India mandates live selfie, geolocation and bank micro-deposit for crypto KYC
India’s Financial Intelligence Unit (FIU) has issued strict new KYC/AML rules for regulated crypto exchanges and virtual digital asset (VDA) service providers, requiring three real-time verification steps at onboarding: live selfie verification with liveness detection (to block deepfakes), geolocation confirmation to ensure users are physically in India, and bank-account authentication via automated micro-deposits. Exchanges must also capture IP addresses and timestamps, collect additional government photo ID, and verify email and mobile numbers. The measures respond to the Income Tax Department’s concerns about anonymous wallets, decentralized exchanges and cross-border crypto flows that hinder tax enforcement. Short-term effects for exchanges include technology upgrades (liveness software, secure geolocation APIs, automated micro-deposit reconciliation), higher implementation and compliance costs, slower or more frictional user onboarding, and privacy concerns for users. Longer-term outcomes could include stronger audit trails for AML/CFT and tax enforcement, increased institutional trust, and a reduction in illicit activity if enforcement and systems work as intended. Traders should expect increased operational scrutiny of Indian exchanges and potential short-term liquidity impacts from slowed user growth, while the broader regulatory clarity may support institutional participation over time.
Neutral
The FIU rules increase regulatory friction for Indian crypto users and require exchanges to implement costly compliance upgrades, which could temporarily slow user onboarding and reduce retail-driven liquidity — a short-term negative for market activity. However, the measures primarily target AML/tax enforcement and onboarding processes rather than banning trading or specifying asset-level restrictions. Over the medium to long term, clearer and stricter KYC/AML can boost institutional confidence and reduce illicit flows, supporting more stable market participation. Because the news affects exchange operations and user verification rather than any single cryptocurrency protocol or token directly, the expected net price impact is neutral: potential short-term liquidity/headline-driven volatility balanced by longer-term institutional benefits and regulatory clarity.