India’s Financial Intelligence Unit (FIU) has updated its guidelines for cryptocurrency exchanges, mandating stricter user verification to address money laundering and terrorism financing risks. Users must now submit a live selfie demonstrating liveliness, along with their geographical coordinates, date, time, and IP address. In addition to the mandatory Permanent Account Number (PAN), exchanges must collect official identification such as a passport, Aadhaar card, voter ID, or driver’s license, and verify mobile numbers and email addresses via one-time passwords (OTPs).
High-risk clients, including those connected to tax havens, FATF-linked jurisdictions, or politically exposed persons, are subject to enhanced due diligence, with checks conducted every six months. Bank account ownership is authenticated through a “penny-drop” mechanism, involving a nominal refundable charge to confirm account access.
Restrictions on Token Offerings and Transaction Privacy Tools
The FIU has explicitly barred cryptocurrency exchanges from supporting initial coin offerings (ICOs) and initial token offerings (ITOs), citing heightened money laundering and terrorist financing risks.
Platforms are also prohibited from using anonymization tools such as tumblers and mixers, which obscure transaction trails. All exchanges must register with the FIU, report suspicious activities, and maintain detailed user records for a minimum of five years.
This approach aligns with India’s cautious stance on virtual digital assets (VDAs), which are permitted for trading on registered platforms but are not recognized as legal tender. By tightening regulatory oversight, Indian authorities aim to integrate digital assets into a framework that prioritizes compliance, transparency, and risk mitigation, while continuing to allow legitimate market activity.
Institutional and Market Context
India’s move comes amid growing global scrutiny of cryptocurrency use in illicit finance. The new regulations place Indian exchanges in line with international best practices, including FATF guidance on virtual asset service providers.
The measures may also influence institutional participation, as regulated frameworks and enhanced compliance standards provide greater assurance for domestic and foreign investors. Analysts note that the restrictions on ICOs and transaction anonymization may limit high-risk speculative activity, while preserving market channels for approved crypto trading under government supervision.