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India has moved to close a long-standing gap in crypto onboarding. The Financial Intelligence Unit (FIU) has issued updated KYC rules that push exchanges toward real-time identity checks. The shift goes beyond paperwork. It asks platforms to prove a person’s physical presence at signup.
Under the guidance, regulated exchanges must verify users through live selfies with liveness checks. The software confirms eye blinks or head movement to block static images and deepfake attempts, according to reporting by The Times of India. Platforms must also capture geolocation, IP address, device details, and a timestamp at account creation.
The onboarding flow now mirrors controls common in regulated banking. Exchanges must verify bank accounts through a small test transfer before granting access. Users must submit additional government-issued photo ID and confirm both email and mobile numbers.
High-risk customers face KYC updates every six months. All others must re-verify annually. The FIU frames the change as an AML measure under India’s Prevention of Money Laundering Act, which brought crypto service providers into scope in March 2023.
India’s market scale raises the stakes. With more than 1.4 billion people, even modest on-chain adoption can move capital flows. Regulators cite crime risks tied to cross-border transfers and anonymous wallets. Recent security incidents sharpened that focus. In 2024, WazirX reported losses of about $235 million after a breach. In 2025, CoinDCX disclosed a $44 million incident involving an operational wallet. Both events revived questions about platform controls.
Tax policy adds pressure. Crypto gains face a flat 30% tax. Losses cannot offset gains. Income tax officials have told lawmakers that decentralized venues and privacy tools complicate enforcement. The new KYC rules align with that stance.
The guidance reiterates opposition to privacy-enhancing tools. Exchanges must block transactions linked to mixers, tumblers, and tokens designed to obscure ownership. The FIU also seeks to curb Initial Coin Offerings and Initial Token Offerings, which it views as high-risk for money laundering and terror financing.
Compliance extends to reporting. Registered platforms must flag suspicious activity and maintain detailed records. As of the 2024–25 period, 49 entities registered as reporting institutions, including domestic exchanges and offshore firms that re-entered after meeting requirements.
As onboarding becomes slower and more intrusive for users, exchanges face rising operational costs.Some industry voices warn that friction could deter first-time users. Others argue that clarity supports long-term participation. The Reserve Bank of India still classifies crypto as high-risk, so further tightening remains possible.
India’s message is clear. Access comes with proof. The market stays open, but only through gates, regulators can see and measure.
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