Source: ET
Context:
India has tightened Know Your Customer (KYC) and anti-money laundering (AML) norms for cryptocurrency exchanges. The move follows updated guidelines issued on January 8 by the Financial Intelligence Unit (FIU).
What has been mandated?
New KYC Requirements
Crypto exchanges must now mandatorily collect:
- PAN of the customer
- Selfie with liveness detection
- Geographical coordinates (latitude & longitude) of onboarding location
- Date & timestamp of onboarding
- IP address of the user
- Bank account verification using ‘penny-drop’ method
These form part of enhanced Client Due Diligence (CDD) norms.
Reporting & Compliance
- All crypto exchanges must:
- Register with FIU as “reporting entities”
- Submit regular reports on suspicious transactions
- Maintain customer transaction records
- The FIU functions under the Ministry of Finance.
Activities Restricted
The guidelines:
- Discourage Initial Coin Offerings (ICOs) and Initial Token Offerings (ITOs)
- Prohibit facilitation of:
- Tumblers and mixers
- Anonymity-enhancing tokens
- Aim to curb:
- Money laundering
- Terrorist financing
- Proliferation financing
Legal Framework
- Crypto exchanges are regulated under the:
- Prevention of Money Laundering Act (PMLA)
- Cryptocurrencies:
- Not legal tender in India
- Taxed under the Income-Tax Act
Background
- FIU first issued AML-CFT guidelines for crypto service providers in March 2023.
- The 2025 update strengthens surveillance and traceability amid rising crypto adoption.
