The cornerstone of this regulatory pivot is the introduction of mandatory "liveness" testing and precise geographical tracking. Prospective investors are now required to undergo a real-time selfie verification process that utilizes physical cues—such as blinking or specific head movements—to defeat the growing threat of AI-generated deepfakes and fraudulent account setups. Parallel to this, exchanges must now record the exact longitude and latitude of a user during registration, alongside their IP address and a timestamp. This geo-tagging requirement ensures that every account is tethered to a verifiable physical location, providing law enforcement with a digital footprint that was previously easy to obscure through virtual private networks or ghost identities.
Beyond identity verification, the FIU has introduced financial validation measures, including the "penny-drop" test. This procedure requires a nominal transaction of one rupee to be successfully processed between the user’s bank account and the crypto platform to confirm the legitimacy of the linked banking credentials. The burden of compliance has also shifted heavily onto the exchanges themselves; they are now legally obligated to maintain comprehensive transaction records for a minimum of five years. Furthermore, the frequency of re-verification is now dictated by a customer’s risk profile, with high-risk individuals mandated to undergo fresh KYC every six months, while standard users must update their details annually.
This systemic tightening reflects the Indian government’s broader strategy to integrate innovation with rigorous oversight. While industry analysts anticipate a short-term slowdown in new user acquisitions due to these heightened barriers to entry, the long-term outlook suggests a more robust and resilient ecosystem. By mandating multi-factor authentication and supplementary documentation such as Aadhaar or Voter ID alongside PAN cards, the FIU is building a sophisticated safety net designed to flush out illicit syndicates. Ultimately, these measures serve as a clear directive that while India remains open to the evolution of digital assets, it will not compromise on national security or the integrity of its financial borders.
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