Paxful stumbles, Coinbase restricts African users; is it time to start embracing African crypto exchanges?
In what many crypto enthusiasts wouldn’t have predicted, Paxful – a peer-to-peer (P2P) platform for trading bitcoin and a few other digital assets announced that it would suspend its marketplace on Tuesday.
According to a statement by its CEO, Ray Youssef, it is not yet sure whether operations will resume again. The statement, however, said Paxful Wallet would remain in operation for customers to retrieve their funds.
Rightly so, Ray said: “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.” He also took note of regulatory challenges, particularly in the P2P market and the United States.
Paxful’s Ray Youssef aims to build 100 schools across Nigeria with Bitcoin
Until its fresh demise, Paxful was one of the leading, if not the leading p2p marketplace Africans use for Bitcoin trading. The crypto firm once announced that Nigeria was its biggest market, with over 2.5 million users and over $3.5 billion in trade volume.
This shows that Africans played a prominent part in Paxful, and this shutdown would be significant for them. Although this development would come as a huge surprise to many, it could have been deduced from less than two months ago when, on February 13, Paxful CEO sent a mail to customers to tell them not to keep savings on the exchange, and at the same time assuring them that funds are safe with Paxful.
Although the full cause and repercussions of the closure have not been disclosed and realized, it’s probably due to regulatory concerns, particularly in the United States.
Coinbase restricts African users
Not popular in the African region like Paxful, but Coinbase is one of the biggest crypto exchanges globally. A background check shows that Coinbase only supports the trading of crypto assets in only 13 African countries, which include Ghana, Cameroon, South Africa, Angola, Kenya and others. Notably, trading options are not available in Nigeria, which is believed to be arguably the largest crypto market on the continent.
Out of the earlier mentioned African countries, using debit and credit cards to trade cryptocurrencies is only supported in three countries which are Ghana, Kenya, and South Africa.
However, many African users of the exchange complained of restrictions on Monday. Check this Twitter thread. According to information gathered online, these users got emails informing them that their accounts would be restricted to sending funds only starting from the 9th of this month.
The notice further says this restriction will “affect accounts that no longer meet Coinbase’s updated standards.” It is, however, bizarre that there’s no link to access these updated standards, and the reasons behind the development are still vague.
Notably, because details surrounding the restrictions are still unclear, we do not know if they affect African users only. But the guess is that since Coinbase has struggled for years to penetrate the African crypto market to no avail due to stringent regulatory requirements, it’s finally packing its bags to return home for good
How FTX treated Africans
Crypto users worldwide lost money to the FTX collapse, but it was more defined in the African region, probably because it is a developing continent.
FTX launches customer balance withdrawal website
The debacle had a devastating effect in countries like South Africa, Nigeria and Ghana, where inflation and local currency devaluation continue to be at an all-time high. Recall that the younger demographic sees crypto as a shield against the harsh situation of their crumbling economies and the FTX exchange, until its demise, was a shield due to its juicy 8% APY on stablecoins which Africans milked.
A report from Reuters captures the story of these African victims. There was a particular Osarieme Aghedo, working in the marketing department of a Nigerian startup, and he had $8,720 of his savings in FTX because he thought it was risk-free. He hoped to use the money to acquire a jolly ride in 2023. However, Osarieme proposes, but Sam Bankman-Fried disposes.
Why African exchanges should be embraced
Gone are the days when Africans relied only on foreign crypto exchanges to make transactions. With the recent rise in popularity and hype, there are now many native crypto exchanges like Yellow Card, Bitmama, Quidax, GIGXPad and others.
Bitmama vs Tradefada: A comparison of 2 leading African crypto exchanges
Although some of these native exchanges have not matched other established ones in some aspects, recent developments have shown the need to embrace them.
Crypto adoption in Nigeria
To put into context, regulatory issues in the United States have led to the closure of Paxful, with Binance also facing the heat in recent weeks, leading to many downtimes. Also, the collapse of FTX stemmed from its CEO, Sam Bankman-Fried, an American who fraudulently raised billions of dollars from investors and misused funds belonging to FTX customers.
It is, however, appalling that Africans continue to suffer for concerns they are not part of or know nothing about. For native crypto exchanges like Bitmama, they know the rules and how to play by them. Ray Youssef of Paxful revealed in a Twitter Spaces session yesterday after the shutdown that the regulators in the United States were impossible to satisfy.
“The regulators still don’t get it. They grow more suspicious every day.”
Recall that a few days ago, Bittrex announced that it would be shutting down its U.S.-based operations, citing the country’s economic environment and regulatory uncertainty. Also, Binance has continually faced challenges which do not look like they are stopping soon.
In this light, African crypto exchanges need to improve their current user interface, security and other infrastructure to onboard African users onto their platforms.
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