Major Cryptocurrency Exchange Discontinues Cash Payment Option for P2P Crypto Trades in India

A major cryptocurrency exchange has implemented a significant policy change by blocking cash payments for peer-to-peer (P2P) cryptocurrency transactions within India. This decision marks a substantial shift in how local traders can conduct their digital asset exchanges, eliminating a previously popular payment method that allowed users to buy and sell supported cryptocurrencies through direct cash deposits or transfers.

P2P Users in India Cannot Use Cash Anymore

Prior to this discontinuation, the P2P platform offered Indian traders an escrow service that facilitated transactions upon receipt of cash or direct bank account deposits. This payment mechanism had become increasingly popular among local traders seeking to maintain trading activities while minimizing regulatory visibility and avoiding substantial taxation obligations imposed by the Indian government. The escrow system provided a layer of transaction security, as the platform would hold funds until both parties confirmed the completion of their agreed terms.

However, while alternative payment methods remain available on the platform, the cash payment option has been completely removed. The decision appears to be primarily motivated by compliance considerations, as it prevents the platform from facilitating transactions that could circumvent Indian government regulations and tax requirements. Beyond regulatory compliance, industry experts have identified critical safety concerns associated with cash-based P2P transactions.

According to Purushottam Anand, founder of Crypto Legal, a specialized cryptocurrency and blockchain law firm, cash transactions present substantial financial and personal risks to traders. Documented cases reveal instances where traders have experienced physical violence and coercion, with perpetrators forcing victims to transfer cryptocurrency assets or surrender cash during in-person meetings. The victims often refrain from reporting these crimes to law enforcement due to legal ambiguity surrounding cryptocurrency transactions—particularly those exceeding ₹2 lakh—which creates an environment where fraudsters can operate with relative impunity by exploiting victims' fear of legal consequences.

The policy adjustment suggests a deliberate strategy to align with Indian governmental expectations and regulatory frameworks. Notably, major platforms maintain that they operate as neutral third-party escrow service providers rather than as direct market participants, which positions them outside the scope of regulations governing illegal financial activities. While the Indian government does not officially recognize cryptocurrencies as legal tender, this technical distinction has allowed such platforms to justify their previous operations.

Interestingly, certain platforms continue to permit P2P cash transactions in other jurisdictions like Dubai, where users can settle trades through direct United Arab Emirates Dirham (AED) cash deposits or exchanges. This geographical distinction reflects the stark difference in cryptocurrency regulatory environments, with some governments demonstrating significantly greater receptiveness to cryptocurrency adoption and innovation compared to the Indian regulatory apparatus.

India's Crypto Regulatory Scene

The policy change carries substantial implications for the broader Indian cryptocurrency ecosystem and raises important questions about whether P2P crypto trading remains legal in India. Other cryptocurrency platforms operating within the country may follow suit and similarly discontinue cash-based P2P trading options, potentially further restricting the accessibility and functionality of cryptocurrency trading platforms in India and constraining market participation.

The Indian regulatory landscape regarding cryptocurrencies presents a complex and sometimes contradictory picture, with different governmental agencies maintaining distinct perspectives on digital asset regulation. The Securities and Exchange Board of India (SEBI) has demonstrated relative openness to cryptocurrency integration by developing a comprehensive regulatory framework designed to facilitate legitimate investor participation in digital asset trading. Internal regulatory documents reveal SEBI's proposed structure involves distributed regulatory authority, where different agencies oversee specific categories of digital assets based on their characteristics and risk profiles.

Under SEBI's proposed framework, the Reserve Bank of India (RBI) would assume regulatory responsibility for stablecoins and cryptocurrency assets backed by fiat currencies, while SEBI would maintain oversight of numerous other digital asset categories. Additionally, the Pension Fund Regulatory and Development Authority (PFRDA) and the Insurance Regulatory and Development Authority of India (IRDAI) would be assigned regulatory authority over pension-related cryptocurrency instruments and products.

Conversely, the RBI maintains a substantially more restrictive stance toward cryptocurrencies, opposing the integration of private cryptocurrencies into India's financial system and actively pursuing regulatory mechanisms to prohibit stablecoin operations. This regulatory divergence between agencies creates uncertainty and inconsistency in the operational environment for cryptocurrency platforms and traders, making it essential for users to understand the evolving legal status of P2P platforms in India.

Conclusion

The discontinuation of cash payment options for P2P cryptocurrency trades in India represents a significant intersection of compliance obligations, consumer safety considerations, and regulatory compliance. The decision reflects platforms' prioritization of operating within an increasingly stringent regulatory environment while simultaneously addressing documented risks associated with cash-based transactions. As the Indian regulatory framework continues to evolve through ongoing deliberations between competing governmental perspectives, cryptocurrency exchanges and traders will likely face continued restrictions and uncertainties regarding the legality and accessibility of P2P trading mechanisms. The outcome of these regulatory discussions will substantially shape the future viability and accessibility of cryptocurrency trading within India's financial ecosystem.

FAQ

Is P2P banned in India?

P2P collect requests on UPI are banned in India as of October 1, 2025. However, P2P trading platforms for cryptocurrencies operate in a legal gray area and are not explicitly banned by the government.

Is P2P taxable in India?

Yes, P2P transactions are taxable in India. Digital asset income is subject to a 30% capital gains tax under Indian tax law. You must report all P2P transaction gains to comply with local regulations.