Paxful, Nigeria's Leading Bitcoin Marketplace, Shuts Down Amidst Regulatory and Internal Issues

Nigeria’s pioneering Bitcoin marketplace, Paxful, is closing amid several internal issues and regulatory challenges. This decision has left Paxful customers in Nigeria and other countries in Africa scrambling for alternative options for the buying and selling of cryptocurrencies. 

The announcement of Paxful’s closure comes just days after Youssef promised to make Paxful Earn customers whole. The service had allowed Paxful customers to earn a yield on Bitcoin through a partnership with Celsius, a prominent crypto lender that filed for bankruptcy last July.

WHAT HAS BEEN SAID?

Youssef claimed he subsequently hired an engineering team to assume control of Paxful’s digital wallet—presumably still being used for safekeeping funds. He said it was the right thing to do, even though it conflicted with a court order that he’s received. 

“I've managed over the weekend to get an engineering team to secure everything,” he said.

“I had to make an ethical decision.”

According to Paxful’s founder and CEO Ray Youssef all customer funds have been accounted for, even as he urged them to withdraw their money, adding that “we are unsure if it [the marketplace] will come back.”

One major regulatory challenge faced by paxful was the use of gift cards to attract the African users that lacked access to traditional financial services. Even though this tactic might have helped the company gain some traction in the region, it also raised suspicions among the regulators in the United States. The company’s decision to expand into other countries, including Nigeria, is an additional contributor to the regulatory challenges they faced.

Adding to all of these external issues, Paxful has also encountered a significant level of internal turmoil. The fact that Paxful has lost several key employees and experienced high employee turnover was enough to raise questions about the leadership and organizational structure of the company.

It is worth of note that the Central Bank of Nigeria (CBN) banned cryptocurrency trading through Nigerian banks in 2021. As a result of that, online companies like Paxful became the preferred alternative option for Nigerians hoping to trade cryptos. Between January 2021 and June 2022, Nigerians transacted well over  $1.16 billion worth of Bitcoin on Paxful and although there are other Peer-to-Peer exchange platforms in Nigeria, Paxful is the only one that made its data public.

WHAT’S NEXT FOR BITCOIN TRADERS?

A major blow has been dealt to customers who trade cryptocurrency on Paxful. Many have now started to search for alternative trading platforms that offer similar services. And although there are many other available options, the reliability and security of these other options remain a concern for users.

Paxful’s closure is a setback not only for the company itself, it is also a major setback for the entirety of Nigeria’s crypto market. In recent years, Nigeria has appeared as a center for cryptocurrency use seeing as businesses and individuals have adopted digital currencies as a means of payment and also for investments. The closure of Paxful is likely to have a ripple effect across the industry, potentially leading to increased regulatory scrutiny and greater uncertainty for market participants.