Cryptocurrencies are an asset class that operates without a central regulatory authority. They are decentralized and that is their distinctive feature. But the uninitiated often ask a crucial question: how to convert the digital asset into a legal tender like the Indian rupee? Here’s how you can do it.
Cryptocurrency Exchanges: They offer an easy way to sell cryptocurrencies and credit Indian Rupees (INR) to your bank account. However, they charge fees and may face regulatory issues.
P2P Platforms: Deal directly with buyers, often with lower fees and flexible payment methods. Beware of scams and the complexity of dispute resolution.
ATMs: Cryptocurrency ATMs provide a quick way to get cash, but they are not widely available in India and often come with high fees, says Sathvik Vishwanath, co-founder and CEO of Unocoin.
Let’s explore in detail the methods of cashing out cryptocurrency:
Using centralized exchanges
Centralized exchanges are one of the most common methods for converting cryptocurrencies into cash. Platforms like Coinbase, Binance, and Mudrex allow users to easily sell their digital assets. To use an exchange:
Users must first register on the exchange and complete all necessary verification processes.
After setting up an account, users deposit their Bitcoin or other cryptocurrencies into the exchange’s wallet.
Users can then place a sell order at a specific price or opt for a market order to sell at the current market price.
Once the sale is complete, users can withdraw the cash to their linked bank account.
Peer-to-peer (P2P) platforms
It is a direct method for those looking for a more straightforward method. P2P platforms like LocalBitcoins and Paxful connect buyers and sellers directly. These services allow users to exchange cryptocurrency for cash through various payment methods, including bank transfers, PayPal, or even in-person cash transactions.
Users can browse listings to find potential buyers.
Users can negotiate price and payment methods, which may include bank transfers, cash payments, or other methods.
Once an agreement is reached, users complete the transaction.
Peer-to-peer (P2P) exchanges vs. centralized cryptocurrency exchanges
Peer-to-peer (P2P) exchanges and centralized cryptocurrency exchanges have two different approaches to cryptocurrency trading.
P2P exchanges facilitate direct transactions between users without intermediaries. They typically offer greater privacy, global accessibility, and often lower fees. Users have more control over their funds and can negotiate terms directly with trading partners.
However, P2P platforms may have lower liquidity, longer transaction times, and require users to be more careful to avoid scams.
On the other hand, centralized cryptocurrency exchanges act as intermediaries between buyers and sellers. They typically provide higher liquidity, faster transactions, and a more user-friendly interface. These exchanges often offer additional features such as advanced trading tools, fiat currency support, and customer support. However, they require users to trust the exchange with their funds, may have higher fees, and may be subject to regulatory scrutiny or hacking attempts. Users also often have to complete identity verification processes, which can compromise privacy.
Cryptocurrency ATMs
Cryptocurrency ATMs offer a physical option to convert cryptocurrency into cash. These machines allow users to buy or sell cryptocurrency. Cryptocurrency ATMs typically charge higher fees compared to online methods. To use a cryptocurrency ATM, follow these steps:
Find a nearby ATM. Users can find nearby ATMs using online maps or dedicated apps.
Follow the on-screen instructions to start a sale.
Send your cryptocurrency to the address provided.
Withdraw your cash from the machine.
Things to consider when investing in cryptocurrencies: Stay informed about changing regulations and tax implications as cryptocurrency transactions are subject to Indian laws and taxes. Profits earned from trading cryptocurrencies are subject to a 30% tax (plus a 4% cess) under Section 115BBH.
The Reserve Bank of India (RBI) has urged retail investors to be cautious when investing in cryptocurrencies, warning that the crypto ecosystem lacks accountability and stability and is marred by regulatory ambiguity.
First published: August 13, 2024 | 11:57 am IS
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