{"id":83055,"date":"2026-01-18T11:05:10","date_gmt":"2026-01-18T05:35:10","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=83055"},"modified":"2026-01-19T11:37:25","modified_gmt":"2026-01-19T06:07:25","slug":"crypto-kyc-in-india-how-exchanges-vet-users","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/crypto-kyc-in-india-how-exchanges-vet-users\/","title":{"rendered":"Crypto KYC in India: How Exchanges Vet Users"},"content":{"rendered":"<h2><b>Crypto KYC Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recently, <\/span><strong><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/fiu\/\" target=\"_blank\">Financial Intelligence Unit\u2013India (FIU-I)<\/a><\/strong><span style=\"font-weight: 400;\"> updated its AML\/CFT (Anti-Money Laundering\/Countering the Financing of Terrorism) guidelines for entities providing services related to <\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-are-virtual-digital-assets-vda\/\" target=\"_blank\"><b>Virtual Digital Assets<\/b><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The revised norms apply to cryptocurrency exchanges and lay down stricter requirements for customer due diligence, mandating how platforms must vet users and monitor transactions to prevent money laundering and terror financing.<\/span><\/li>\n<\/ul>\n<h2><b>Stricter KYC and Due Diligence Norms for Crypto Exchanges<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Enhanced Customer Verification<\/b><span style=\"font-weight: 400;\"> &#8211; Under the updated guidelines issued by FIU-I, cryptocurrency exchanges must conduct robust Know-Your-Customer (KYC) checks.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">This includes collecting verified identity details, contact information, occupation, income range, and a selfie with liveness detection.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Location and Bank Account Authentication<\/b><span style=\"font-weight: 400;\"> &#8211; Exchanges are required to record the customer\u2019s onboarding location using latitude\u2013longitude data, along with date, timestamp, and IP address.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Bank accounts must be verified through the penny drop method, ensuring the account belongs to the customer and is operational.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><span style=\"font-weight: 400;\">Penny drop method is\u00a0a bank account verification technique where a tiny amount of money (like \u20b91) is sent to an account to confirm its validity and match the account holder&#8217;s name against provided details.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Risk-Based Monitoring<\/b><span style=\"font-weight: 400;\"> &#8211; Platforms must identify high-risk clients and transactions and apply enhanced due diligence. High-risk customers must update KYC details every six months, while others must do so annually.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Restrictions on ICOs and Registration Requirements<\/b><span style=\"font-weight: 400;\"> &#8211; The guidelines strongly discourage Initial Coin Offering (ICO) and Initial Token Offering (ITO) activities. They also urge all virtual digital asset service providers to register with FIU-IND as reporting entities.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Ban on Anonymity-Enhancing Tools<\/b><span style=\"font-weight: 400;\"> &#8211; Exchanges are barred from facilitating transactions involving privacy-focused tokens and crypto mixers, which obscure transaction trails and hinder traceability, reinforcing India\u2019s AML\u2013CFT compliance framework.<\/span><\/li>\n<\/ul>\n<h2><b>KYC Practices Across Cryptocurrency Exchanges<\/b><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Centralised Exchanges and Compliance &#8211; <\/b><span style=\"font-weight: 400;\">Most <\/span><b>centralised cryptocurrency exchanges<\/b><span style=\"font-weight: 400;\"> already conduct KYC procedures to ensure lawful use, deter criminal activity, freeze offending accounts, and trace fraudulent transactions. These checks support <\/span><b>AML\u2013CFT<\/b><span style=\"font-weight: 400;\"> compliance to prevent misuse of fiat-to-crypto conversions.<\/span><\/li>\n<li aria-level=\"1\"><b>Why Regulators Insist on KYC &#8211; <\/b><span style=\"font-weight: 400;\">Regulators fear cryptocurrencies could be used to evade reporting requirements or finance terrorism. AML laws and <\/span><b>Countering the Financing of Terrorism (CFT)<\/b><span style=\"font-weight: 400;\"> rules aim to curb such risks.\u00a0<\/span>\n<ul>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">In 2023, <\/span><b>Binance<\/b><span style=\"font-weight: 400;\"> settled with U.S. regulators over failures to prevent and report suspicious transactions.<\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>Evidence of Illicit Use \u2013 <\/b><span style=\"font-weight: 400;\">It has been reported that groups such as <\/span><b>Hezbollah<\/b><span style=\"font-weight: 400;\">, <\/span><b>Hamas<\/b><span style=\"font-weight: 400;\">, and the <\/span><b>Houthis<\/b><span style=\"font-weight: 400;\"> have used crypto at unprecedented scales, reinforcing regulatory concerns.<\/span><\/li>\n<li aria-level=\"1\"><b>The Challenge of Decentralised Exchanges &#8211; <\/b><span style=\"font-weight: 400;\">Not all exchanges enforce stringent KYC. Decentralised exchanges (DEXs) allow anonymous, unregulated transactions with minimal controls.\u00a0<\/span>\n<ul>\n<li aria-level=\"1\"><span style=\"font-weight: 400;\">While DEXs have legitimate uses\u2014privacy, avoiding repression, and asset self-custody\u2014they are also attractive to money launderers, scammers, hackers, and terror financiers.<\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>The Road Ahead for India &#8211; <\/b><span style=\"font-weight: 400;\">To effectively address these risks, Indian regulators will need to go beyond issuing guidelines\u2014strengthening enforcement, oversight, and international cooperation to curb illicit crypto activity without stifling legitimate use.<\/span><\/li>\n<\/ul>\n<h2><b>How Indian Crypto Exchanges Vet Customers<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Leading Indian exchanges already follow global best practices and bank-level compliance, with the Financial Intelligence Unit\u2013India rules largely formalising existing processes.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indian exchanges typically conduct core identity checks, selfie-based face match with liveness detection, and bank account verification under FIU\/PMLA norms.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Some of them also uses geo-tagging to match user location with ID details (with exceptions) and instant KYC via DigiLocker for Aadhaar and PAN.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Overall, FIU-IND\u2019s updated guidelines do not introduce drastic changes; they codify practices already in place across major Indian crypto exchanges, including DigiLocker-based KYC and periodic re-verification.<\/span><\/li>\n<\/ul>\n<h2><b>Unclear Legal Status of Cryptocurrency in India<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cryptocurrency in India operates in a <\/span><b>regulatory grey zone<\/b><span style=\"font-weight: 400;\">, with investors and industry leaders repeatedly seeking clearer rules.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While debates continue, policy responses have largely focused on legality and security, lagging behind comprehensive crypto frameworks emerging in the US, Europe, and East Asia.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Although virtual digital assets are <\/span><b>taxed at 30%<\/b><span style=\"font-weight: 400;\"> on capital gains with a <\/span><b>1% TDS<\/b><span style=\"font-weight: 400;\">, India offers little investor protection against scams, hacks, or unfair practices by private platforms.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Many users choose Indian exchanges to comply with tax and legal norms, but face uncertainty and a discouraging regulatory environment due to the absence of a clear, investor-friendly legal framework.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/www.thehindu.com\/sci-tech\/technology\/how-are-cryptocurrency-exchanges-in-india-vetting-customers-explained\/article70508477.ece\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>India has tightened crypto KYC norms after FIU-IND\u2019s AML update, mandating detailed user data, bank verification, and monitoring of high-risk transactions.<\/p>\n","protected":false},"author":18,"featured_media":83158,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[4799,60,22,59],"class_list":{"0":"post-83055","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-crypto-kyc","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/83055","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=83055"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/83055\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/83158"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=83055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=83055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=83055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}