India is significantly tightening its grip on crypto onboarding, pushing exchanges to adopt stricter identity verification measures as regulators sharpen their stance on digital assets and tax compliance.
FIU Raises the Bar for Crypto Verification
India’s Financial Intelligence Unit (FIU) has issued new guidelines that dramatically increase know-your-customer (KYC) and anti-money laundering (AML) requirements for crypto platforms operating in the country. The updated framework reflects growing concern among regulators that permissionless blockchains and cryptocurrencies undermine tax collection and financial oversight.
According to The Times of India, regulated exchanges must now verify users using live selfie photographs, paired with geographic location checks, before accounts can be approved. These measures are designed to close loopholes exploited by fraudulent actors during onboarding. Live Selfies, Location Tracking, and AI Detection
Live Selfies, Location Tracking, and AI Detection
One of the most notable changes involves real-time biometric verification. Exchanges are required to use software that tracks eye and head movements during selfie capture to prevent AI-generated deepfakes from bypassing identity checks. This marks a clear escalation in India’s effort to combat synthetic identity fraud.
In addition, platforms must collect geolocation data and IP addresses at the time of account creation, along with a precise timestamp. These data points will be stored as part of each user’s compliance profile, significantly reducing anonymity at the onboarding stage.
Bank Account and Identity Verification Tighten Further
Crypto exchanges must also now verify user bank accounts by sending a small test transaction, a standard AML technique designed to confirm ownership and traceability. This adds another compliance layer between users and trading access.
Beyond biometrics and banking checks, users are now required to submit additional government-issued photo identification, alongside verified email addresses and mobile numbers, before an account can be activated. These steps place crypto onboarding closer to the standards applied to traditional financial institutions in India.
A Market Too Big to Ignore
The new rules underline India’s hardline regulatory stance toward digital assets, even as the country represents one of crypto’s largest untapped markets. With a population exceeding 1.4 billion people, widespread onchain adoption could inject massive new capital and liquidity into the global crypto ecosystem.
Regulators appear to be walking a fine line between controlling financial risks and managing the economic potential of blockchain adoption. For now, the emphasis is firmly on oversight rather than expansion.
Tax Authorities Call Crypto a Compliance Threat
India’s concerns extend well beyond onboarding. Officials from the Income Tax Department (ITD) recently met with parliamentary lawmakers, arguing that cryptocurrencies and decentralized finance platforms weaken tax enforcement.
They also highlighted that jurisdictional differences in tax rules further complicate enforcement, especially when transactions span multiple countries.
Strict Tax Rules Leave Little Flexibility
Under India’s Income Tax Act, gains from cryptocurrency sales are taxed at a flat 30%, with traders permitted to deduct only the cost basis from profits. Unlike traditional markets, crypto investors cannot harvest tax losses, meaning losses from one trade cannot offset gains from another.
This rigid framework reinforces the government’s view that crypto activity must remain tightly controlled, even as user interest continues to grow. The combination of strict taxation and invasive onboarding checks sends a clear message:
