How are crypto firms vetting customers?, Pg11

Key Highlights:

• On January 8, 2026, India's FIU-IND updated AML & CFT guidelines for entities providing services related to Virtual Digital Assets (VDAs), including cryptocurrency exchanges.
• The updated guidelines mandate stringent KYC procedures for crypto exchanges, including verification of customer details, occupation, income range, selfie with liveness detection, geo-tagging, and bank account verification via the penny drop method.
• AML laws and CFT regulations aim to prevent the use of cryptocurrencies for money laundering, terror financing, and other illegal activities.
• While many centralized exchanges already implement KYC procedures, decentralized exchanges (DEXs) often offer anonymous transactions with fewer controls, posing risks.

Detailed Insights:

• The updated Financial Intelligence Unit (FIU-IND) guidelines formalize existing practices followed by leading Indian exchanges, aligning them with global best practices and bank-level compliance standards.
• KYC procedures on crypto exchanges help deter criminal activities, freeze offending accounts, and prevent the conversion of fiat currency into harder-to-trace crypto assets.
• Decentralized exchanges (DEXs), while offering privacy and avoiding state repression, can be exploited for money laundering, scams, and terror financing due to their anonymous nature.
• Indian exchanges like WazirX, ZebPay, and CoinDCX have already been implementing measures like liveness detection, geo-tagging, and DigiLocker integration for KYC.
• Despite a 30% capital gains tax and a 1% TDS rate on crypto, Indian investors lack a reliable safety net in case of scams or unfair practices by private players.

Key Concepts Involved:

• KYC (Know Your Customer): A process used by businesses to verify the identity of their customers and assess potential risks.
• AML (Anti-Money Laundering): Laws and regulations designed to prevent criminals from disguising illegally obtained money as legitimate income.
• CFT (Countering the Financing of Terrorism): Measures taken to prevent the use of financial systems to support terrorist activities.