India’s FIU Mandates Live Selfies, Geolocation for Crypto Sign-Ups
January 11, 2026 — India’s Financial Intelligence Unit (FIU) has issued stringent new know-your-customer (KYC) and anti-money laundering (AML) requirements for cryptocurrency exchanges. The guidelines, reported today, mandate live selfie verification with AI detection and geolocation tracking for all new user onboarding. This regulatory tightening reflects ongoing concerns from Indian tax authorities that crypto assets facilitate tax evasion and complicate enforcement.
Immediate Details & Direct Quotes
According to a report from The Times of India, the new rules force regulated crypto platforms to verify users through software that tracks eye and head movements in live selfie pictures. This measure is explicitly designed to prevent AI-generated deep fakes from bypassing the KYC process. Exchanges must also collect a user’s geolocation and IP address at the moment of account creation, along with a timestamp.
To satisfy AML requirements, platforms are now required to verify a user’s linked bank account by sending a small test transaction. Additionally, users must submit government-issued photo identification and verify both their email and mobile number to create an account. These steps represent a significant escalation in India’s regulatory approach to its vast crypto market.
The move aligns with statements from India’s Income Tax Department (ITD). Officials told parliamentary lawmakers that “cryptocurrencies and decentralized finance platforms undermine tax enforcement.” They specifically cited decentralized exchanges, anonymous wallets, and the cross-border nature of crypto as challenges for efficient taxation.
Market Context & Reaction
India represents one of the world’s largest total addressable markets for cryptocurrency, with a population exceeding 1.4 billion. The potential for this population to come onchain has long been viewed as a major catalyst for a fresh wave of global crypto investment. The new rules, however, create a higher barrier to entry for new users.
Market reaction details were not immediately available in the source report. The regulatory stance comes as India maintains a firm 30% tax on gains from cryptocurrency sales. Under the current Income Tax Act, users can only deduct the cost basis against gains and cannot harvest tax losses to offset gains from other transactions. This combination of high taxation and strict onboarding could influence user growth and exchange operations within the jurisdiction.
Background & Historical Context
India’s relationship with cryptocurrency has been complex and evolving. The regulatory landscape has shifted from proposed bans to taxation and now to stricter operational controls for exchanges. The FIU’s latest action is a direct extension of its role as the agency that sets AML and KYC regulations for the financial sector, now firmly applied to virtual digital asset service providers.
The tax authority’s concerns are not new. Officials have repeatedly argued that the permissionless and pseudonymous features of blockchain technology complicate tax collection. The specific mention of decentralized exchanges and cross-border functionality highlights the ongoing tension between regulatory oversight and the foundational principles of decentralized finance (DeFi). This development follows the Reserve Bank of India’s previous urgings for countries to prioritize central bank digital currencies (CBDCs) over stablecoins.
What This Means
Short-Term Impact (30-90 Days):
- Crypto exchanges operating in India must rapidly implement the new live selfie and geolocation verification systems.
- New user onboarding will become more cumbersome, potentially slowing sign-up rates.
- Existing users may face additional verification steps for certain platform features or higher transaction limits.
Long-Term Implications (6-12 Months):
- The regulations could set a precedent for other jurisdictions considering similar biometric and location-based KYC measures.
- Exchanges may face increased operational costs for compliance, which could be passed on to users.
- The clarity, though strict, could provide a more stable framework for compliant businesses to operate, separating them from non-compliant platforms.
User Action Items:
- New users in India should be prepared for a more detailed verification process requiring a live selfie session and document submission.
- All users should ensure their linked bank account information is accurate to receive the small verification transaction.
- Traders must continue to account for the 30% capital gains tax with no loss harvesting, factoring this into their investment strategy.