Binance users in India can no longer avoid tax payments by making cash deposits for P2P trades as the exchange has suspended this option.
Major crypto exchange Binance has blocked the use of cash payments for peer-to-peer (P2P) cryptocurrency trades in India. Local users can no longer buy or sell supported cryptocurrencies by depositing or receiving cash payments.
Binance P2P Users in India Cannot Use Cash Anymore
Before now, Binance allowed Indian traders to use an escrow option that allows users to close transactions after cash has been received or directly deposited into bank accounts. Traders used this option to continue trading under the government’s radar and avoid any risk of government action. Some traders also preferred the cash option to online fund transfers to avoid paying heavy taxes imposed by the government. While other options are still available, the cash option has been discontinued.
The exchange likely made the move for compliance reasons, ensuring that the platform no longer enables users to sidestep government rules, such as tax requirements. However, some stakeholders have also noted a safety issue with the cash option.
The founder of crypto and blockchain-focused law firm Crypto Legal recently highlighted some of these problems. According to Purushottam Anand, there are serious financial and physical risks to consider.
“There have been cases where traders have been physically assaulted and forced to transfer their virtual assets or hand over cash during physical meetings. Victims hesitate in filing criminal complaints due to regulatory uncertainty regarding the legality of such transactions, especially if it involves more than ₹2 lakh, and fraudsters prey on such fear,” he said.
Binance’s action might signal a willingness to comply with the Indian government, especially since the trades technically do not defy local laws. The exchange is supposedly only a third-party agent providing escrow services for people looking to trade cryptocurrencies, assets that are not considered legal tender in the country.
Although Binance has discontinued P2P cash payments, the option is still available in Dubai, where users can settle trades via direct AED cash deposits or exchanges. The Dubai government is much more receptive to cryptocurrencies than India.
India’s Crypto Scene
The decision Binance has made may affect several other crypto exchanges, which might decide to follow suit and discontinue cash payments for P2P trades. This could further stifle the cryptocurrency scene in the country.
Interestingly, India’s stance on cryptocurrencies seems split between authorities. For instance, the Securities and Exchange Board of India (SEBI) is interested in establishing a framework that allows investors to get involved with crypto trading in the country. According to internal documents, SEBI’s proposed framework suggests that digital assets will not be regulated under one agency. The Board believes that the Reserve Bank of India (RBI) should handle stablecoins and any other cryptocurrencies backed by fiat currencies. This leaves SEBI in control of several other assets.
In addition, SEBI wants the Pension Fund Regulatory and Development Authority (PFRDA) and the Insurance Regulatory and Development Authority of India (IRDAI) to oversee all pension-related cryptocurrencies.
On the other hand, the RBI believes that private cryptocurrencies should not enter the financial market, and is looking to ban stablecoins.
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