India”s Financial Intelligence Unit (FIU) has announced new regulations that significantly tighten the onboarding process for users on cryptocurrency platforms. This move aims to enhance both know-your-customer (KYC) and anti-money laundering (AML) measures across the sector.
According to reports from The Times of India, the updated guidelines mandate that regulated crypto exchanges implement live selfie verification as part of the KYC process. This technology utilizes software capable of tracking users” eye and head movements, effectively mitigating the risk of AI-generated deep fakes that could circumvent verification procedures.
In addition to facial recognition, exchanges will now be required to capture the geographic location and IP addresses of users at the time of account creation. A timestamp marking the creation of the account must also be recorded. Furthermore, to comply with AML regulations, these platforms must verify users” bank accounts by sending a nominal transaction to the specified accounts.
Additionally, users will face stricter requirements, including the submission of further government-issued photo identification, along with email and mobile number verification to establish accounts with licensed exchanges. These enhanced measures reflect the Indian government”s regulatory approach towards cryptocurrencies and digital assets, particularly as the country possesses one of the largest potential markets for such technologies, with over 1.4 billion residents.
The recent regulatory changes come amid discussions within India”s Income Tax Department (ITD) regarding the challenges posed by cryptocurrencies and decentralized finance platforms to effective tax enforcement. ITD officials highlighted the complexities introduced by decentralized exchanges, anonymous wallets, and the cross-border nature of crypto transactions, which complicate taxation efforts.
Under the current framework of India”s Income Tax Act, profits derived from cryptocurrency transactions are taxed at 30%. Notably, users are permitted to deduct only their cost basis from these gains, which restricts their ability to offset losses across different transactions.
As India continues to refine its approach to cryptocurrency regulation, these developments are poised to impact the way users interact with digital assets, potentially ushering in a new wave of investment as the population becomes increasingly engaged with blockchain technology.
