and retain user data for at least five years. Despite these tight controls, India maintains a cautious yet progressive approach towards digital assets. Cryptocurrencies remain classified as virtual digital assets under the Income Tax Act of 1961; thus citizens can trade them only via FIU-registered platforms but cannot use them as legal tender.
This regulatory tightening aligns with India’s broader strategy to regulate cryptocurrencies strictly. In February 2025, authorities imposed a hefty 70% penalty on undisclosed crypto income retroactively over the past four years.
Moreover, by November 2025 there were reports indicating government plans to introduce a state-backed stablecoin—the Asset Reserve Certificate pegged to the rupee—in Q1 2026 under central bank oversight ensuring compliance with existing regulations.
In conclusion—these developments signal a significant pivot towards transparency and accountability within India’s burgeoning cryptocurrency sector while safeguarding against illicit financial activities globally.