The Shift in India’s Approach to Cryptocurrency
As global attitudes toward cryptocurrency evolve, India has chosen to toughen its stance through markedly stricter compliance measures. In a major update announced by the Financial Intelligence Unit (FIU) on January 8, crypto investors operating in India now face extensive security and verification requirements. These measures aim to address the growing challenges of fraud and anonymity associated with digital assets.
Beyond Traditional Verification Methods
While traditional ID-based verification has been the cornerstone of user authentication, it is no longer sufficient under India’s new rules. Effective January 12, crypto users must perform advanced identity checks, including live selfie authentication, where users must blink or perform head movements to prove they are real and not AI-generated deepfakes. This enhanced biometric verification is paired with location-tracking requirements, such as capturing a user’s latitude and longitude, along with IP address verification.
Penny-drop bank verification has also become mandatory. This process ensures that a user’s bank account matches their verified identity, adding another layer of security. Nischal Shetty, founder of WazirX, stated, “Steps like the penny-drop method and live selfie checks were already in place on our platform as part of a robust onboarding strategy.”
Heightened Compliance Standards
Indian authorities have introduced a three-level compliance system that aligns with the Prevention of Money Laundering Act (PMLA). This system categorizes crypto exchanges as closely monitored reporting entities, ensuring transparency and accountability in every transaction. Alongside a mandatory PAN card as verification, users must support their identities with an Aadhaar card, passport, or voter ID.
Notably, the FIU has also intensified scrutiny on Initial Coin Offerings (ICOs), now labeling them as high-risk ventures. Exchanges must comply with the “Travel Rule,” requiring sender and receiver information for every crypto transfer to establish a clear audit trail. This makes cross-border anonymity nearly impossible.
Ongoing Due Diligence
Virtual Digital Asset Service Providers (VDASPs) are now obligated to perform real-time due diligence. High-risk users must undergo Know Your Customer (KYC) processes every six months. Additionally, exchanges must screen users against both domestic and international sanctions lists, ensuring comprehensive regulatory compliance.
Exchanges are also required to store transaction and identity records for up to five years. Last year alone, the FIU imposed fines totaling ₹28 crore, demonstrating the government’s aggressive approach to cracking down on fraudulent digital asset operations and hawala-style crypto transactions.
India vs. Global Trends
The timing of India’s new regulations coincides with broader global trends. Some jurisdictions, including the U.S., have adopted more lenient stances on the usage and acceptance of cryptocurrency. However, India’s Economic Affairs Secretary, Ajay Seth, stated, “More than one or two jurisdictions have changed their stance towards cryptocurrency… India must recalibrate its vision to ensure responsible use.”
Secure Investments in the Crypto World
For crypto investors looking to navigate these complex regulations, it is more critical than ever to partner with exchanges offering robust compliance measures. Platforms like WazirX and ZebPay, for instance, have already integrated many of these enhanced protocols, ensuring user security and transparency.
If you’re diving into the world of cryptocurrency, tools like the Ledger Nano X hardware wallet can provide an additional layer of safety for storing your digital assets securely offline.
The Future of Crypto Regulations in India
India’s new stringent regulations signal a strong intent to ensure operational transparency and curb illegal activities associated with cryptocurrencies. While the measures may appear restrictive, they demonstrate the government’s commitment to long-term security and a safer digital asset ecosystem.
As global cryptocurrency markets continue to evolve, India’s approach might set a precedent for other nations striving to balance innovation with security.
