The rise of cryptocurrency in Nigeria has been unprecedented. Although a volatile market, it has become one of the biggest methods for many young individuals to make money. The social acceptance of this digital currency has been so immense that 10.34 percent of the country’s population has invested in it, Bitcoin being the most popular. In 2020, the interest of most Nigerians in Bitcoin climaxed, attaining its highest level since 2018. Reports indicated that the trading volume helped the substitution of domestic currencies for virtual currencies in transactions. In fact, statistics identified Nigeria as one of the three countries with the most recorded bitcoin trading globally.
Currently, crypto traders trade their cryptocurrencies via peer-to-peer exchanges which entails a direct buying and selling of cryptocurrencies amongst users without the use of any intermediary. However, one of the biggest peer-to-peer platforms, Paxful, which boasts of about 1.5 million Nigerian users, has announced its intention to shut down its total operations. This news was revealed by the Co-founder and Chief Executive Officer of the platform, Ray Youssef, on Tuesday. He said that the platform would be suspending its operations, noting an uncertainty at any imminence of a return. He added that while he could not divulge the full story, the platform witnessed the departure of some important staff members.
Despite ban, Nigeria still rated 8th in crypto adoption and usage globally.
He also indicated that there were regulatory challenges that had disrupted the growth of the industry, especially in the peer-to-peer industry. The Paxful CEO stated that whilst they were working to resolve these issues, the company has had to take the safest option by letting traders explore self-custody and trade via other platforms. A Crypto focused news website, Decrypt, pointed out that the decision to shut down this platform was as a result of a lawsuit by one of the co-founders, who was suing Youssef and Paxful for being unlawfully dismissed about a year ago.
During a Twitter space, Youssef was quoted to have complained about being sued by a co-founder, stating that he had a lawsuit over his head. Whilst the plaintiff wasn’t explicitly named, reports gather that he was most probably referring to Artur Schaback, who had filed a lawsuit against Youssef in the Delaware Chancery Court in January, on the basis of a court docket which was hosted on CourtConnect. Whilst Cryptocurrency is still restricted across Nigeria, the Geography of Cryptocurrency Report 2020 by Chainalysis insisted that Nigeria was eighth amongst about 154 countries in crypto adoption and usage.
Lagos and Ibadan listed amongst the top 50 crypto hubs for 2022.
Regions in Nigeria like Lagos and Ibadan have also been listed as some of the biggest cryptocurrency hubs across the world by Recap, a crypto accounting service company which provided a list of the top 50 crypto hubs of 2022. Lagos and Ibadan were ranked 14th and 24th respectively. Paxful had been responsible for pioneering the peer-to-peer exchange technology in Nigeria, which further enhanced the expansion of the cryptocurrency industry in Nigeria. Paxful’s CEO, in a previous interview, disclosed that Nigeria was the company’s biggest market with about 1.5 million users from 2015.
With this impending shut down, Paxful joins a host of crypto companies to close down after making numerous promises to customers. This firm gained immense traction in Nigeria, after the Central Bank of Nigeria placed restrictions on transactions of crypto via official channels. As a result of its P2P nature helping traders circumvent the restriction, most crypto traders in the country relied on the platform for their crypto-related demands. The firm disclosed last year that with about $760 million in trade volume, Nigeria was its biggest country.
CBN’s ban heralded the viability of P2P as an option in the crypto market.
On Paxful’s imminent shutdown, Senator Ihenyen, the President of Stakeholders in Blockchain Technology Association of Nigeria who doubles as the General Secretary of Blockchain Industry Coordinating Committee of Nigeria, said that this would negatively affect the Nigerian crypto community. He explained that CBN’s restriction had heralded the viability of P2P as an option in the crypto market and with P2P controlling the big market in the country, this development would definitely impact the crypto space.
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