India Pushes Crypto Into Banking-Style Compliance Regime

New guidelines issued by the country’s Financial Intelligence Unit significantly raise the bar for how exchanges identify and monitor users, signaling a harder regulatory line on digital assets.

Key takeaways:

• Indian crypto exchanges must implement live selfie verification with anti-deepfake checks.
• Platforms are now required to collect geolocation, IP address, and account creation timestamps.
• Bank account verification via test transactions is mandatory under AML rules.

The measures reflect India’s push for tighter oversight despite its massive crypto market potential.
Under the updated rules, crypto exchanges registered in India must now verify users through live selfie authentication, rather than static photos. The system tracks eye and head movement in real time to ensure a real person is present, a measure aimed squarely at blocking AI-generated deepfakes from bypassing know-your-customer checks. The changes were first reported by The Times of India.

Location data has also become mandatory. Platforms must collect a user’s geolocation, IP address, and the exact timestamp of account creation. In addition, exchanges are required to verify ownership of user bank accounts by sending a small confirmation transfer, bringing crypto onboarding closer to traditional banking compliance standards.

Users will also face additional identity hurdles. Exchanges must collect extra government-issued photo identification and require verification of both email addresses and mobile numbers before accounts can be activated. Together, these measures sharply reduce anonymity and raise the operational burden for platforms serving Indian customers.

Tax enforcement concerns drive tougher oversight

The stricter onboarding rules align with concerns raised by India’s tax authorities. Officials from the Income Tax Department recently told lawmakers that cryptocurrencies and decentralized finance platforms are increasingly being used to evade taxes.

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They pointed to anonymous wallets, decentralized exchanges, and cross-border transactions as major enforcement challenges.
India already enforces one of the world’s toughest crypto tax regimes. Under current law, profits from crypto sales are taxed at a flat 30%, with traders allowed to deduct only the original cost of acquisition. Losses from other crypto trades cannot be used to offset gains, eliminating tax-loss harvesting entirely.

Despite these constraints, India remains one of the largest potential crypto markets globally. With a population of more than 1.4 billion, even limited adoption could drive substantial onchain activity. Regulators, however, appear determined to ensure that any growth occurs under strict surveillance and compliance.

Taken together, the new FIU guidelines and India’s uncompromising tax stance send a clear signal: crypto is permitted, but only within a tightly controlled framework that prioritizes traceability, enforcement, and state oversight over frictionless access.

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