Aka Ekene, PBA Journalism Mentee
Paxful, a global peer-to-peer Bitcoin exchange on Tuesday, 4th April announced that it is closing down its operations.
The company’s founder and CEO, Ray Youssef, cited regulatory challenges and the loss of a significant number of employees as the reason for the shutdown. While Youssef assured customers that their funds are secure, there is still uncertainty about the future of the marketplace, especially on the side of the users.
Join our WhatsApp ChannelRegulatory Concerns Arise Over Paxful’s Use of Gift Cards to Attract African Users
One factor that contributed to Paxful’s regulatory challenges was its use of gift cards to add new users in Africa without bank accounts. This tactic attracted the attention of regulators in the United States, who expressed concern about the potential for such a system to facilitate money laundering and other illicit activities.
Legal Battle and High Employee Turnover Further Complicate Paxful’s Situation
In addition to regulatory issues, Paxful is facing a legal dispute with its former COO and co-founder, Artur Schaback, who filed a lawsuit against the company in January. The suit names Youssef and Jude Chidi Ogene as defendants. Paxful has also experienced high employee turnover, losing some of its key staff members in recent months.
The Backstory: LocalBitcoins Ceases Operations Amid Challenging Market Conditions
Paxful’s shutdown comes on the heels of LocalBitcoins, another popular peer-to-peer Bitcoin platform, announcing its closure due to challenging market conditions. The company’s CEO cited declining transaction volumes and market share as reasons for the decision.
Central Bank of Nigeria Ban on Crypto Trading Fuels Paxful’s Popularity as
Paxful became a popular alternative for Nigerians after the Central Bank of Nigeria (CBN) banned crypto trading via Nigerian banks in 2021. Between January 2021 and June 2022, Nigerians transacted more than $1.16 billion worth of Bitcoin on Paxful. While other P2P players exist in Nigeria, Paxful is the only one that has made its data public and publicized.
Conclusion
Paxful’s closure marks another setback for the peer-to-peer Bitcoin exchange industry. Regulatory challenges and employee departures have compounded the company’s troubles, which also include a legal dispute with a former co-founder and high turnover rates. The shutdown is a stark reminder of the challenges facing cryptocurrency businesses in an evolving regulatory landscape.
