Policy · Financial Services

India tightens KYC rules for crypto exchanges

By Startup Enthusiast · 12 January 2026

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India's financial intelligence unit updated KYC and AML rules for crypto exchanges

New rules mandate live selfie detection, geo-tracking, and penny-drop bank verification during onboarding

Higher compliance costs may push more crypto startups to move abroad, continuing an exodus

India's Financial Intelligence Unit (FIU) updated Know Your Customer (KYC) and Anti-Money Laundering (AML) rules for crypto exchanges.
The new rules aim to curb illegal activities like money laundering and terror financing.
Exchanges must now use live selfie detection and geo-tracking during user onboarding.
Exchanges must collect geo-tagging data (latitude, longitude, date, timestamp, IP address) from users.
Exchanges must verify bank accounts using the penny-drop method (a small charge to confirm an active account).
Exchanges must appoint full-time designated directors and principal officers for compliance.
Exchanges must update KYC for high-risk clients every six months and for other users annually.
Exchanges must preserve user information (name, address, transaction details) for at least five years.

Higher compliance costs could force crypto startups to move abroad, increasing the exodus from India.
The Reserve Bank of India (RBI) has been a staunch critic of cryptocurrencies due to macroeconomic risks.
In 2018, the RBI banned financial institutions from crypto services; the Supreme Court reversed the ban in 2020.
RBI governor Sanjay Malhotra reiterated in June 2025 that virtual digital assets (VDAs) could hamper financial stability.
New funding for the Indian crypto sector has more or less dried up.