India’s Financial Intelligence Unit (FIU), the regulatory agency that sets anti-money laundering and user-knowing regulations, has issued new guidelines that tighten rules for user onboarding of crypto platforms.
The new rules force regulated crypto exchanges to verify users via live selfie images and geo-location verification, according to for The Times of India.
Live selfie images are verified by software that tracks the user’s eye and head movements to prevent deep forgery AI from being used to bypass the Know Your Customer (KYC) process.
Exchanges will also need to collect geolocation and IP addresses at the time of account creation, along with a timestamp of when the account was created.
Exchanges must verify user bank accounts by sending a small transaction to the account to meet anti-money laundering (AML) requirements.
Users will now be required to submit additional government-issued photo identification to exchanges and to verify their email and mobile numbers in order to create an account with a registered crypto exchange.
The new rules reflect the regulatory attitude towards cryptocurrencies and digital assets in India, which has one of the largest total addressable markets in the world. India’s population of over 1.4 billion people coming to the chain could bring a new wave of crypto investment.
Related: India’s central bank urges countries to prioritize CBDCs over stablecoins
India’s tax regulator claims that crypto is a tax evasion tool
Officials from India’s Income Tax Department (ITD) met with parliamentarians on Wednesday and argued that cryptocurrencies and decentralized financial platforms are undermining tax enforcement.
ITD officials said decentralized crypto exchanges, anonymous wallets and cross-border functionality of cryptocurrency make taxation difficult.
Tax regulations, which change by jurisdiction, also complicate the ability to effectively tax cryptocurrencies, ITD officials told lawmakers.
Under the Indian Income Tax Act, profits from the sale of cryptocurrency are taxed at a rate of 30%, with users only allowed to deduct the cost base from the profits.
Crypto traders in India cannot collect tax losses, which means they cannot use losses from other crypto sales to offset gains made in different transactions.
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