- India’s Financial Intelligence Unit has implemented stricter KYC rules requiring “live” selfie tests with movement monitoring to block AI deepfakes and ensure users are real.
- Exchanges must now capture geolocation, IP addresses, and timestamps during signup while verifying bank accounts through small test transactions to strengthen AML controls.
- Despite India being a significant potential market, regulatory friction is increasing through high 30% capital gains taxes and prohibitions on offsetting trading losses.
India’s Financial Intelligence Unit has tightened the checks crypto exchanges must run before letting users open accounts, adding “live” identity tests and location tracking to standard KYC.
Under the new onboarding rules, exchanges must verify users using a live selfie, not a static photo. The selfie check must include software that monitors eye and head movement to confirm the person is real and to block AI deepfakes. Platforms must also capture a user’s geolocation and IP address at signup, along with a timestamp of account creation.
The FIU guidelines also require stronger links to the traditional banking system. Exchanges must verify a user’s bank account by sending a small test transaction, a common AML control used to confirm ownership.
In other words, users will need to submit an extra government-issued photo ID and confirm both email and mobile numbers before an account can be activated on a registered platform.
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Basically India allows regulated access, but keeps controls tight. Many in the Web3 community agree that India remains a large potential market for crypto, but regulatory friction around onboarding and compliance continues to increase.
More Crypto Taxes
Separately, India’s Income Tax Department has been telling lawmakers that crypto and DeFi make enforcement harder. Officials cited decentralised exchanges, anonymous wallets, and cross-border transfers as barriers to tracing and taxation, and said differences between jurisdictions further complicate compliance.
India’s tax rules on crypto are already blunt. Crypto gains are taxed at 30%. Traders can deduct only the purchase cost and they cannot use losses from one crypto sale to offset gains from another.
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