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Layer 2 side chain Polygon is requiring extensive KYC (Know Your Customer) details to provide funding, investments, grants or financial support to potential partners in India, said a person familiar with the matter.

• Polygon, whose system runs alongside the Ethereum blockchain, is looking to be "extremely compliant," according to the person, at a time when there is increased scrutiny from regulators.

• The person said that "there would be no grants to anyone who is unwilling to share full KYC details."

• "Anybody legit should not be reluctant to share KYC details and therefore to avoid procedural delays. It's a requirement going forward," the person added.

• Developers in India have recently been talking about the difficulty of acquiring funding or investment from Polygon, going as far as saying Polygon had altogether stopped funding projects in the country, said a separate industry source.

• However, the source familiar with Polygon's decision clarified that the move is not a complete pause on funding to Indian projects but is related to increased government scrutiny.

• Recent unfriendly crypto moves by Indian authorities have included imposing a stiff new crypto tax, cutting off payment processors from local exchanges after the rough local launch of crypto exchange Coinbase (COIN), failing to support the industry after a plunge in trading volumes and moving ahead with a new crypto tax – a 1% deducted-at-source levy scheduled to begin on July 1.

Read more: India Needs a Single Crypto Regulator, Says Polygon Co-Founder