Crypto P2P in India 2025: Legal, Illegal, or Just a Grey Zone?

India’s Crypto P2P Trading: Legal, Illegal, or Just Plain Confusing?

India’s relationship with cryptocurrency remains a puzzle for millions, especially those engaging in peer-to-peer (P2P) trading. Headlines, regulatory notices, and Finance Ministry statements have turned the question “Is crypto legal in India?” into one of the most Googled topics in the country in 2025. The government’s answer? “It’s complicated.”

While India has not outlawed digital asset trading, it has layered the environment with rules on taxation, reporting, and registration requirements that shape what users can—and cannot—do within the country’s crypto ecosystem.

Source: X

A Nation Caught Between Innovation and Regulation

A recent update from the Ministry of Finance, shared by Bitcoin advocate Sapna Singh on X on July 23, confirmed the government’s conservative stance toward global exchanges while clarifying that crypto trading is legal but under strict watch.

Crypto exchanges operating within India must be registered with the Financial Intelligence Unit (FIU-IND), part of a broader effort to control financial crime and enforce anti-money laundering compliance. Although trading crypto is not a criminal act in India, the Central Board of Direct Taxes (CBDT) has significantly stepped up its oversight, ensuring that traders report earnings and pay the applicable taxes.

From 2022 to 2024, India collected over ₹706 crore (approximately $85 million) in crypto-related taxes, showcasing the sector’s substantial footprint in the financial ecosystem despite regulatory uncertainty.

A History of Mixed Signals

India’s complex stance on cryptocurrency can be traced back to 2018 when the Reserve Bank of India (RBI) banned banks from dealing in crypto. In 2020, the Supreme Court overturned that ban, re-legalizing trading and opening doors to renewed activity within the crypto market.

Despite this, the government has not yet implemented a clear legal framework for cryptocurrency regulation. Instead, it continues to maintain a fragmented oversight structure, where crypto is permitted, taxed, and closely monitored—but lacks a formal law defining its place within India’s financial system.

Concerns around money laundering, market stability, and the misuse of unregulated digital assets remain top priorities for regulators, and these concerns often translate into policy hesitancy, making crypto in India a “gray zone” for traders and investors.

The Popularity of P2P Trading—and Its Risks

The surge in P2P trading in India has been fueled by the desire for convenience and lower costs. These platforms allow direct wallet-to-wallet transfers without third-party intermediaries, making them attractive for traders seeking efficiency and privacy. However, this system does not exempt users from taxation or government oversight.

Crypto traders must be aware that while P2P transactions are legal, they remain subject to India’s strict tax structure. The government currently levies a 30% tax on profits from digital asset transactions, along with a 1% tax deducted at source (TDS) on each trade.

The Government’s Current Position

The Indian government’s current focus on crypto regulation revolves around transparency, taxation, and compliance with global standards.

The Ministry of Finance requires all exchanges operating within India to register with FIU-IND to monitor financial activities and prevent illegal transactions. The Finance Minister has repeatedly emphasized that all digital assets, regardless of type, must comply with anti-money laundering laws.

India’s top tax authority, the CBDT, has signaled a move toward collaboration with international agencies to align local laws with frameworks such as the Financial Action Task Force (FATF) guidelines. This alignment is part of India’s preparation for the COINS Act 2025, which could introduce a structured legal framework for crypto operations.

Reports indicate that a discussion paper is in the works, expected to be released in late 2025, outlining potential guidelines for crypto asset definitions, investor protections, and exchange licensing.

Upcoming Stricter Oversight in 2026

Starting April 1, 2026, India will implement stricter monitoring rules around digital transactions. The CBDT has announced it will intensify its focus on digital evidence in tax investigations, which will include crypto transactions.

Source: X

Access to digital wallets will only be allowed during official income tax raids, while cloud storage and digital banking platforms will come under enhanced scrutiny. Authorities have clarified that any digital asset activity can be examined for potential tax violations, emphasizing the need for traders to maintain accurate transaction records.

Global Trends and Potential Impact

India’s regulatory journey unfolds against a backdrop of global crypto developments. In the United States, the recently passed Clarity Act on stablecoins has pushed many nations to reconsider their regulatory approaches. As global crypto adoption increases, India may follow suit with clearer laws to ensure a balance between innovation and regulatory compliance.

Experts believe that establishing structured regulations will provide the clarity needed to encourage responsible participation in the crypto ecosystem while mitigating risks of fraud and illicit financial activities.

Crypto’s Role in India’s Digital Economy

Despite regulatory ambiguities, crypto continues to play a growing role in India’s digital economy. With increasing awareness among young investors, digital asset adoption is climbing steadily, positioning India as one of the largest crypto markets globally.

Peer-to-peer platforms and crypto payment solutions have enabled greater financial inclusion, allowing users to bypass traditional banking systems and directly participate in the digital economy. However, the lack of a cohesive legal framework continues to create uncertainties for retail and institutional investors alike.

What Traders Should Do Now

Until India provides a definitive regulatory framework, traders are advised to:

• Keep meticulous records of all transactions, including wallet addresses, transaction IDs, and corresponding fiat values.

• File crypto gains accurately during tax season to avoid penalties.

• Use registered platforms for trading where possible, as using non-compliant platforms may result in complications with tax authorities.

• Stay informed about upcoming regulations, including the COINS Act 2025 and other legislative measures.

Crypto enthusiasts and investors in India are navigating a landscape that is legal yet layered with complexities. For those willing to comply with the taxation and reporting requirements, crypto trading, including P2P transactions, remains an accessible opportunity to participate in the evolving financial system.

Looking Ahead

India’s crypto journey is at a pivotal moment. The government’s balancing act between innovation, tax collection, and financial security reflects its cautious optimism toward the sector. If executed well, the proposed discussion papers and upcoming COINS Act could provide much-needed clarity, making India a major player in the global crypto landscape.

As the world moves toward clearer crypto regulations, the question remains whether India will embrace this momentum and define crypto in a way that fosters innovation while safeguarding economic interests.

For now, crypto in India is neither illegal nor fully regulated—it is, as the government says, “complicated.” And for millions of Indians, the path forward lies in understanding and navigating these complexities with informed caution.

Writer @Ellena

Ellena is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

 Check out other news and articles on Google News

Disclaimer:

The articles published on hokanews are intended to provide up-to-date information on various topics, including cryptocurrency and technology news. The content on our site is not intended as an invitation to buy, sell, or invest in any assets. We encourage readers to conduct their own research and evaluation before making any investment or financial decisions.

hokanews is not responsible for any losses or damages that may arise from the use of information provided on this site. Investment decisions should be based on thorough research and advice from qualified financial advisors. Information on HokaNews may change without notice, and we do not guarantee the accuracy or completeness of the content published.