{"id":64063,"date":"2026-01-12T18:35:55","date_gmt":"2026-01-12T13:05:55","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=64063"},"modified":"2026-01-14T12:42:36","modified_gmt":"2026-01-14T07:12:36","slug":"crypto-exchange-regulation-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/crypto-exchange-regulation-india","title":{"rendered":"India Tightens Regulatory Oversight of Cryptocurrency Exchanges"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ Governance, GS3\/ Security<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Financial Intelligence Unit (FIU), has issued revised Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines for cryptocurrency exchanges.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Regulatory Status of Cryptocurrencies in India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cryptocurrencies are <strong>not recognised as legal tender<\/strong> in India.<\/li>\n\n\n\n<li>Transactions involving <strong>crypto assets are taxed<\/strong> under the Income-tax Act.<\/li>\n\n\n\n<li>Cryptocurrency exchanges are classified as <strong>Virtual Digital Asset (VDA<\/strong>) service providers.\n<ul class=\"wp-block-list\">\n<li>All VDA service providers are regulated under the <strong>Prevention of Money Laundering Act (PMLA).<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Financial Intelligence Unit (FIU) acts as the <strong>regulator<\/strong> for crypto exchanges operating in India.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Guidelines for cryptocurrency exchanges<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Identity Verification: <\/strong>The exchanges have been directed to <strong>collect one more identity <\/strong>and address document of the client&#8211; either passport, driving licence, proof of possession of Aadhaar etc. apart from verifying their mobile number and email through a <strong>one-time password (OTP).<\/strong><\/li>\n\n\n\n<li><strong>A verification of the client&#8217;s bank account <\/strong>shall be done through the <strong>&#8216;penny-drop&#8217; <\/strong>mechanism to confirm the ownership and operational status of the account.<\/li>\n\n\n\n<li><strong>Liveness Detection: <\/strong>Crypto exchanges must capture a <strong>live selfie<\/strong> of the user at the time of onboarding, with liveness detection technology, such as <strong>eye blinking or head movement.<\/strong>\n<ul class=\"wp-block-list\">\n<li>This measure ensures that the individual submitting the credentials is physically present and personally initiating the account creation process.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Geo-Location: <\/strong>Exchanges are required to record the <strong>latitude and longitude of the onboarding location.<\/strong>\n<ul class=\"wp-block-list\">\n<li>The date, timestamp and Internet Protocol (IP) address must also be captured.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Restrictions on High-Risk Crypto Activities:&nbsp;<\/strong>\n<ul class=\"wp-block-list\">\n<li>The guidelines strongly discourage<strong> Initial Coin Offerings (ICOs) <\/strong>and<strong> Initial Token Offerings (ITOs). <\/strong>They are viewed as posing heightened risks of money laundering and terrorist financing.<\/li>\n\n\n\n<li>Transactions involving <strong>anonymity-enhancing crypto<\/strong> tokens are not to be facilitated.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Record-Keeping: <\/strong>Exchanges must preserve customer identity and address details.\n<ul class=\"wp-block-list\">\n<li>Transaction records must be maintained for a minimum period of <strong>five years.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>What Is Cryptocurrency?<\/strong><br><br>&#8211; Cryptocurrency is a <strong>digital form of money<\/strong> that<strong>uses cryptography for security and operates on decentralised blockchain networks <\/strong>instead of central banks.\u00a0<br><br>&#8211; <strong>Key Features<\/strong><br><br>a. <strong>Digital and Decentralised: <\/strong>Exists only online and is not controlled by any single authority.<br>b. <strong>Cryptography-Based Security: <\/strong>Uses encryption and public\u2013private keys to secure ownership and transactions.<br>c. <strong>Blockchain Technology:<\/strong> Transactions are recorded on a distributed, tamper-resistant public ledger.<br>d. <strong>Peer-to-Peer System: <\/strong>Allows direct transfer of value between users.<br>&#8211; <strong>Examples: <\/strong>Bitcoin, Ethereum and Altcoins.<br><br><strong>Blockchain technology<\/strong><br><br>&#8211; Blockchain technology is a <strong>decentralized, distributed ledger system<\/strong> that records transactions across many computers in a way that ensures security and transparency.<br>&#8211; Blockchain networks rely on <strong>consensus algorithms to validate transactions <\/strong>and maintain network integrity.\u00a0<br>a. These mechanisms ensure that <strong>only legitimate transactions are added<\/strong> to the chain.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Significance of the New Guidelines<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The revised guidelines bring India\u2019s cryptocurrency regulatory framework in closer alignment with <strong>Financial Action Task Force (FATF) <\/strong>standards on virtual digital assets.<\/li>\n\n\n\n<li>They <strong>strengthen India\u2019s ability <\/strong>to prevent money laundering, terrorist financing and proliferation financing risks associated with crypto assets.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Greater inter-agency coordination among the FIU, RBI, SEBI and law enforcement agencies is essential to address cross-border crypto risks.<\/li>\n\n\n\n<li>The use of <strong>regulatory technology (RegTech) and supervisory technology (SupTech) <\/strong>should be expanded to improve real-time monitoring and risk assessment.<\/li>\n\n\n\n<li><strong>Capacity building <\/strong>of enforcement agencies and judicial authorities is necessary for effective investigation and prosecution of crypto-related offences.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.businesstoday.in\/latest\/policy\/story\/explained-why-india-is-mandating-live-selfies-and-location-tracking-for-crypto-users-510354-2026-01-11\" target=\"_blank\" rel=\"noopener\"><strong>BL<\/strong><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> The Financial Intelligence Unit (FIU), has issued revised Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines for cryptocurrency exchanges. <\/li>\n<p><\/p>\n<p><strong> Regulatory Status of Cryptocurrencies in India <\/strong><\/p>\n<li class=\"ms-5\"> Cryptocurrencies are not recognised as legal tender in India. <\/li>\n<li class=\"ms-5\"> Transactions involving crypto assets are taxed under the Income-tax Act. <\/li>\n<li class=\"ms-5\"> Cryptocurrency exchanges are classified as Virtual Digital Asset (VDA) service providers. <\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/crypto-exchange-regulation-india\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-64063","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64063","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=64063"}],"version-history":[{"count":4,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64063\/revisions"}],"predecessor-version":[{"id":64177,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64063\/revisions\/64177"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=64063"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=64063"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=64063"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}