FIU Imposes Stricter Regulations on Crypto Exchanges

To curb illegal activities in the digital asset market, India’s Financial Intelligence Unit (FIU) has introduced stricter new Anti-Money Laundering (AML) and Know Your Customer (KYC) guidelines for cryptocurrency exchanges. As per the directions issued on the 8th of this month, crypto exchanges have been classified as Virtual Digital Asset (VDA) service providers and are now required to implement enhanced security measures in addition to routine document uploads. These include onboarding procedures such as liveness detection through “live selfies” and geo-tagging to capture users’ geographical details.

Under the new norms, users must submit a live selfie to verify their physical presence, which involves actions like blinking or head movement to prevent the use of static images and deepfakes. Exchanges are also required to record precise location details including latitude, longitude, date, time stamp and IP address at the time of account creation. The “penny-drop” method has been made mandatory to confirm that the linked bank account is active and belongs to the user, through a nominal Re.1 transaction. In addition to PAN, users must provide a secondary identity document such as a passport, Aadhaar or voter ID, along with OTP verification of their email ID and mobile number.