Binance, one of the world’s leading cryptocurrency exchanges, has made the decision to discontinue cash payments for peer-to-peer (P2P) crypto trades in India. This move is aimed at improving compliance and aligning with regulatory standards. Previously, traders in India were able to settle transactions using physical cash or bank deposits. However, Binance has now ended this option in order to establish greater legitimacy in the Indian market.
The termination of cash payments for P2P trades represents a significant shift in Binance’s operational approach in India. The exchange had previously allowed traders to use its escrow service to post buy or sell orders and complete transactions using various payment methods, including cash. This flexibility was particularly beneficial for avoiding the high taxes imposed on crypto trades by the Indian government.
While non-cash payment methods in Indian rupees are still available for P2P trades on Binance, the removal of the cash option is part of the exchange’s broader strategy to enhance compliance and gain legitimacy in the Indian market. This market has been facing increasing regulatory scrutiny.
Interestingly, Binance still permits cash payments for P2P trades in UAE dirhams (AED). This enables the exchange to match buyers and sellers in Dubai and facilitate payment settlements in cash. Dubai is positioning itself as a growing cryptocurrency hub, with developers even accepting cryptocurrencies for payments.
However, there are risks associated with P2P cash transactions, as highlighted by Purushottam Anand, the founder of Crypto Legal, a blockchain and crypto-focused law firm based in Bengaluru. Anand explained that these transactions expose parties to physical and financial risks, citing incidents where traders were assaulted and forced to transfer their virtual assets or hand over cash during physical meetings. The regulatory uncertainty surrounding the legality of such cash transactions, especially for large amounts, makes victims hesitant to file complaints and leaves them vulnerable to fraud.
Despite this, it is claimed that Binance is not technically violating Indian laws, as it acts as a third party providing escrow services for cryptocurrency transfers, which are not legally recognized as tender in India.
Binance was previously banned from operating in the Indian market in late 2023, with a potential penalty of around $2 million. However, on May 10, the Financial Intelligence Unit of India (FIU-IND) announced that Binance, along with KuCoin, had successfully registered with the regulatory body. This marked a significant credibility shift for the cryptocurrency industry in India. The ban on offshore entities, including Binance, KuCoin, Huobi, and Kraken, had negatively impacted the local crypto industry and led to a shift in trading volumes to international exchanges.
With KuCoin resuming operations after paying a penalty and Binance expected to settle a $2 million fine, other sanctioned platforms are also negotiating their return. However, OKX and Bitstamp plan to exit the Indian market.
Before its ban, Binance dominated India’s crypto market, holding nearly 90% of the estimated $4 billion worth of cryptocurrency held by Indian citizens. This was largely due to its non-compliance with Indian tax regulations, specifically the 1% tax deducted at the source (TDS) on transactions.
