On April 4, peer-to-peer crypto trading platform Paxful announced the suspension of its operations, a move that dented its popularity among African crypto traders.

In his statement, Paxful founder and CEO, Ray Youssef, cited issues including staff departures and regulatory challenges as the industry continued to grow, especially in the peer-to-peer market -more so in the US- as key issues that necessitated the end of Paxful’s services.

But Paxful hasn’t been the only P2P platform to suspend operations lately. In early February this year, LocalBitcoins, a similar bitcoin exchange platform also closed shop citing unfavorable market conditions and a difficult environment in the crypto industry.

In 2022, the now defunct centralized exchange FTX went under, and controversially closed shop with its customers’ funds locked in it. While many users globally lost millions of funds in the much publicized FTX scandal, it is in Africa where it was more hyped, that the effects were more pronounced.

Youssef nonetheless indicated that the platform’s wallet will remain up for its users to retrieve their funds as he asked them to consider exploring other options elsewhere, including at Noones, Bitnob, and also the decentralized P2P bitcoin trading application, Civilization Kit (Civ Kit), which is built on the decentralized open-protocol social site Nostr.

The Noones marketplace allows its users to buy, sell, and trade in bitcoin, tether (USDT), and USD coin (USDC), and mainly targets the global south, while Bitnob is touted to make it easy for Africans to connect with Bitcoin.

Another crypto platform, Coinbase, which would perhaps have been an alternative option for cryptocurrency dealers in the continent, isn’t much popular in Africa as Paxful has been, due to the numerous restrictions that it has. That means Binance, the biggest exchange in the continent, has less competition.

Opportunity for African Exchanges

But the closure of Paxful and LocalBitcoins offers an opportunity for other rising pan-African exchanges such as Yellow Card, Busha, Bitmama, Prestmit, Bit Pesa, Luno, Quidax, Naijacrypto, and GIGXPadto capitalize on the need for trustworthy platforms that give users more services at affordable rates.

“It is sad to witness the collapse of Paxful. But this is a chance for remaining P2P exchanges to create credibility and allow users to be in full custody of their crypto on an offline account,” Nairobi-based long-time crypto trader Victor Kyalo tells Nodo News. “The remaining crypto exchanges must do more in engaging with their users just like Binance to understand what they want. For instance, LocalBitcoins initially asked users for a deposit fee, but when we spoke to them they removed it.”

Blockchain research, analytics, compliance, and advisory firm ChainAdvise founder, Benjamin Arunda, while concurring with Kyalo, acknowledges that the collapse of Paxful appears to have followed a familiar trend.

Alongside the collapse of several other platforms previously, he says the regulatory environment around these platforms, their cost of doing transactions and also the variety of assets they provide, have largely been factors contributing to their waterloo.

“At the point of the establishment of some of these exchanges, the crypto ecosystem was largely unregulated,” he tells Nodo News. “But that is fast changing as regulators are now keen on the interactions between crypto and fiat currencies. Users are therefore forced to be regulated.”

Crypto traders, Arunda says, have also been looking for variety in terms of assets and services that they can transact in these P2P platforms. And since some of the platforms may, perhaps not have been providing the variety that these traders look for, they opt for other marketplaces that are more affordable and provide a large variety. Paxful and LocalBitcoins only provided a few crypto services, losing their business edge to Binance.

“Crypto traders need to be careful as they gradually grow, and look at the regulatory environment,” he advises. “They also need to have more assets and services in their portfolio and not just restrict themselves to a particular service or asset – such as bitcoin only in the case of Paxful. They should also make the cost of their transactions and services affordable to their markets, to retain their customers.”

Regulation is Key Crypto Business Enabler

But with an IMF internal survey showing that 66% of sub-Saharan countries are seeking to regulate their crypto environments, existing crypto exchanges are now more confident about the future of their businesses. CEO of Busha Michael Adeyeri told Nodo News in March that as more African central banks keep allowing regulated crypto trade, “we can open up our inter-Africa remittance services. It means you can go from Naira to Kenya shillings to Cedis, all using crypto.”

In January, Yellow Card launched Yellow Pay across Africa, a service that enables users to send funds without any extra charges. It also allows users to “send money for business, school and healthcare.”

In an interview with Nodo News in February, Oparinde Babatunde, the startup’s director of special projects said: “We try to reach out to them – the people – and understand their points. We also get feedback from them to create products that are suited for those types of markets.”

Ogochukwu Umeokafor, director of product management at Yellow Card said in a March statement that “we are constantly taking deliberate steps to scale our business, which means expanding our offering in various indices to drive adoption and usage.”

But Arunda strikes a warning: “Let them scale gradually and be keen on the market. Like Yellow Card, Africa’s crypto exchanges should sit down with regulators in different African jurisdictions to understand if all regulatory requirements are favorable.”