What is P2P?
P2P stands for peer-to-peer, derived from the English phrase “equal to equal.” It represents a decentralized network where equality among its participants is fundamental. The term “peer-to-peer” was first coined during the development of the APPN protocol in 1984.
P2P trading is a method of asset exchange between two participants without intermediaries or centralized platforms. Deals are made directly between the parties involved, with special platforms used for communication and transaction oversight.
In P2P trading, the platform acts as a guarantor for the transaction, providing protection against fraud and facilitating the search for suitable offers.
How Does P2P Trading Differ from Trading with Intermediaries?
In P2P, the terms of the transaction are determined by the participants themselves, not the platform. In contrast, on traditional exchanges, the platform sets its commission rates and limits on buying and selling.
In P2P trading, participants select their preferred payment methods, currency, minimum and maximum transaction amounts, as well as exchange rates or fees. P2P platforms may impose some restrictions, such as available currency pairs and verification requirements.
In trading through intermediaries, market participants don’t have the freedom to choose their trading partners. The platform’s mechanisms handle fund exchanges among users.
Risks in P2P Trading
Like any other form of trading, P2P trading should be approached with caution, and potential risks carefully evaluated.
Scammers
P2P trading can be susceptible to the risk of losing funds due to fraudulent transactions. Unscrupulous sellers or buyers might convince you that they’ve fulfilled their part of the deal when, in reality, they haven’t, hoping to trick you into sending them funds.
Additionally, scammers can accept your money and fail to send their part of the trade, leaving you at a loss.
Bank Card Blockage
In addition to the risk of losing funds through fraudulent transactions, you can also encounter the blocking of your bank card. This risk is present when trading with fiat currencies. Banks monitor user transactions and, under specific conditions, may freeze an account due to the sending and receiving of funds.
The bank’s financial monitoring service operates based on the Federal Law on Anti-Money Laundering and Counterterrorism Financing (No. 115-FZ of August 7, 2001). The law lists the reasons banks use to identify clients subject to account suspension.
The criteria for suspicious transactions depend on the legal status of the user.
For individuals, recommendations from the Central Bank of Russia (CBR) No. 16-MR of September 6, 2021 apply:
1. More than 10 transactions a day or 50 transfers to individuals per month.
2. The card is solely used for receiving and withdrawing funds, with no signs of using the account for regular expenses. For instance, a client receives, transfers, and withdraws money but doesn’t make purchases at supermarkets, stores, and so on.
3. The account balance remains below 10% of the total daily transaction volume for seven days after the transactions.
4. Receiving and sending funds to individuals exceeding 100,000 rubles a day or 1,000,000 rubles a month.
5. More than 12 hours of deposit and withdrawal operations per day.
6. Less than a minute between deposit and withdrawal.
7. More than 30 transfers and deposits per day.
8. Multiple bank accounts are used on a single device.
These are general criteria that may lead to account suspension. Additionally, banks can employ their own criteria to track suspicious transactions.
How to Avoid Falling Victim to Scammers on P2P Platforms
Shielding yourself from fraudulent transactions can be achieved by selecting a platform that guarantees secure transactions. If such a feature isn’t available, no one will protect you.
How does a secure transaction work?
The platform locks the funds in the account of the participant withdrawing assets until the payment is confirmed.
For instance, if you’re withdrawing from the platform, the money equal to the transaction amount will be locked until you confirm receipt of the funds. After confirmation, they will be sent to the other participant in the transaction.
If you’re depositing money on the platform, the second participant in the transaction won’t be able to deceive you by receiving the funds. Their funds will be locked until they confirm receipt. If they refuse to confirm, you’ll need to provide proof of the transfer to customer support. They will conduct an investigation and release the frozen funds to you.
When a secure transaction feature is not available on the platform, you can protect yourself from fraud by checking the seller’s completed transaction statistics. If their percentage is high, and they have a substantial number of transactions, the likelihood of honesty increases. However, it’s safer to avoid risks and use only platforms with secure transactions.