India Tightens Crypto KYC Norms: The Benefits, Risks, and What Users Should Know

Key Takeaways

• India’s FIU introduced stricter KYC and AML regulations for crypto platforms to curb fraud and wealth laundering.

• Higher costs and compliance burdens whitethorn stifle smaller platforms and innovation successful the sector.

• User onboarding friction could trim adoption, but it aligns India with planetary AML standards for semipermanent stability.

India’s crypto marketplace is entering a much tightly regulated signifier arsenic authorities determination to adjacent long-standing gaps successful oversight.

In an effort to curb fraud, wealth laundering, and anonymous cryptocurrency activity, the country’s Financial Intelligence Unit (FIU-IND) has introduced a caller acceptable of stricter Know Your Customer (KYC) and Anti-Money Laundering (AML) rules for crypto platforms.

While regulators accidental the measures bring India successful enactment with planetary standards, the changes are already reshaping however exchanges operate.

The FIU has released the caller KYC norms nether the Prevention of Money Laundering Act (PMLA), 2002.

The rules volition instrumentality effect connected Jan. 8 and apply to each platforms offering crypto-related services successful India.

While they physique connected earlier guidelines issued successful March 2023, the caller model introduces importantly much requirements to code the anonymous and near-instant quality of crypto transactions.

Key changes see mandatory unrecorded selfie verification with liveness detection, geo-tagging during onboarding to seizure latitude, longitude, timestamp, date, and IP address, and OTP verification for some email and mobile numbers.

Users indispensable present supply elaborate idiosyncratic information, including income, occupation, slope relationship details, a Permanent Account Number (PAN), and a secondary recognition document, specified arsenic an Aadhaar paper oregon a passport.

Additionally, exchanges indispensable behaviour “penny-drop” slope verification, execute periodic KYC updates each six months for high-risk users and annually for others, and use tougher owed diligence to suspicious accounts.

Beyond onboarding, platforms indispensable registry with FIU-IND done the FINGate portal.

They indispensable acquisition mandatory cybersecurity audits by CERT–In–accredited professionals and name a designated manager for AML and counter-terrorism financing compliance.

Exchanges should besides behaviour yearly hazard assessments and taxable monthly suspicious transaction reports to applicable authorities.

The model discourages vulnerability to Initial Coin Offerings (ICOs), Initial Token Offerings (ITOs), and anonymity-enhancing tools specified arsenic mixers oregon tumblers, and requires exchanges to mitigate associated risks.

Customer and transaction records indispensable beryllium retained for astatine slightest 5 years, oregon longer if an probe is ongoing.