India Escalates Regulatory Initiative to Curb Crypto Crime

In a move to address the mounting concerns over money laundering and the financing of terrorism, India has revamped its regulatory measures concerning the cryptocurrency industry. Effective from January 8, the nation’s financial intelligence agency has rolled out comprehensive regulations targeting cryptocurrency exchanges. These regulations require detailed technical verification of user identities and are designed to meticulously track the geographical and temporal details of transaction activities. This effort aims to enhance the transparency of crypto transactions and promptly identify any illicit financial conduct.

How Do New Identity Verification Rules Impact Crypto Users?

The regulations usher in a new era of customer identification for crypto exchanges, now demanding far more than just a tax identification number. Real-time selfie verification processes, requiring users to demonstrate liveness through gestures such as blinking, are now compulsory. Exchanges will meticulously log details such as geographical coordinates, date-time stamps, and IP addresses associated with each user.

To ensure thorough identification, users must provide additional credentials like passports, driver’s licenses, Aadhaar cards, or voter IDs. Verifying mobile numbers and emails through one-time passwords has also become mandatory. Account ownership is confirmed through a practice known as “penny-drop,” where a minimal transaction validates bank account details.

Will India’s Crypto Policies Suppress Growth?

Beyond identity verification, the regulations introduce further restrictions. Cryptocurrency exchanges are barred from supporting fundraising methods like Initial Coin Offerings (ICOs) or Initial Token Offerings (ITOs), which, according to Indian authorities, pose significant monetary risks and lack adequate economic rationale. The use of anonymity-enhancing technologies such as mixers or tumblers is also prohibited.

Cryptocurrency services are obligated to register with the Financial Intelligence Unit, report suspicious activities, and adhere to ongoing reporting duties. These measures are crafted to bolster centralized oversight in combating financial misconduct.

India approaches cryptocurrencies cautiously, officially categorizing them under its Income Tax Act as “virtual digital assets.” Transactions on registered platforms are permitted, but the use of cryptocurrencies as legal tender is forbidden.

• Mandatory live selfie verification for identity checks.
• Ban on ICOs and ITOs to avoid complex financial risks.
• Mixers and tumblers are prohibited to maintain transparency.
• Centralized oversight through obligatory registration and reporting.

“These measures significantly enhance the transparency of cryptocurrency activities and are a crucial step in preventing the misuse of these technologies for illegal activities,” a statement from the financial agency reads.