In December 2023, the Central Bank of Nigeria lifted the ban placed on Nigerian Banks, restricting them from facilitating crypto transactions, a move highly welcomed by the crypto community. Now, the next logical course of action is a more heated competition between the cryptocurrency-fiat exchange platforms and peer-to-peer (P2P) merchants. Experts are starting to predict that this new law may just lead to the death of P2P trading in the crypto space. Is this the end of the road for P2P trading? Let’s share some useful insights in this article.
The rise of P2P trading in the Nigerian crypto community
Before the CBN restricted Nigerian banks from executing cryptocurrency transactions, P2P merchants were less popular in the crypto space. Since crypto traders could easily use their banks to facilitate transactions in the crypto market, there was no need for P2P trading.
However, everything changed when the ban was implemented in February 2021, prohibiting Nigerian financial institutions from facilitating transactions related to cryptocurrencies. This restriction made P2P merchants prevalent in the crypto space, as the crypto community now depended on P2P for trading.
The ban implemented was supposed to rule out the use of Bitcoin and any other kind of cryptocurrency in Nigeria. Rather, the crypto community embraced peer-to-peer trades or just sending crypto payments directly to each other.
Essentially, P2P services allow crypto users to buy and sell Bitcoin and other cryptocurrencies from each other via an escrow facility and pay for the transaction offline. They were created to promote the spirit of decentralization and to facilitate crypto trades even after the ban.
Just by posting a buy or sell advert, the peer-to-peer platform would permit a seller or buyer to initiate a trade, with the platform functioning as an escrow.
Users could just post a buy or sell advert on the P2P platform, and another person (a buyer or seller) would then commence a trade with the platform acting as an escrow agent and finalize the trade following the guidelines of the platforms. These platforms really helped the crypto community to continue trading seamlessly even after the restrictions.
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CBN lifts the Crypto ban
In response to concerns over money laundering and terrorism financing, the Central Bank of Nigeria (CBN) implemented a ban on banks and financial institutions dealing with or facilitating transactions in crypto assets in February 2021. Despite this, the Securities and Exchange Commission of Nigeria introduced regulations in May of the same year, seeking to strike a balance between a complete ban and unregulated use of crypto assets.
In a circular dated December 22, the CBN eased the ban and provided detailed guidelines for banks and financial institutions. These guidelines cover the procedures for opening accounts, managing designated settlement accounts, offering settlement services, and acting as conduits for foreign exchange inflows and trade for entities engaged in crypto asset transactions. Notably, the guidelines stress the importance of Virtual Asset Service Providers (VASPs) obtaining licensing from the Nigerian SEC to partake in crypto-related activities.
Although easing the ban came with several stringent requirements, it was still welcomed as a positive step in the industry. In a way, the premier bank of Nigeria was seen as finally “adopting” crypto. However, this cast shadows on the need for P2P marketplaces that had prospered so well due to the ban.
What’s next for P2P trading?
With some P2P platforms announcing that they have discontinued trading services, the future of P2P is not looking too exciting globally. This has even become more of a source of concern in Nigeria especially after the CBN lifted the ban on crypto. While no one can certainly conclude whether this indicates the end of the road for P2P crypto trading, it’s critical to understand the likely implications of the crypto-lifted ban lifted by CBN. Here are some possible scenarios:
- Complete ban: Although a complete prohibition on P2P trading is very unlikely, stricter regulations and rigid licensing prerequisites may limit its accessibility to users of the crypto community.
- Increased scrutiny and regulation: P2P platforms may encounter stringent supervision and reporting requirements, including compulsory KYC checks as well as transaction monitoring.
- Innovation and adaptation: Platforms and users may embrace innovative/ evasive solutions to maintain unrestricted access to P2P trading.
All in all, the future of P2P crypto trading in Nigeria remains uncertain especially as the one need for it (CBN ban) has been lifted. Government entities are actively formulating comprehensive guidelines to pave the way for the full integration of centralized institutions such as banks and mobile money services into the cryptocurrency industry. The existence of platforms like Bitmama signifies significant progress, offering individuals the ability to effortlessly buy and sell a range of cryptocurrencies directly with fiat. Ultimately, it remains to be seen what the future holds for P2P trading in Nigeria.