Legal or Illegal? India’s Crypto P2P Trading Status Is “Complicated”

Crypto P2P trading in 2025 is the hottest topic of discussion in India. More than half of the population doesn’t know whether digital assets are legal or illegal in India. The most searched on Google are made on “is crypto legal in India.” The Indian government concludes, “IT’S COMPLICATED.” Now, what’s complicated is explained in this article on the latest circumstances collected from the 2025 status.

What's the story?

A recent X post of a Sapna Singh (a Bitcoin Enthusiast) revealed a Ministry of Finance update (July 23, 2025) that points to the conservative attitude of the country towards international exchanges. Although the government has not outlawed crypto, it requires exchanges to be registered with the Financial Intelligence Unit (FIU-IND).

This update is a confirmation that trading is legal, yet not fully regulated. It is due to heightened tax monitoring by the Central Board of Direct Taxes (CBDT) and events such as the U.S. Clarity Act on stablecoins. Despite this, India collected over ₹706 crore in crypto taxes from 2022 to 2024 . The whole point is that P2P trading is not a crime, but there are rules to be followed: taxation and government reporting.

Source: X

Why Is Crypto Still Unclear in India?

In 2018, the RBI prohibited banks from trading. In 2020, the ban was overturned by the Supreme Court, and trading was again permitted.

Furthermore, the government has not regulated crypto with systematic laws. Consequently, the question keeps arising on regulations, and the answer is tricky. It is permitted, taxed, and developing, but not with a legal framework. Money laundering, stability of the economy, and the misuse of unregulated assets are still the issues that the government is concerned about.

Additionally, trading platforms and P2P trading are being used by traders and investors who do not go through an intermediary. These venues have become popular because of their convenience of access and direct wallet-to-wallet exchanges. However, do not forget about the P2P trading tax.

What Is the Latest Stance of the Government?

The Indian government is actively watching and significantly focusing on the following aspects:

1. The Ministry of Finance requires all trading platforms operating in India to register with the FIU-IND. Its objective is to prevent financial crimes and ensure compliance.

2. The Finance Minister has previously noted that digital assets must follow tax and anti-money laundering laws.

3. Despite the lack of regulation, the government continues to collect a 30% tax on profits and a 1% TDS on transactions.

4. Now, the CBDT (India’s top tax body) has said it is working with global agencies to build a regulatory framework. This includes aligning with global standards like the FATF guidelines.

5. Additionally, the government is reportedly preparing a discussion paper in 2025 to outline future rules. This may focus on defining crypto assets, investor protection, and exchange licensing.

6. They are also working on the COINS Act 2025 .

Source: X

What’s New?

Starting April 1, 2026, country will implement stricter surveillance rules. The CBDT will focus heavily on digital evidence during tax investigations.

According to the update:

• Access to digital wallets will only be allowed during official IT raids.

• Cloud storage and digital banking platforms will face more monitoring.

• Any digital asset activity can be scrutinised for potential tax violations.

What’s Ahead?

As global trends push for clarity—like the U.S. passing the Clarity Act—India may follow suit. The expected discussion paper in 2025 may lay the groundwork for defining laws. As India works with global agencies, traders can expect clearer rules on taxation, trading platforms, and investor protection.

Until then, users should keep records of all transactions to avoid legal issues in the future. As confusion continues about crypto regulation, do you think we could ever agree on stablecoins to redefine the future of finance ?