- India’s FIU ordered exchanges to stop trading and transfers of privacy-focused cryptocurrencies.
- Tokens like Monero and Zcash were flagged for high money-laundering risks.
- Exchanges must follow stricter KYC, monitoring, and user risk classification rules.
India has moved to further tighten oversight of the cryptocurrency sector, directing exchanges to stop dealing in privacy-focused digital tokens such as Monero and Zcash, citing heightened risks of money laundering and illicit finance.
As reported by ET, the directive was issued by the Financial Intelligence Unit (FIU), which operates under the finance ministry and is responsible for tracking suspicious financial activity.
Privacy Coins Flagged as High Risk
According to the updated guidance, crypto exchanges and intermediaries registered in India must not allow deposits, withdrawals, or trading in so-called anonymity-enhancing crypto tokens. These assets are designed to obscure transaction details, including the sender, recipient, and transaction value, making them difficult to trace.
Coins such as Monero and Zcash were specifically flagged as falling under the scope of the restriction. Regulators argue that the lack of traceability in such tokens poses challenges for anti-money laundering and counter-terrorism financing controls.
Why Regulators Are Concerned
Unlike Bitcoin or Ethereum, which operate on public blockchains where transactions can be analysed despite pseudonymous identities, privacy coins use advanced cryptographic techniques to hide transaction trails entirely. Indian authorities say this makes them vulnerable to misuse for illegal activities, including money laundering and moving funds across borders without detection.
The FIU has categorised dealings in such tokens as incompatible with the risk-mitigation frameworks that exchanges are required to maintain. This comes after earlier reports that Monero and Zcash were banned in Dubai.
Dubai’s financial regulator has fully banned privacy coins inside the Dubai International Financial Centre. The ban applies to trading, promotion, investments, and derivatives linked to privacy-focused cryptocurrencies like Monero and Zcash, as part of tighter crypto rules.
Stricter KYC and Monitoring Rules
The privacy coin restriction is part of a broader tightening of rules for virtual digital asset platforms. Earlier this month, the FIU updated its anti-money laundering guidelines, requiring crypto exchanges to conduct deeper customer checks.
Under the revised framework, platforms must collect additional information such as occupation, income range, verified bank details, geolocation data at the time of onboarding, and enhanced biometric verification. High-risk users are required to undergo more frequent KYC reviews, while exchanges must closely monitor and report suspicious transactions.
Aligning With Global Trends
India’s move mirrors a broader global regulatory trend. Several jurisdictions have either restricted or closely scrutinised privacy-focused cryptocurrencies, arguing that transparency is essential for financial stability and law enforcement.
Related: Indian Crypto Investors Decry “Unfair” Tax Regime Ahead of Union Budget Presentation
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