After weathering through long-winter bears, Paxful has become the latest victim of the U.S. strict regulation policies. Paxful’s CEO, Ray Youssef, issued a statement early Tuesday on the platform’s webpage, informing its community about halting all its operations indefinitely. The CEO is pessimistic about the platform’s future.
Paxful, a renowned P2P (peer-to-peer) bitcoin trading exchange with a community of about 11 million users, broke into the scene in 2015 and rapidly gained recognition, especially in China, India, Kenya, Nigeria, and the U.S.
According to Paxful’s CEO statement, the platform’s Wallet though will remain active to facilitate its clientele in withdrawing their funds. Ray suggested that the platform’s customers bank their digital assets in self-custody, such as Exodus Wallet or Muun Wallet. The CEO also recommended a few options to its non-US client base for P2P trading, such as Yellowcard, Noones(P2P marketplace), and Bitnob. The CEO’s declaration reads:
This will probably come as a big shock to many. While I cannot share the full story now, I can say that we, unfortunately, have had some key staff departures. Also, regulatory challenges for the industry continue to grow, especially in the peer-to-peer market and most heavily in the U.S. While we work through these issues, we have taken the most secure option and ask you to explore self-custody and trade elsewhere.
Challenges leading to Paxful marketplace halt
Per Paxful CEO’s declaration, the United States’ regulatory policy is the main reason behind the platform’s closure. Although the platform did not reveal its trading figures, Coin Dance’s data revealed it was struggling. Since 2020, Paxful’s weekly global trading volume has remained under $50 million. In contrast, Coinbase’s daily volume is roughly $1.3 billion.
Top centralized crypto exchanges like Binance and Coinbase managed to sustain their operations despite the country’s watchdogs’ continued pressure and long crypto winter. Marketplaces with relatively lower trading volume found it hard to continue their businesses. Besides Paxful, other popular P2P trading exchanges, LocalBitcoins and LocalCryptos, also halted their operations in the previous 8 months.
Besides these regulations’ pressures, the CEO also took several hard decisions in the past, which did not help the platform increase its revenue.
In December last year, Youssef delisted Ethereum from the Paxful marketplace on the pretext of switching its network to POS(proof-of-stake) from POW(proof-of-work). Ray also announced to compensate the exchange’s users, who lost their funds in Celsius Earn, through his own pocket, instead of letting the bankruptcy process pan out. At the time of closing its operations, users could only trade bitcoins on the platform.
Paxful was also facing troubles with its key staff members, especially those at the executive level, who left the platform ever since its co-founder brought a lawsuit against Ray Youssef and the platform. During a Twitter space on Tuesday, Ray said the lawsuit from his co-founder also influenced this decision. In his own words:
There were concerns about the safety of customers; I couldn’t guarantee the security of the platform. This is why this thing had to go down. [Schaback] was pissed, so he sued the company, and his litigation team was really nasty. They drove away all of our senior level staff. They just couldn’t deal with this guy anymore and then he refused to pay our engineers and he refused to pay our compliance.
Arthur Schaback, Paxful’s co-founder, filed a lawsuit in January this year after being terminated for more than a year.
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