Stricter Crypto Rules in India: What You Need to Know
India is intensifying its oversight of the cryptocurrency sector with the introduction of new compliance standards under its anti-money laundering (AML) laws. These updated regulations aim to curb financial crimes and improve transparency within the growing digital asset industry.
Crypto Exchanges Now Classified as VDA Service Providers
Under the framework launched on January 8, Indian crypto platforms are officially categorized as Virtual Digital Asset (VDA) service providers. This designation brings crypto exchanges under the same regulatory umbrella as traditional financial institutions, ensuring they adhere to the same stringent AML standards. Authorities have noted the potential risk posed by the semi-anonymous nature of cryptocurrency transactions, particularly concerning money laundering, terrorist financing, and similar illicit activities.
Key Compliance Changes for Users
The new rules introduce live identity verification as a mandatory process during user onboarding. Users must now verify their identity in real-time through methods such as selfie-based authentication, ensuring that identification documents are genuine and up to date.
Additionally, exchanges are required to collect and store a range of technical data, including:
- IP addresses with timestamps
- Geolocation data
- Device identifiers
- Wallet addresses
- Transaction hashes
These data points enhance monitoring, tracing, and risk profiling capabilities for regulators and exchanges alike.
Increased Documentation Requirements
To access crypto-related services in India, users must complete new documentation requirements, including:
- Permanent Account Number (PAN) verification before any services are offered
- Bank account verification through the ‘penny-drop’ method to confirm ownership
- A secondary government-issued ID, such as a passport, Aadhaar card, or voter ID
Additionally, users must verify their phone numbers and email addresses via one-time passwords (OTPs).
Industry Reaction to Stricter Regulations
Major Indian cryptocurrency exchanges have largely welcomed these changes, as many leading platforms had already implemented similar safeguards. Industry leaders believe these regulations will reduce inconsistencies in enforcement and foster a more secure ecosystem for digital assets.
Enhanced Due Diligence Standards
Exchanges will now face heightened due diligence requirements for high-risk users, including politically exposed persons, nonprofits, and entities linked to jurisdictions flagged by the Financial Action Task Force (FATF). Additionally, transactions involving mixers or other anonymity-enhancing tools will be blocked to prevent misuse.
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