In the world of traditional finance, trust is typically synonymous with established institutions, centralized authorities, and tangible assets.
But the rise of cryptocurrencies has introduced a new paradigm, challenging our conventional understanding of trust in financial transactions.
Despite the remarkable growth of the cryptocurrency industry, which has now reached a market capitalization of over $1 trillion, the trustworthiness of genuine participants in the space is being undermined by the illicit activities of certain individuals.
For example in 2023 alone, about $1 billion have been stolen from users within the space. Also, a survey by Finance Magnates revealed that 30% of non-crypto users don’t trust exchanges.
Speaking about how this has affected the Nigerian crypto space and its effect, as early as 2015, most crypto users had to rely on online community platforms such as WhatsApp Groups to facilitate trade with a trusted person (most times, the group admin) acting as an escrow.
However, after several scams by individuals who ran these groups, people became weary of trading on WhatsApp, although this is still a practice. From 2017, when Binance was launched, through 2018, new local exchanges came up such as Patricia and BitFTX.
Over the course of five years, more Nigerians have increasingly joined Binance as well as other foreign exchanges and made it their go-to platform for crypto trading despite the presence of local exchanges. What it portrays is a seemingly less trust in local exchanges when you consider the number of users on them.
Speaking about this was Seun Dania, the founder and CEO of TradeFada, at the Digital Assets Summit hosted by SiBAN. TradeFada is a Nigerian-based crypto exchange that offers users the opportunity to buy and sell cryptocurrencies including bitcoin using naira and other foreign currencies such as the US dollar.
First, he said that there are local exchanges that are trustworthy and reliable exchanges in Nigeria that attend to the needs of users locally. These exchanges, he noted, play a crucial role in the cryptocurrency ecosystem and are instrumental in enabling users to access digital assets.
Presence of bad actors
Conversely, he said that in the midst of the good exchanges are bad actors that make the crypto space insecure for users locally. He pointed out that the cryptocurrency industry has, unfortunately, witnessed instances of unscrupulous individuals or entities engaging in various unethical practices.
This reality, he noted, necessitates a concerted effort within the industry to address these concerns and enhance user confidence.
He went ahead to say that education is one of the tools needed to create awareness for users in the industry. He stressed the importance of educating users about the cryptocurrency market, exchanges, and the reasons they should trust local platforms.
Seun added that trust is not automatically bestowed but is cultivated through transparency, understanding, and informed choices.
Opportunities but need for transparency
He elaborated on the unique challenges and opportunities faced by local exchanges in Nigeria and across Africa. An example of the challenge is the competition local exchanges face with international platforms in serving local users.
On the contrary, he said that this challenge also presents an opportunity where these exchanges can be uniquely positioned to provide tailored solutions that align with the region’s specific business practices and user needs. However, he acknowledged that trust deficiency remains a hurdle that must be overcome.
Transparency, according to the founder, is a cornerstone of blockchain technology. He said that local exchanges should prioritize transparency, ensuring that users have access to clear information about their operations, security measures, and policies. This commitment to transparency, he explained, is essential in building and maintaining trust within the crypto community.
