The adoption of Bitcoin as a tradable asset has found a warm welcome in African regions. Underdeveloped countries show a large volume of Bitcoin holders and traders, among other digital assets. Statistics taken by a blockchain data firm factored out gross transaction volume to favor peer-to-peer trading activity.
This evens out the leverage of high-level professional and institutional crypto buy-in, prevalent in developed countries. It also exposes the frequency of crypto adoption by low-volume traders in numerous African countries.
According to Chainalysis, Nigeria ranks sixth in the world and second in Africa (only behind Kenya). Interesting figures when you consider the cryptocurrency ban. Still, further analysis of the metric reveals the growth of adoption by users in existing regions.
The Reception of Cryptocurrency in Nigeria’s Financial System
Peer-to-peer trading, also known as P2P, offers a marketplace for entirely or quasi-anonymous interaction between a global network of computers, to buy and sell cryptocurrency.
Peer-to-peer has provided a secure and decentralized channel for successfully trading Bitcoin outside the eyes of the government or other interloping third parties. For this reason, a significantly increasing number of users in African countries have quickly taken up this method of acquiring crypto.
Although this technology has been available for a while, restrictions placed by the suspecting Nigerian government pushed individuals interested in crypto to sought-after alternative means of selling, buying, or holding Bitcoin.
In January 2017, the Central Bank of Nigeria (CBN), circulated an issue to all residing banks within the country, stating that the anonymous nature of virtual currency transactions makes them susceptible to malicious use, such as money laundering, tax evasion, drug trafficking, and terrorism funding; and should be prohibited. CBN expressed that the lack of KYC (Know Your Customer) verifications, attracted the fraudulent abuse of digital assets since they were entirely untraceable.
Nigeria’s regulatory body failed to recognize Bitcoin and sibling virtual assets as valid currencies because they were founded by unregistered companies and had no central ruling authority.
Economical concerns were also voiced in this circular. It feared that the volatility of these virtual currencies might disturb the country's financial system stability.
Additionally, CBN claimed that the security of users on this kind of network was not guaranteed. Users were said to be vulnerable to fund hijacks, DOS (Denial of Service) assaults, and unwanted leaks of personal information.
Later in February 2021, the regulatory body took stricter actions of ordering nullification of accounts associated with cryptocurrency activity.
Just so we're clear, Nigeria’s financial market’s regulator only pulled the support of banks and other financial institutions from handling cryptocurrency transactions, and didn’t necessarily rule it illegal. Much like the country’s local currency, it is the questionable use of crypto to fund illegal activities that are ascribed as unlawful.
Despite the regulatory relentless efforts to eradicate crypto in Nigeria, attempts remain futile, since these digital currencies were specifically designed to workaround centralized systems. So far, several other African countries permit crypto transactions and no international body has been set up to control the circulation of cryptocurrency.
Over time, Nigerian regulatory bodies decided to take a diplomatic approach towards controlling crypto activity. Nigeria’s Cyber Crime Act in 2015, enforced the integration of KYC verification among Fintech companies, as well as other financial institutions.
In addition, CBN encouraged user privacy in fulfilment of its Customer Protection Framework. CBN charged all financial institutions under its purview with the responsibility of shielding sensitive consumer data from undesirable exposure. However, this doesn’t address the issue of user data being untraceable. Usually, traditional data protection involves securing user data from unauthorized third parties and making them available to law enforcement agencies for investigations.
Instead of pushing for the forceful ban of cryptocurrency, Nigerian ruling bodies geared their actions towards subjecting Fintech companies (offering the acquisition and trade of digital assets), to existing regulatory policies.
The predominant regulatory body for Nigeria’s capital market, Security and Exchange Commission (SEC), made a statement addressing the categorization and control of digital assets in Nigeria, most especially cryptocurrency. SEC expressed its determination to achieve its goals of fostering the development of crypto in Nigeria through market deepening, safety, and reviewing issues related to regulations and strategies that challenge innovation in the cryptocurrency sector. The objective of the agency isn’t to hamper the adoption or development of cryptocurrency in Nigeria, but to promote the ethical and safe use of such assets.
To this end, SEC established policies for digital currency companies and startups, taking the responsibility of facilitating crypto investments, under the tenet of securities. SEC ensured that any organization offering crypto investment services were registered, and advised investors to beware of entities posing as capital market operators, promising ridiculous ROIs (return of investment), only to rip people off.
The desire to protect citizens financially didn’t end with the warnings, CBN created a committee to carefully define a blueprint for blockchain regulations and conduct the legitimate use of digital assets in a beneficial and globally acceptable vein.
Nigeria hasn’t created a legal framework for trading cryptocurrency yet. However, discussions on providing a fundamental basis for digit assets exchange in the country are underway.
How P2P Trading Works in Nigeria
Statistics from UsefulTips reveal that Nigeria had an average monthly P2P volume of $33.1 million in 2021, a thirty percent increase compared to 2020. Digital currency restrictions only seemed to fuel the crypto market in Nigeria. P2P trading proved to be more convenient and faster than the traditional means of exchanging crypto.
Peer-to-peer trading doesn’t work any differently in Nigeria compared to the rest of the world. The same universal principle underpins P2P exchange globally; a network of participants hosted on an exchange and a computer program for automatically executing transactions. A purely decentralized process, independent of ruling bodies or human interference.
Let’s look at what peer-to-peer in terms of digital currencies mean.
What Is P2P Trading?
Investopedia refers to peer-to-peer exchange or sharing of information, data, or assets between parties without the involvement of a central authority. Peer-to-peer (P2P) involves decentralized interactions among individuals and groups. This approach has been used in computers and networking (peer-to-peer file sharing), as well as with trading virtual currencies.
In a digital peer-to-peer network, each user is (in theory) an equivalent owner of and contributor to the network. This kind of network can be used for almost any kind of information or file-sharing. (One of the earliest mass uses of P2P networks was the now-defunct music-sharing service Napster).
P2P was easily integrated into Bitcoin due to its anonymity and decentralized nature. Powered by blockchain technology, software developments were carried out to accommodate a secure channel for crypto transfer on a network.
While this network covers the anonymous transfer of digital assets from the sender to the receiver's wallet, making an exchange for assets that aren’t native (local currencies) to the chain, still requires a conventional payment method. Many crypto marketplaces have stepped up to take the responsibility of hosting both arcs of a transaction and maintaining the autonomy of such transactions at the same time. They merely create a secure space for the two counterparts to perform a trade, on their own terms.
This technique shares a close resemblance with the trading systems used on popular marketplaces like Craigslist, eBay, Etsy, e.t.c. Willing buyers and sellers directly interact and agree on a price online. An online platform typically simulates a physical market store in a digital space.
However, with crypto, the difference is that items available for sale are not physical assets, but Bitcoin. A P2P marketplace helps people find Bitcoin buyers or sellers at the price and payment method of their choice.
Peer-to-Peer vs. Conventional Exchanges
There are two distinct methods for trading Bitcoin; conventional exchange and peer-to-peer.
The former matches traders automatically. An algorithm randomly pairs a buyer and seller, without the exposure of either's identity. This system is almost entirely anonymous and is a favorite for people that are concerned about privacy protection. This system predominantly consists of transactions identified as conversions from local currency to bitcoin.
On the other hand, peer-to-peer exchanges disclose the basic information of the person on the other side of the transaction and could involve their name, wallet address, location, IP address, bank details, transaction history, or an in-person encounter for cash transactions. Peer-to-peer exchanges give users the privilege of specifically choosing whom they wish to trade, and also connect traders living close by.
P2P is much more flexible than regular exchange and enables users to have more control over their transactions. Besides picking a buyer or seller of their preference, traders can also choose a rate they find satisfactory.
P2P also provides a safety net to allay the fears of traders. The nature of such a transaction begs the question of whether the other party will fulfil the terms of an agreement after one side commits funds. Escrow services put these worries to rest by providing a safe for temporary locking funds to avoid this scenario.
Additionally, peer-to-peer trades usually incorporate a reputation system, which means that all users on the network have their trade history tracked and put on display. This serves as a measure for traders to gauge their options and select trustworthy vendors, leading to more successful trades.
Peer-to-peer trades may be partially or fully anonymous, depending on the exchange platform used.
Why Buy Bitcoin Using Binance P2P?
Binance is the most secure place to purchase Bitcoin in Nigeria. It is the go-to marketplace for many in the country due to the numerous advantages enjoyed by traders on this platform. Binance P2P is also supported in other African countries like South Africa, Ghana, Morocco, and Egypt.
Binance resumed P2P operations in 2018, providing a portal for Bitcoin traders to meet online, directly interact with other users and make exchanges for local currencies. In 2021, Binance extended the support to five more cryptocurrencies tradable via 150+ payment methods, in exchange for 55 local currencies.
According to Binance, last year, Binance P2P processed $7 billion worth of transactions made through 3.8 million orders, with daily volumes reaching as high as $54 million. P2P users on Binance grew sevenfold compared to 2019, and they had plenty of options, with more than 2,000 P2P merchants serving their needs worldwide.
Look at those numbers!
It is also noteworthy that Binance continuously doles out new features to improve the security and convenience of P2P trades on its platform, and some of the most recent are:
This new feature enables direct interaction between traders in the literal sense. The seller can now transfer crypto to the buyer's wallet and make cash pickups face-to-face.
However, for obvious reasons, only select merchants with reputable trade history may engage in cash-in-person transactions.
Binance provided a feedback feature in January 2021, which allows traders to comment on their trading experience and the compliance of the other trading counterpart. This would form one of the yardsticks for choosing a potential online vendor. Merchants' ads now contain transaction details, alongside their trading history and review from previous encounters.
Good reviews indicate an element of trust and encourage engagement from interested crypto buyers.
In October 2019, Binance added the ad post feature to advocate large-scale vendors on their platform for zero charges. Users can now upload their offers online, and have them showcased on Binance’s P2P network for any interested users to see.
Before this feature was introduced, only verified merchants had the privilege of buying and selling Bitcoin. Ad posting opened the door for regular users to participate in crypto trading as a profitable business.
Binance CEO, Changpeng Zhao said Binance strived to“ increase the freedom of money, and we are delighted to give our global users more freedom of crypto trading through creating their trades. Moreover, users can trade peer-to-peer for free, as we are not charging any fees for providing the P2P Trading platform.”
Escrow Service – How Binance Protects Your Crypto
The Binance escrow service ensures the smooth run of trades on the platform, protecting either side of the transacting pair from getting cheated out of trades.
Binance comes in as a third party to temporarily keep the cryptocurrency at stake in a box until both parties have marked the transaction as successful. This adds a degree of assurance to trades and eliminates posers or ill-intentioned users from the network.
So here’s how escrow works;
A buyer finds an offer on the ads list, matching their preferred rate and payment method, and is convinced with the merchant's trading history and reviews, so they decide to place an order.
Immediately this order is made, Binance escrow service gets involved by withdrawing the given cryptocurrency from the seller's wallet, and locking it away in a safety deposit box.
Then, the buyer sends a fiat equivalent to the designated bank account or uses one of the 50+ payment methods supported by Binance and available in their country to make payment and then mark the transaction as done.
The seller has a limited time to confirm the trade as complete before funds are released from escrow to the buyer's wallet. Failure to do so and escrow service intervenes and may release the funds to the buyer's wallet depending on the quality of evidence showing that payment was indeed made.
How to Buy Bitcoin Using Binance P2P in Nigeria
Binance does not offer anonymous trading services. Before participating in P2P trades, you must have a Binance account, and complete the second-step KYC verification process, which requires that a legal document for confirming your identity is rendered.
After fulfilling this requirement, here are the steps to completing your first successful Binance P2P trade.
Step 1: Click on “P2P Trading” on the Binance app home page.
Step 2: You’ll be taken to the P2P section. There are three P2P options: express, P2P, and block trade. Binance restricts accounts using P2P trading for the first time to express only. However, other subsequent trades may be carried out using either Express or P2P.
For express, Binance only requires user input on the amount of crypto to be purchased. The system matches you with a relevant buyer or seller automatically.
Block trade is for whales interested in buying large quantities of Bitcoin.
Step 2: Click on the drop-down at the top of the page and select P2P. The P2P page features a list of ad posts showing several vendors' names, rates, equivalent range of crypto available for purchase in your local currency, additional details about their trade success rate, and the total number of trades they have taken are also put on display, to guide your decision.
You may use the filter (at the right-top corner of the page), to fetch ads closer to your interest.
Step 3: After finding a seller of your preference, click buy. A trade window will open up. Enter the quantity of Bitcoin you wish to purchase or amounting Fiat, then click “Buy with 0 Fee”.
Step 4: You’ll arrive at the seller's page, containing their bank account details. You have about 15 minutes to make payment before the transaction is cancelled (If Binance cancels out on your payment a few times consecutively, you will face some penalties). Do NOT add a transaction description while making payment through your bank app or over-the-counter.
Step 5: Mark payment as done. Binance contacts the seller immediately. However, you may call the user to ensure that you get their attention.
Step 6: As soon as the user confirms payment, bitcoin is released from escrow to your Funding Wallet.
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