One significant interception of Bitcoin gaining mainstream adoption is the sour relationship between cryptocurrency and central banks.
Many governmental authorities believe that the cons of holding and investing in bitcoin outweigh the pros such as allowing decentralized peer-to-peer transactions. This belief has led some countries to place certain restrictions on cryptocurrency trading to reduce the adoption of this form of digital currency.
Nigeria is one of such countries facing a kind of cryptocurrency ban.
Nigeria’s CBN Ban Banks From Handling Crypto-related Transactions
Nigeria is confirmed to be Africa’s largest bitcoin market, and the second-largest peer-to-peer (P2P) cryptocurrency market globally. However, they might not be able to keep that record anymore.
In a recent development, the Central Bank of Nigeria (CBN) issued a circular stating that all Deposit Money Banks (DMBs), Non-Financial Institutions (NBFIs), and Other Financial Institutions (OFI) in the country should stop dealing with cryptocurrencies or providing services to cryptocurrency exchanges, warning that failure to adhere with the directive will “attract severe regulatory sanctions.”
Some lawmakers in the country disapproved of the crypto ban in the country by the CBN claiming that Cryptocurrency is gaining recognition as a financial asset and that the Nigerian Securities and Exchange Commission (SEC) were making plans of providing regulatory clarity before the ban.
Individuals can still trade or invest in Bitcoin as authorities did not specify that doing so could result in a sort of punishment.
Yet, the ban has severed all connections between Cryptocurrency and Nigerian banks. Before now, people could purchase bitcoin from an exchange and complete the payment via a credit or debit card or through a bank account.
With that option no longer available, we take a look at alternative methods of buying and selling Bitcoin in Nigeria despite the CBN ban.
Alternative Methods to Trading
Personal contacts: This is one of the most direct and private ways to trade your bitcoin. You can decide to transfer with an interested person who either wants to sell or buy bitcoin. This other party could be a trusted friend or regular acquaintance, or you can find an interested person at a bitcoin meetup.
Bitcoin meetups refer to places where you can meet, interact and even trade with other crypto enthusiasts. Since this trading method also has its risks, individuals need to adhere to some safety measures during transactions.
The first box to check off is to ensure that the other party is a trusted and reliable person. On the safer side, do not conduct such transactions with unfamiliar faces to avoid scams or fraud.
Coinfomania recently covered a report about a Hong Kong cryptocurrency trader woman who lost USDT worth about US$448,700 to a gang of thieves posed as buyers at knifepoint.
To avoid situations like this, you can choose to conduct transactions in an open, public place and ensure that the buyer has made the payment before transferring the Cryptocurrency.
Use of peer-to-peer-trading (P2P) platforms: P2P trading platforms are exchanges where two interested individuals trade cryptocurrency directly.
Unlike personal contact or face-to-face method, the P2P platform offers features for more trading effectiveness and to reduce risks. These services may include searching, screening, rating, payment processing, or providing escrow services.
How P2P Trading Works
A peer-to-peer trading platform offers escrow services, providing a wallet where a seller can deposit the coins to be sold. When the seller confirms a buyer’s successful payment, the escrow will release the funds to the buyer’s wallet.
Due to the crypto ban in Nigeria, citizens who hold Bitcoin can use either of these two methods since using exchanges is out of the picture (for now).
The use of peer to peer trading platform is much safer, provides more liquidity, and is regulated; therefore, it is a better choice than the face-to-face or personal contact method of purchasing Bitcoin.
The following is a list of peer-to-peer exchanges Nigerians can purchase bitcoin from at this time.
Where To Buy And Sell Bitcoins in Nigeria Despite Ban
Binance P2P is one of the divisions of the Binance cryptocurrency exchange founded by Changpeng Zhao. Created in 2018, the peer-to-peer marketplace connects sellers and buyers from different countries with various payment methods.
Due to the bank crypto ban in Nigeria, Binance stopped customers from making deposits with the Nigerian Naira (NGN) and advised them to withdraw their money.
However, Nigerian users can still buy and sell crypto on Binance using the P2P trading feature. The process involves creating an order, making or receiving payment, and then release the crypto to the buyer after payment confirmation.
To solve the issue about withdrawing Naira from Binance, the exchange launched an NGN FIAT/NGN pairing, allowing customers to buy and sell their NGN balance at no extra cost.
Binance P2P also offers an “Express Mode” allowing buyers and sellers to have their orders filled instantly, instead of browsing through the P2P order book to find the ideal offer. To use the Express Mode feature, users must complete the compulsory Know-Your-Customer (KYC) and identity and business verification checks.
Supported Cryptocurrencies: Bitcoin (BTC), Binance coin (BNB), Ethereum (ETH), tether USD (USDT), and Binance USD (BUSD).
Supported P2P Payment Methods: Bank Transfer, Mobile Top-up.
Paxful is a peer-to-peer Bitcoin exchange. Founded in 2014 in Wilmington, Delaware, the USA by Mohammed Ray Youssef and Artur Schaback, the business was known as ‘EasyBitz’ before changing its name to Paxful in 2015.
The exchange does not sell or store cryptocurrencies but is an exchange platform connecting buyers and sellers on their platform. Users on the platform can have access to 300 payment options which include cash payments or digital payments.
Paxful offers escrow service to its users, holding the cryptocurrency first and then release it to the buyer as soon as the seller confirms payment.
Supported Cryptocurrencies: Bitcoin only.
Supported P2P Payment Methods: Bank Transfer, Mobile top-up.
LocalBitcoins, located in Finland, is one of the oldest and largest Bitcoin peer-to-peer platforms globally. It was founded by a programmer and entrepreneur named Jeremias Kangas in 2012; the platform works as an escrow for all the traders.
The platform allows traders from 16000 cities and 248 countries, including Nigeria to meet directly and trade on acceptable terms.
LocalBitcoins is regulated by the Financial Supervisory Authority (FIN-FSA). Users do not have to pay any money to either register, buy, or sell bitcoin on the platform. However, it charges a 1% fee per completed trade to customers who create advertisements on the platform.
Supported Cryptocurrencies: Bitcoin, with fiat currencies like the USD, Euro, British Pound,
Supported P2P Payment Methods: Bank Transfer, Cash (in-person)
LocalCoinSwap claims to be the world’s first multi-blockchain P2P exchange. It is the world’s first community-owned peer-to-peer Bitcoin and even for Altcoin. Users have access to the P2P cryptocurrency exchange platform with about 160+ fiat currencies with 23+ cryptocurrencies that you can buy or sell, and over 250+ payment methods.
The platform offers traders optional Know Your Customers check options to reduce fraud and scams. Although LocalCoinSwap does not charge for placing buy and sell advertisements, they charge the market maker a reasonable 1% fee from completed trades.
Local coin swap uses a 2FA security method. The platform also acts as an escrow between individuals buyers and sellers.
Supported Cryptocurrencies: Bitcoin (BTC), Ether (ETH), LCS (LocalCoinSwap’s own loyalty token), Dash, Tether (Stablecoin), USDC (Stablecoin), DAI (Stablecoin), and Kusama (KSM).
Supported P2P Payment Methods: Cash in person, Bank Transfer.
Remitano is a peer-to-peer trading platform owned by Babylon Solutions Limited and created in Seychelles. At first, the exchange was created in April of 2016 as a P2P bitcoin exchange but later added more currencies and other services like Remitano Invest, Remitano Swap, Wallets, and Affiliate program.
On this platform, buyers and sellers can buy and sell bitcoin and other supported currencies with their local currency like the Naira for Nigerians directly from and to one another. They support cryptocurrencies like Bitcoin [BTC], Ethereum (ETH), Tether (USDT), Bitcoin Cash (BCH), Litecoin (LTC), and Ripple (XRP).
Talking about countries recognized by Remitano, Nigeria is one of the exchange’s biggest markets with about $600,000 daily trade volume.
Supported Cryptocurrencies: Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), and Tether (USDT). They also support Binance Coin (BNB), Cardano (ADA), EOS, Stellar’s Lumen (XLM), and Tron (TRX for swapping).
Supported P2P Payment Methods: Bank transfer and in cryptocurrencies.
While the peer to trading option provides alternative methods for Nigerians to trade due to the Nigerian crypto ban, it is not always flowers and rays of sunshine.
Let us now consider some of the advantages and disadvantages of using it.
Pros and Cons of P2P Trading
- Peer to peer trading provides privacy and anonymity since there is no third party involved and traders deal directly with each other. This method also reduces the exposure of the KYC protocols since this feature is not compulsory in most P2P platforms.
- Peer to peer trading platforms is cheaper to operate than regular bitcoin exchanges since it is run by computer software and don’t need to pay workers who stand as middlemen in trades.
- In a case of a mistaken transaction, since there are no middlemen involved, a refund is difficult or even impossible to initiate.
- There are higher chances of falling into fraud traders’ hands than a regular exchange.
- Price is controlled by buyers and sellers, and sometimes may be above the actual Bitcoin market price.