India is taking a decisive stand against the evolving threats of deepfake technology and financial crime within the crypto sector. The Financial Intelligence Unit (FIU) has unveiled a new set of stringent security regulations, significantly enhancing user verification and compliance requirements for all crypto investors and service providers across the nation, effective January 12th.
Heightened Verification Standards
Moving beyond traditional ID-based checks, Indian crypto users now face a rigorous verification process designed to combat sophisticated deepfakes and ensure genuine identity. The updated guidelines mandate "live selfie" checks, requiring users to perform actions like blinking or turning their head to prove physical presence and defeat AI-generated impersonations. This is coupled with biometric verification, the collection of exact location details—including latitude, longitude, and IP addresses—and a "penny-drop" bank verification to confirm a precise match between the user's identity and bank account. These measures collectively aim to create an undeniable digital trail, making fraudulent activities exceptionally difficult to execute.
Robust Anti-Money Laundering Framework
To further bolster the Prevention of Money Laundering Act (PMLA), the FIU has established a strict three-level compliance system, effectively transforming crypto exchanges into closely monitored reporting entities. While a PAN card remains essential, it must now be supported by an additional government ID. Initial Coin Offerings (ICOs) are now classified as high-risk activities, and the "Travel Rule" has been reinforced, requiring all crypto transfers to include sender and recipient details to deter cross-border anonymity. Virtual Digital Asset Service Providers (VDASPs) are also obligated to conduct ongoing due diligence, including KYC updates every six months for high-risk clients, real-time screening against domestic and global sanctions lists, and maintaining all transaction and identity records for at least five years. These comprehensive steps are geared towards preventing money laundering, digital asset scams, and hawala-style crypto transactions, positioning India at the forefront of global crypto security standards.
