In a significant move to tighten oversight of the virtual digital asset (VDA) ecosystem, Indian authorities have introduced stringent new verification protocols for onboarding crypto users. The guidelines mandate the use of real-time geo-location technology and live selfie capture as part of enhanced Anti-Money Laundering (AML) compliance.
New Verification Protocols for Virtual Digital Assets
The updated framework, which came into focus on 12 January 2026, outlines specific technological requirements for entities dealing in cryptocurrencies and other VDAs. The core of the new rule involves a two-fold verification process. Firstly, platforms must implement a geo-location check to confirm the user's physical presence in India. Secondly, they are required to collect a live selfie during the onboarding process, moving beyond static document uploads to ensure the person is genuinely present and participating.
The primary objective of these measures, as stated in the guidelines, is to assist businesses engaged in VDA activities. The rules are designed to help them better understand and fulfill their legal obligations under India's Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) framework. The move aims to bring the crypto sector in line with the compliance standards expected of traditional financial institutions.
Implications for Crypto Platforms and Users
For crypto exchanges and wallet providers, this means a substantial upgrade to their Know Your Customer (KYC) infrastructure. They must now integrate systems capable of performing real-time location checks and liveness detection. This step is seen as a direct effort to prevent the use of virtual private networks (VPNs) or spoofed locations to bypass regional restrictions and to eliminate fake or stolen identity fraud.
For users, the onboarding experience will become more rigorous. The process will now involve granting location permissions and taking an instant selfie through the platform's app or website. While this adds a layer of friction, it is intended to create a more secure and transparent trading environment, potentially boosting institutional and cautious retail participation.
The Road Ahead for Crypto Compliance in India
The issuance of these guidelines marks a continued effort by Indian regulators to formalize the crypto industry. By enforcing geo-location verification and live selfie requirements, the government is addressing critical gaps in digital identity verification. These AML obligations underscore a global trend of increasing scrutiny on virtual digital assets.
Industry experts suggest that while compliance costs may rise for service providers, these measures could foster greater long-term legitimacy for the sector in India. The guidelines provide a clearer roadmap for VDA entities to operate within the legal framework, potentially reducing regulatory uncertainty. The development, reported by Uma Kannan, sets a new benchmark for user verification standards in the country's rapidly evolving digital finance landscape.
