Bitcoin marketplace Paxful to shut down, two months after LocalBitcoins closure as P2P market dwindles

Paxful, a peer-to-peer bitcoin marketplace, is shutting down its marketplace — and might not return at all.

The news “will probably come as a big shock to many,” CEO Ray Youssef wrote in a post, adding he could not share all the details.

The platform is closing down following some “key staff departures” and challenging regulatory conditions for the industry. “While we work through these issues, we have taken the most secure option and ask you to explore self-custody and trade elsewhere,” Youssef said.

Youssef also claimed during a Twitter Space event on Tuesday that a lawsuit filed by a Paxful co-founder “drove away all of the senior-level team.”

Peer-to-peer marketplaces allow users to buy and sell bitcoin directly with others, in-person or online. This is in contrast with more traditional crypto exchanges, which facilitate trading between buyers and sellers. 

Shifting conditions 

Customer funds are all accounted for, according to the post, and Youssef encouraged users to withdraw them, recommending self-custody options. Paxful is also offering “easy migration” to other options for non-U.S. users, to platforms like Noones, a new peer-to-peer platform “dedicated to the global south.”

The news comes two months after the shuttering of LocalBitcoin and narrows the options for people to trade cryptocurrency among themselves. While exchanges, including Binance, offer P2P trading, Paxful and LocalBitcoin were among the few pure-play P2P outfits.

“With the shutdown of LocalBitcoins and Paxful this year, peer-to-peer bitcoin trading is now much more difficult,” Steven Zheng, research director at The Block, said. As a result, users can no longer easily trade Bitcoin in a purely private manner. 

Paxful, founded in 2015, hit $5 billion in total volume traded on the platform in 2021, with Nigeria, China, India, Kenya, and the U.S. as the top five countries by volume. It was listed as one of the most influential companies of 2022 by Time, boasting around 9 million users at the time. Weekly volume on the exchange peaked around $50 million in May 2022, according to coin.dance data.

Ether was removed from its marketplace in December, with CEO Youssef saying, “revenue is nice, but integrity trumps all,” at the time, in response to a tweet criticizing Ethereum’s design.

Not your keys, not your crypto

Youssef told customers to remove their bitcoin from the platform and move it into self-custody in December. He cited the collapse of FTX as his reason for urging Paxful’s 11 million customers to self-custody their cryptocurrency.

“I take great pride in protecting our community’s funds and, unlike others in our industry, I have never touched our customers’ money,” Youssef said in an email to users at the time.

“My sole responsibility is to help and serve you. That’s why today I’m messaging all of our users to move your Bitcoin to self-custody. You should not keep your savings on Paxful or any exchange and only keep what you trade here.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.