- India’s FIU mandates live identity verification and location checks for exchanges.
- Platforms must collect IP addresses, geo-location, device IDs, and wallet addresses.
- The community criticizes 30% crypto tax and 1% TDS as primary regulatory obstacles.
India’s Financial Intelligence Unit has tightened compliance requirements for cryptocurrency platforms. On January 8 the updated rules were issued mandating live identity verification and location checks as part of enhanced anti-money laundering and know your customer measures targeting illicit transactions.
The guidelines classify crypto exchanges as virtual digital asset service providers, requiring more stringent verification processes beyond simple document uploads. The FIU cited the anonymous and instantaneous nature of VDA transactions as justification for expanded monitoring. Platforms face obligations to prevent money laundering, terror financing, and proliferation financing through robust Client Due Diligence mechanisms.
Enhanced Verification Mechanisms
The Client Due Diligence process now requires platforms to identify clients by obtaining details and documents while verifying identity through reliable independent sources. Reporting entities must collect additional identifiers including IP addresses with timestamps, geo-location data, device IDs, VDA wallet addresses, and transaction hashes for verification, authentication, monitoring, and risk assessment purposes.
Permanent Account Number verification becomes mandatory for onboarding and undertaking any VDA-related activity. Platforms must verify client bank accounts through penny-drop mechanisms to confirm ownership and operational status. Users must provide secondary identification such as passports, Aadhaar cards, or voter IDs along with OTP verification for email addresses and phone numbers.
Edul Patel, CEO of Mudrex, welcomed the guidelines as a positive step for India’s crypto ecosystem. He stated many measures including strong KYC, transaction monitoring, cybersecurity audits, and Travel Rule compliance were already followed by responsible exchanges. According to him, formalizing these practices would help standardize best practices across the industry.
Community reactions on X expressed frustration with broader regulatory approaches. User Simba stated the rules are acceptable for exchanges but identified the primary problem as 30% crypto tax and 1% TDS. “They need to solve this tax issue first,” Simba wrote.
Robbin posted that India always lags in new technologies like AI or crypto not from lack of talented builders but due to over-regulation creating frameworks for institutional corruption. “A 30% tax on profits without adjustment for losses is an example of such a regressive mindset,” Robbin stated.
Veepul questioned the surveillance implications, asking about selfie and GPS requirements every six months for high-risk users. “Cool, so now we’re just one step away from crypto KYC doing full Aadhaar-level surveillance. Did India take decentralization back to centralization level?” Veepul wrote.
Related: Top Countries with Zero Bitcoin Tax Enter a New Era of Global Reporting
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Source: https://coinedition.com/indias-fiu-mandates-live-identity-verification-and-location-checks-for-crypto-exchanges/
