P2P (peer-to-peer) trading is a cryptocurrency exchange process which allows users to trade directly with one another, meaning no third party is required. But how does P2P trading work? This guide covers all you need to know to get started with P2P trading and how it differs from traditional online trading models. We also look at fees, security, the UK regulatory framework and compatibility with top P2P exchanges.
Best P2P Exchanges
BitMEX is a crypto exchange and derivatives trading platform, launched in 2014, that offers low fees and starting deposit for a fiat–crypto onramp, spot trading, and crypto derivatives including perpetual contracts, traditional futures and quanto futures. BitMEX offers amongst the largest market liquidity of any cryptocurrency exchange.
Demo Account Regulated By MT4 Integration Yes Republic of Seychelles No Min. Deposit Min. Trade Leverage $0.01 Variable None
OKX is a respected cryptocurrency firm, established in 2017, that offers a large suite of products, from mining pools to NFTs. Traders can access over 400 crypto tokens via OTC trading and derivatives. With an excellent web platform, developer tools and dynamic charts, OKX is a popular choice for technical traders.
Demo Account Regulated By MT4 Integration Yes VARA No Min. Deposit Min. Trade Leverage 10 USDT Variable None
Bitfinex is a crypto trading firm with a powerful proprietary platform and a good range of digital assets. With 180+ cryptocurrencies and 430+ market pairs traded via spot or perpetual swap derivatives, this is a flexible exchange with plenty of opportunities for serious crypto traders. Bitfinex also offers decent leverage up to 1:10.
Demo Account Regulated By MT4 Integration Yes Yes Min. Deposit Min. Trade Leverage $10,000 $10 - $25 None
Kucoin is a crypto exchange that offers trading on 1000+ tokens as well as leveraged trading opportunities via futures and perpetual swaps. This exchange has a slick trading platform that supports robots, allowing traders to implement automated strategies. Other attractive features include a demo account, flexible funding methods and DeFi features like staking and mining.
Demo Account Regulated By MT4 Integration Yes No Min. Deposit Min. Trade Leverage $0 0.0001 Lots None
Binance is one of the best-known crypto exchanges. The company is available in more than 180 countries with over 120 million registered customers. The platform offers a suite of crypto trading products, from staking and NFTs to derivatives.
Demo Account Regulated By MT4 Integration No No Min. Deposit Min. Trade Leverage $0 $10 None
What Is P2P Trading?
The peer-to-peer (P2P) trading model allows traders to buy and sell cryptocurrency directly with one another on web platforms and mobile apps.
Unlike traditional exchanges which use an automated engine to execute transactions, P2P trading does not require a centralised third party or intermediary. The model works much like a marketplace, with buyers and sellers browsing or posting advertisements of decentralised products. As a result, traders have more control over pricing.
As well as connecting buyers and sellers, P2P exchanges offer a layer of protection by securing transactions, as well as providing escrow services and public ratings. In addition, the absence of a third party means that P2P trading tends to be more relaxed in terms of requirements. As such, fewer restrictions and greater flexibility have led to many traders favouring it over traditional models.
- Global accessibility
- Personalised offers
- No centralised third party
- Limited upfront requirements
- Fewer fees vs traditional models
- Trade directly with counterparts
- Public feedback systems offer some protection to clients
- Higher security and safety risks compared to crypto brokers
How Secure Is P2P Trading?
To ensure the safety of your funds, prospective P2P traders should opt for a secure platform with a strong reputation. Indeed, P2P trading generally requires fewer checks and compliance measures, however, that does not mean that there are no safeguards in place.
At the minimum, most good exchanges will use an escrow service to secure transactions until both parties have confirmed that they are happy with the terms of the sale. This means funds are held by an independent third party until the transaction is fully approved. If a transaction goes wrong, users can file an appeal and the platform will mediate until a resolution is found.
P2P platforms also use a public rating system, which means buyers and sellers can post reviews of their interactions with one another. This ensures full transparency and legitimacy in the marketplace, so users with poor ratings can be avoided.
With that said, P2P trading exchanges are risky, with a history of financial mismanagement and weak internal controls. As a result, some traders are turning to established crypto brokers which offer derivatives like CFDs.
Pros Of P2P Trading
P2P trading is appealing to those looking to trade cryptocurrencies flexibly. Furthermore, traders enjoy the following benefits:
- Traders have control – There is more freedom to choose pricing, settlement times and who to purchase from.
- Multiple payment options vs fiat channels – Traders have a choice of payment methods including bank transfer, credit/debit cards and e-wallet payments, plus digital currencies.
- Community and support – Top exchanges allow traders to deal in a transparent marketplace and gain exposure to a global network of traders.
- Fewer restrictions and regulations – Traders are not constrained by pricing and can enjoy more flexible trade orders.
- No third-party fees or commissions – Traders can benefit from lower overall costs when P2P trading.
Cons Of P2P Trading
Whilst P2P trading is attractive, there are some notable drawbacks:
- Lower liquidity – Compared to traditional trading in the financial markets like forex, P2P trading is still a relatively new concept. As a result, crypto exchanges tend to have lower liquidity than centralised platforms.
- Slower trading speeds – With P2P trading, both parties must confirm the transaction which can take some time. Parties can also decide to pull out at the last minute, adding a level of unpredictability.
- Greater uncertainty and risk of scams – Whilst fewer regulations bring more freedom, it also comes with risk and potential halts. Be wary of platforms or sellers with bad reputations and ensure you have done sufficient research before trading. Some exchanges have also gone bankrupt due to weak internal controls and mismanagement.
- Difficult to establish trust between peers – Due to more ambiguity in P2P networks, it can often be difficult to establish strong links with reliable and trustworthy traders.
How To Start P2P Trading
Follow our simple step-by-step P2P trading guide to get started:
- Find a cryptocurrency exchange – Choosing the best P2P trading platform for you will depend on your preferences. This may include, fees, payment methods and customer support. In any case, make sure you choose a reputable brand that offers top-tier security features.
- Create an account – Next, register for an account via the exchange’s website. Some may require to you complete a short online registration form, whilst others may allow you to quickly register using your Google or Apple account. Complete any subsequent verification procedures such as submitting a photo of your ID or setting up facial recognition.
- Start browsing – Once verified, you can start buying and selling tokens directly from the exchange’s website or mobile app. Head to the P2P section and browse the selection of crypto advertisers with competitive prices. If you are selling cryptocurrencies, make sure to load them into your digital wallet first.
- Choose a payment method – Once you are ready to buy or sell, choose from the exchange’s range of payment methods to complete your transaction and select your fiat currency. Remember to look out for any applicable payment charges.
What Should A P2P Platform Offer Traders?
A good P2P platform will be easy to navigate, accessible and transparent. It should also offer the following:
- Reputation – Given that these systems have fewer checks and processes, reputation is one of the most important markers to gauge the legitimacy and security of a platform, or seller. Top P2P platforms will be backed up by a credible reputation.
- Security – A P2P exchange should offer robust and transparent security features. As a minimum, we would expect to see two-factor authentication, encrypted storage and secure payment processing.
- Payment methods – A good range of payment methods and currencies should be supported, catering to a UK audience. This should include bank/wire transfers, credit/debit cards and e-wallet payments such as Skrill and Neteller.
- Fees – Always check the platform transaction fees upfront as these can vary between websites. It is also worth checking any exchange fees levied by your bank as these can quickly add up.
- Customer support – It is important to have someone to contact quickly if something goes wrong. Most reputable platforms will have a clear complaints process and offer accessible customer support, including popular brands Binance and Coinbase.
Platforms That Offer P2P Trading
There are many brands that offer P2P trading in the UK. Popular options include:
The P2P marketplace on Binance is one of the most streamlined and intuitive, offering a filtering feature for narrowing down key search criteria such as amount, fiat currency and payment method.
Note that Binance does not charge a taker fee but makers are charged up to 0.35%. Traders can choose from hundreds of payment methods and a vast selection of fiat currencies.
Bybit is another leading P2P platform offering zero fees on 50+ fiat currencies. Payments can be made via one of the 80+ payment methods which include credit and debit card transactions, cash payments and more.
Bybit uses an escrow service to protect buyers and sellers. This means that funds are held by Bybit and only released once the terms of the deal have been met by both parties.
KuCoin offers over 20 payment methods to buy and sell five stablecoins, including the KuCoin token (KCS). Transfer fees will vary according to the payment method used.
P2P Trading Tips
P2P trading operates differently from traditional exchanges so there are a few things to consider to get the most out of platforms:
- Research the market and set realistic prices
- Communicate effectively with counterparties
- Exchange feedback to bolster your own rating
- Avoid cancelling transactions before completion where possible
- Stay up to date with market movements, the latest news and forecasts
Bottom Line On P2P Trading
P2P trading on the top exchanges such as Binance and KuCoin allows users to buy and sell without the need for a third party or intermediaries. A global marketplace with fewer restrictions means that individuals have the power and flexibility to control prices, timelines and payments. In addition, public rating systems and escrow services offer a layer of security.
However, crypto exchanges do come with safety issues. Poor management and weak accounting procedures have led to public failures and bankruptcies. As a result, UK traders are considering crypto brokers which have a better track record of serving customers.
Is P2P Trading Profitable?
Some investors argue that P2P is a more cost-effective way to trade. Without hefty commissions, platform fees and no centralised party to dictate prices, P2P exchanges can offer better rates. Therefore, fewer fees can potentially translate to greater potential profits for traders.
However, due diligence is key. Traders should research the crypto market and ensure that they have a good understanding of pricing and cryptocurrency exchange rates.
Is P2P Trading Taxable?
Is P2P Crypto Trading Legal In The UK?
UK traders can buy and sell digital currencies through P2P crypto platforms. The approach the British government has taken is to warn customers about the risks associated with digital assets. However, it is worth noting that UK investors will have limited legal protections should the platform go under.
How Does Binance P2P Trading Work?
Peer-to-peer trading on Binance is relatively straightforward. A web accessible platform connects buyers and sellers of popular tokens like Bitcoin, Ethereum and Tether. Users can filter between tokens, fiat currencies and region.
Binance also offers a tutorial and guide on their website that unpacks trading charges, platform updates, plus how to check your account history and invoices.
Is P2P Trading Safe?
Whilst the top P2P trading platforms have security measures like multi-factor authentication, there is a danger of scams and market volatility. The limited legal protections afforded to UK traders also make P2P trading risky.
Is P2P Trading Cheaper?
Without a third party dictating prices and fewer commissions, P2P platforms are generally cost-effective. Top exchanges offer zero fees for buyers and low fees for sellers. A large marketplace of merchants and advertisers on exchanges like Binance also means that traders have the freedom to choose the best prices.
Is P2P Trading Halal?
This is open to interpretation. Some scholars believe it is Halal given the peer-to-peer nature and the absence of interest charges. Speak to a local religious leader for guidance.