Peer-to-peer Bitcoin platform, Paxful, with 1.5m users in Nigeria, has announced that it is shutting down its operations.

This was disclosed by the Co-founder and Chief Executive Officer, Ray Youssef, in a blog post on Tuesday.

He said, “Today, Paxful will be suspending its marketplace. We are not sure if it will come back. 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.”

According to crypto-focused news website, Decrypt, Youssef said during a Twitter Space that the decision to close the platform was also influenced by a lawsuit brought by a Paxful co-founder who is suing Paxful and Youssef after being “kicked out of the company” over a year ago.

“My co-founder sued the company and sued me. I have a lawsuit over my head right now,” he was quoted as saying on the Twitter Space.

Though he did not name the plaintiff explicitly, Youssef was likely referring to co-founder Artur Schaback, who filed a lawsuit in Delaware Chancery Court against Youssef in January, based on a court docket hosted on CourtConnect.

Although cryptocurrency is restricted in Nigeria, the 2020 Geography of Cryptocurrency Report by Chainalysis, ranked Nigeria eighth in crypto adoption and usage among 154 countries included in the study.

Nigerian cities, Lagos and Ibadan, have also been listed as cryptocurrency hubs across the globe by crypto accounting services firm, Recap, which put together a list of the top 50 crypto hubs in 2022. Nigerian cities made it to number 14 (Lagos) and 24 (Ibadan) respectively.

Paxful is credited with pioneering the use of peer-to-peer technology in the country, thus helping to expand the crypto industry in Nigeria.

In an interview with Business Africa Insider in 2022, Paxful’s CEO said that Nigeria is the firm’s largest market, with 1.5 million users and over $1.5bn volume to date (since 2015).

With its impending closure, Paxful joins a long list of crypto firms to shut down after promising customers so much. Paxful gained prominence in Nigeria after the Central Bank of Nigeria placed a restriction on crypto transactions through official channels.

Due to its P2P nature which allowed Nigerians to circumvent the ban, a lot of individuals started relying on the firm for their crypto demands. In 2021, the firm disclosed that Nigeria was its biggest market with a volume of $1.5bn.

It stated that it had over 1.5 million users from Nigeria at the time. In 2022, the firm told The PUNCH, “Nigeria is our largest country based on trade volume — Over $760m in trade volume last year. In 2021, we also saw over 6 million successful trades in Nigeria, which breaks down to over 16,000 trades each day.”

The firm confirmed to The PUNCH on Wednesday that there is currently no timeline for withdrawals. In an email, a spokesperson said, “The Paxful Wallet is up for users to safely get out their funds. Ray shared that he will not get his BTC off the platform until users do so as well.

“There’s no timeline, but we will be transparent as details unfold.”

Commenting on the firm’s shutdown, The President of Stakeholders in Blockchain Technology Association of Nigeria and General Secretary of Blockchain Industry Coordinating Committee of Nigeria, Senator Ihenyen, told The PUNCH that it would negatively impact the Nigerian crypto space.

He explained, “If you observe closely in the last two years, especially with the CBN’s restriction of crypto from the banking industry, the adoption of P2P has been the only viable option into the crypto market.

“Paxful had a P2P platform that was largely trusted by its users. From all indications, it controls a big market here, I expect that this will be a significant negative impact on the growth of P2P in the Nigerian space.”

He noted that self-custody of crypto assets on decentralised exchanges will gain more prominence, especially with the recent and pronounced failure of many centralised exchanges.