India’s Financial Intelligence Unit (FIU-IND) issued updated directives that prohibit registered crypto platforms from processing private coins.

Directive details

The new rules forbid exchanges from facilitating deposits, withdrawals or transfers of cryptocurrencies that provide strong privacy features and unlinkability.

Scope of the ban

The prohibition explicitly targets tokens using stealth addresses and zero-knowledge proofs for transaction unlinking, including Monero, Zcash and Dash.

In addition, the measure extends to cryptocurrency mixers and tumblers, defined as services that obfuscate transaction paths by mixing funds from multiple sources.

KYC and traceability requirements

FIU-IND stated an objective to make every cryptocurrency transaction fully traceable and strengthened identity verification obligations for platforms.

• Registration now requires a live selfie with liveness detection, for example blinking or deliberate head movement.
• Platforms must capture user geolocation together with the associated IP address during onboarding and transactions.
• Bank account verification is mandated using the penny-drop method to confirm account ownership.

Enforcement and penalties

Registered platforms that fail to comply face significant fines and regulatory action under the updated FIU-IND directives, the regulator warned.

Providers of mixing services may be treated as facilitators of non-compliant transfers and therefore subject to the same enforcement measures.