India’s Financial Intelligence Unit (FIU) issued stringent new KYC/AML rules January 8, 2026, mandating live selfies with liveness detection (eye blink/head movement) and geo-tagging (exact lat/long, timestamp, IP) for all crypto exchange onboarding.
Key Compliance Mandates
Exchanges must capture live photographs verifying physical presence during account creation, eliminating static photos and deepfakes. Penny-drop verification (₹1 bank transaction) confirms account ownership alongside PAN + secondary ID (Aadhaar/Passport/Voter ID) with OTP. High-risk clients face enhanced due diligence every 6 months—politically exposed persons, tax haven connections, FATF grey/black list jurisdictions, and NPOs trigger open-source database checks.
Crackdown Targets FIU explicitly discourages ICOs/ITOs lacking economic rationale and bans anonymity-enhancing coins (AECs), tumblers, mixers designed to obscure transaction origins. All VDA service providers must register as reporting entities under PMLA, maintaining 5-year client records. Impact: 49 registered exchanges face immediate compliance pressure onboarding friction spikes while offshore platforms gain. India’s 20M+ crypto users now navigate strictest global KYC regime amid 30% tax enforcement.
Regulatory noose tightens, compliance costs vs user exodus battle begins.
