The reason is that he wants to return the money to me this way. But it's probably better if he returns cash to me, and I buy peer-to-peer for cash in the traditional way. Because I don't want him to incur tax obligations after I sell those sats in the future.
I see.
This will depend on tax laws in your country, if gift worth of $700 is taxed, your friend need to bear the tax. As long as your friend declare that he give that $700 in Bitcoin as a gift, he don't have to worry.
But yeah returns cash is more private.