Paxful, the well-known peer-to-peer (P2P) trading platform, has declared its decision to shut down its marketplace and urged its users to withdraw their funds.
This announcement comes at a time when the cryptocurrency sector is slowly recuperating from a year-long decline.
Also, regulatory challenges for the industry continue to grow especially in the peer-to-peer market and most heavily in the US. While we work through these issues, we have taken the most secure option and ask you to secure self-custody and trade elsewhere.Ray Youssef – CEO and co-founder
Youssef disclosed that Paxful’s difficulties stem mainly from a lawsuit filed against him and the company by one of its co-founders, who was ousted about a year ago.
According to Youssef, the co-founder’s legal team caused the departure of all senior-level personnel and refused to compensate the company’s engineers and compliance team. Youssef further stated that the company now owes $6 million in compliance expenses.
Despite a court order prohibiting him from taking action, Mr Youssef opted to shut down the company after realizing that it had no operational staff.
I couldn’t do it anymore. Ethically, there’s no way I’m going to lie to people and tell them that this is a safe place, and their funds are safe when they’re not.Ray Youssef – CEO and co-founder
In sub-Saharan Africa, where most cryptocurrency transactions are on a small scale, Paxful has emerged as a prominent peer-to-peer (P2P) trading platform.
Furthermore, the proportion of P2P transactions relative to all cryptocurrency transactions in the region is the highest globally.
In the year to November 2022, Paxful recorded a 140 per cent rise in the number of users.
Since its launch in Kenya in May 2016, Paxful has recorded an average weekly trading volume of KES 297.9 million ($2.23 million) in the country, and in the last week alone, which ended on April 1, KES 206.2 million ($1.55 million) were traded on the platform in Kenya. Furthermore, globally, $36.8 million was traded on the platform last week.
However, the collapse of the platform comes at a time when the crypto industry was just beginning to recover from a year-long slump. This slump was caused by the collapse of a crypto token called Luna, and it was further exacerbated by the folding of the crypto exchange platform FTX, which occurred within months of each other.
Despite this setback, the total crypto market cap has risen from $828 billion in November last year to about $1.2 trillion, where it currently stands. Additionally, the price of the largest cryptocurrency, Bitcoin, has risen from $15,883 in November last year to $28,501 at present.
There will be no Loss of Funds
Despite the collapse of Paxful, analysts believe that the impact on the crypto industry will not be as severe as that caused by the folding of Luna and FTX last year as reported by East Africa.
This is because, unlike Luna and FTX, users of Paxful have not lost and are unlikely to lose any funds as a result of its closure. Yvonne Kagondu, Paxful’s former country manager for Kenya, explained that FTX, for instance, used its users’ deposits for external investments without their knowledge, leading to insolvency when users attempted to withdraw their funds.
Kagondu added that Luna and FTX collapsed due to flawed decisions made by a central body or person, seeking to enrich the founders.
Read Also: The End of the Road for P2P Trading