The P2P cryptocurrency exchange Paxful is closing operations after eight years of operation. Co-founder and CEO Ray Youssef dropped the news on April 4, citing “key staff departures” and “regulatory challenges.”
The exchange was recently in the news after Youssef announced that the company would personally reimburse its Paxful Earn users affected by the Celsius bankruptcy. The crypto community didn’t expect that the company’s next news would be that it was ending
.
The passing of Paxful is a comment on the relentless nature of crypto regulators and the potentially far-reaching implications of corporate leadership: simply not getting along.
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Trouble in Heaven and Uncle Sam
In a spontaneous Twitter space hosted by Brad Mills, Ray Youssef said that he decided to call it one day out of concern for user funds because of an ongoing lawsuit against him and the company by co-founder Artur Schaback.
“I have a lawsuit over my head right now,” Youssef said. According to him, Schaback is holding grudges after being ‘kicked’ by the company a year ago. “I couldn’t guarantee the security of the platform. That’s why this thing had to go down.”
He continued:” [Schaback] was mad, so he sued the company, and his litigation team was really bad. They kicked out all of our senior-level staff. They just couldn’t deal with this guy anymore and then he refused to pay our engineers and refused to pay for our compliance
.”
Although the court ordered him not to make important moves, Youssef said that he “could no longer do it, ethically,” and took on “enormous legal responsibilities” to put an end to everything.
Meanwhile, according to the CEO, Paxful has failed to win with US regulators. In the frustration often echoed by other players in the sector, Youssef complained that the company has “bent backwards in the last five years to comply with the highest standards,” but regulators “still don’t understand it, and it’s painful to see.” He revealed that a quarter of the company’s staff were people who were responsible for compliance, but “even that wasn’t enough to please Uncle Sam
.”
At the close of the exchange, Youssef urged users to withdraw funds and preferably self-custody, recommending the Exodus and Muun wallets.
He also backed Noones and Bitnob for BTC trading. Noones is an app still under development that will power a P2P market for the South of the world and will initially allow users to exchange BTC, USDT and USDC. Bitnob is an app based in Nigeria that users from certain African countries can use to buy, sell and save
in Bitcoin.
Paxful over the years
Paxful burst onto the scene in 2015 and quickly achieved success to become a household name, especially in African countries such as Nigeria, Ghana, South Africa and Kenya, even entering the Times’ prestigious list of 100 most influential companies along the way.
By 2023, it had processed more than $5 billion in transactions and registered more than six million users with a presence in more than 100 countries.
The company has supported 350+ payment methods for users to buy and sell cryptocurrencies, including cash deposits, gift cards, online and mobile money wallets, and bank transfers. Over the years, Paxful has expanded its offering beyond Bitcoin to include other assets such as Ethereum, Litecoin, USDT,
and USDC.
But despite all its success, Paxful has lost the fine print on the customer experience. While it had merchant protection mechanisms such as engagement and dispute resolution in place, that didn’t stop a horde of fraudsters from setting up the tent in the exchange. As someone who has used the platform, my experience has been that the trading climate of the exchange could be terribly lax or even
fraudulent.
Such fraudulent behavior could include:
- More buyers who violate the non-negotiation rule for P2P negotiations
- Traders regularly cancel a trade without notice to the other party (a practice that is explicitly prohibited, for example, on Binance)
- Buyers who attempt to buy cryptocurrencies not only below their fixed trading price, but below the market price
In fact, a quick check on online forums like Reddit seems to show a lot of angry users, with the common theme ‘Paxful is full of scams’ and the complaint that the exchange does little or nothing to protect customers.
While there will always be people who will try to cheat the system wherever there is money to earn, and Paxful has positive reviews, that doesn’t mean that a portion of its users haven’t found its trading environment super unprofessional.
Looking to the Future: Other P2P Crypto Trading Alternatives
Paxful is the last P2P exchange to bow after the legendary Bitcoin exchange LocalBitcoins closed its doors in February. Both exchanges felt the regulatory heat, with the Finnish company once saying that compliance requests in Europe had an impact on its operations. Paxful losing the battle is another bitter pill to chew on for an industry that can’t keep regulators happy..
But what other P2P alternatives are available for Paxful users? Here are some of the most reliable:
- Binance P2P: a marketplace that allows users to buy and sell cryptocurrencies using their local currency. It is a platform offered by Binance, the largest cryptocurrency exchange in the world by
- Huobi P2P: a Huobi platform based in Seychelles that allows users to buy and sell directly from another place.
- Bisq Network: an open source, privacy-focused Bitcoin trading platform built on Tor
- Hodl Hodl: an open source Bitcoin trading solution that uses a multi-signature escrow system to obtain secure and trust-free transactions
volume
P2P will live on
The closure of Paxful was an unexpected development. The closure, caused in part by regulatory oversight, is a reminder that heavy oversight remains a thorn in the side
of cryptocurrencies.
It’s also a warning for leadership that doesn’t read from the same script. In an already precarious environment, cryptographic companies that keep the peace will be better
equipped to survive.
But despite a sticky legal landscape, the cryptocurrency industry continues to grow. It is encouraging that protocols such as Bisq and Hodl Hodl, which are decentralized and therefore immune to regulatory repression, exist and can fill the gaps in times like these.
