Peer-to-peer cryptocurrency marketplace Paxful announced an end to its support for Venezuelan customers. This comes in response to US sanctions against the country and the associated regulatory complications.
Announced this week, Paxful indicated in a statement provided to Decrypt that it was ceasing operations in Venezuela due to risks in dealing with regulators because of US sanctions against the country:
"Due to concerns regarding the regulatory landscape around Venezuela and Paxful's own risk tolerance, we regret to report that Paxful will be ceasing operations in Venezuela. We made our best efforts for several months, but with current risks, we had no choice but to make this incredibly difficult decision."
These concerns over the regulatory landscape reference sanctions by the US Department of the Treasury which state that US persons are blocked from dealing a Specially Designated National (SDN) such as the Venezuelan government:
"U.S. persons should be cautious in dealings with the government to ensure that they are not engaged in transactions or dealings, directly or indirectly, with an SDN, for example by entering into contracts that are signed by an SDN, entering into negotiations with an SDN, or by processing transactions, directly or indirectly, on behalf of the SDN, absent authorization or an applicable exemption."
Paxful is a US-based company that allows customers to trade cryptocurrencies peer-to-peer through a variety of payment options including bank transfers, debit cards, cash transfers, and gift cards. According to data from Coin.Dance, the platform's weekly transaction volume is about $40 million.
The need for decentralized, not just peer-to-peer, exchanges
Paxful's exit from Venezuela shows the risk of reliance on centralized platforms for peer-to-peer exchange activity. Peer-to-peer exchanges remove some risk from exchanges holding custody of all funds and liquidity and typically allow for a more diverse set of payment methods, but nonetheless still hold some of the same drawbacks as traditional exchanges if centralized.
The Twitter account of Bisq, a fully-decentralized peer-to-peer exchange platform, reacted to the news of Paxful's withdrawal from Venezuela. Bisq currently processes a weekly transaction volume of under $2 million according to Coin.Dance.
Venezuela's skyrocketing demand for cryptocurrency
Venezuela has seen a surging demand for cryptocurrency since the beginning of its current economic crisis and hyperinflation of the national currency. Volume on LocalBitcoins, the leading peer-to-peer cryptocurrency exchange platform, shows a significant increase in weekly trading volume from about 268 billion bolivars to about 1.8 billion in the past six months, a nearly 570% increase.
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