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India’s Financial Intelligence Unit has rolled out a tougher rulebook for crypto exchanges, tightening identity checks in an effort to curb money laundering and terror financing. Under the new framework, which took effect on January 8, platforms must perform “liveness” KYC that includes a blinking selfie video, plus capture accurate geo location, IP address and timestamp whenever a user onboards. On top of a Permanent Account Number, exchanges now have to collect extra ID such as passports, driving licences, Aadhaar or voter cards, along with verified phone numbers and emails.
The FIU is also demanding deeper links between users’ crypto activity and the traditional banking system. Exchanges must verify that the bank accounts customers connect to their trading profiles actually belong to them, using small test transfers as proof, and apply enhanced due diligence every six months for higher risk clients, including those in tax havens, FATF grey listed jurisdictions or sensitive non profit sectors. All registered platforms are required to file suspicious transaction reports, keep detailed records for at least five years and stay fully registered with the FIU or risk penalties.
On the product side, regulators are drawing harder lines. The guidance tells exchanges not to support ICO style token sales or use privacy tools such as mixers that deliberately obscure transaction trails, arguing that initial coin offerings and similar fundraising methods often lack clear economic purpose and carry “higher and more complex” money laundering and terror financing risks. Authorities say the new package is a response to a spike in suspicious activity reports that tied local and offshore platforms to scams, gambling rings, darknet markets and cross border terror financing channels.
For India’s crypto industry, the message is that participation now comes with bank grade surveillance duties. Nearly 50 exchanges are already registered with the FIU, and more will need to follow the same anti money laundering playbook if they want to serve Indian users. While the rules add friction and effectively end anonymous trading on compliant platforms, officials argue that stricter KYC and traceability are the price of keeping digital assets inside the formal financial system instead of pushing them toward outright bans.
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