Crypto’s Promised Land? Paxful CEO on the ‘Unbanked’ in Africa

Crypto isn’t a zero-sum game; or at least, not yet. While some companies are attempting to compete for established markets, others have realized the potential to reach into new corners of the globe and create new markets.

One of these is US-based peer-to-peer crypto exchange Paxful. Much of the exchange’s growth has come from users in the African continent. In 2018, Paxful’s user base almost tripled in Ghana, with 41,243 accounts, and in Nigeria to 321,476 accounts.
Since then, the–in October of 2019, Paxful recorded a 64% increase in the number of trades across the African continent since October of 2018, including a 2800% increase in trades from South Africa. In total, Paxful now has 3 million wallets and processes over 50,000 trades a day globally.
Paxful’s growth has not gone unnoticed. In December, that Paxful’s web-based Virtual Bitcoin Kiosk was to be on the Binance platform for new and existing users.
Recently, Finance Magnates , Paxful’s chief executive and co-founder, about the exchange’s strategy for growth in Africa, the ethics of engaging with unbanked individuals, and the future of the exchange.

Skepticism and potential
Based on Paxful’s numbers, it seems as though the potential for cryptocurrency-related growth in Africa is vast–but Ray has encountered quite a bit of skepticism. “As an American, when I first started talking about Bitcoin in Africa, it was funny, because everyone came out and said, ‘oh, that’s bullshit, those Africans don’t have any money at all–how are they gonna use Bitcoin when they make a dollar a month?’”
“I really couldn’t blame them for saying that–as ignorant as it was–because there was a time when I believed the same thing,” he said. “In America, when it comes to Africa, we’re only shown disease, poverty, and corruption. Those are the only things we hear.”

Africa is already leading the way. Question is when the crypto heads will notice…

— Ray Youssef (@raypaxful)

Youssef, who is originally from Egypt, said that the reality of the situation is quite different from the media narrative: “when you actually go there, you see…these people have money. They have a lot of money there–they just can’t use it.”
Why? “The banking system there is disconnected from the rest of the world,” Ray explained. “If you’re in western Africa and you want to send money out of the country, it’s nearly impossible. You have to go to three or four or five hops–you have to use your friends and family networks.”
This is where Paxful has identified an opportunity for the Bitcoin network to be used as a “There is real, true need for Bitcoin [in Africa],” Youssef said, “not on a speculative basis, but on a real utility basis.”
Engaging directly with “the unbanked”
Ray said that the perception of Bitcoin in Africa–like in many parts of the rest of the world–is fairly negative; most people associate it with scams. Therefore, people need to be re-educated on how the Bitcoin network can be practically used.
Therefore, people need to know that “there’s another way to use it–you can use it as a means of exchange, as a means to move and transfer and convert your money, and move it around your world to solve real problems based on real use cases: remittance, payments, e-commerce, wealth preservation; once you give it to them like that, they’re like, ‘ok, tell me more.’”
Ray explained that a lot of Paxful’s growth and engagement within African markets came from doing this kind of hands-on educational outreach: “we went to Africa and we actually engaged with the people. We listened to them. We found out what their problems were; we found out what the dominant payment networks [they used] were, and how people used the money that they had.”
With that information, “we found out who the big players were, and we got them all together in a room and said, ‘hey, let’s solve these problems–here’s how we can do it…Bitcoin is just one of the building blocks. You guys are the other big building block here.”
This kind of hands-on engagement seems to be fairly rare in the cryptocurrency and financial industries. Dovey Wan, founding partner at Primitive Crypto and renowned Crypto Twitter commentator, said in November of last year that most of the teams who are building platforms for “unbanked” peoples don’t seem to have any direct contact or knowledge about their daily lives.

So far, 90% of the teams I met who are building Defi for the unbanked never met a single unbanked in their entire life

My favorite question for them is “describe the life of any unbanked ppl you know, as detailed as possible”


— Dovey 以德服人 Wan 🪐🦖 (@DoveyWan)

Building on existing social financial structures
Ray said that having this kind of direct contact with individuals and communities in Africa has allowed Paxful to build systems that augment existing financial structures within African societies. For example, “Isusu”–a term that describes what the Journal of the International African Institute as one of many “indigenous credit institutions in underdeveloped societies” around the globe.
“Every society has them,” Ray said. “These are money rotation clubs. For example, three mothers will get together from the same village…and [pool] all of the money they’ve gotten in a month, and they’ll give it to one of the ladies.”
With that money, “she’ll be able to, say, buy a sewing machine to start up her business.” Then, “the next month, all the money will go to another one of the ladies.” Ray explained that this is just one mechanism in these complex systems, which may also include things like credit rating systems.

Surviving New York in the 80’s as an immigrant kid working on the street taught me so much. I am amazed everyday to see how it helps me now. Couldn’t lead without those lessons.

— Ray Youssef (@raypaxful)

However, these kinds of systems are very often unknown outside of the societies they exist in. “But when you go to Africa and actually talk to people, [you find] that they have advanced financial social structures that have existed for thousands of years…we can work with their existing structures here and make amazing things happen.”
Ray believes that this is the key to healthy and sustainable business growth: “too many businesses pursue Africa with the mindset of a serial rapist…how about going there and actually understanding the people and then working with them. Money is all about trust, and Africa is all about relationships, just like the rest of the world.”
On the Binance partnership
We also asked Ray about the Binance partnership. “Working with [Binance], it’s no secret why those guys are on top. They move with incredible speed and aggression–and I love it. We actually matched it,” he said, “which was not easy.”
“What they want to do is bank the world–they want to provide services to the entire planet. That’s not easy, because it’s hard for people to get Bitcoin. We are the guys that have gone to every corner of the world and said, ‘hey, how can we get crypto to these people and show them how to use it in a way that is non-speculative?’”
Therefore, “it’s an interesting arrangement,” Ray remarked. “If you look at the seven true use cases of Bitcoin–gray markets, speculation (where 95% of the volume is right now), payments, e-commerce, wealth preservation, remittance, and social good…Binance focuses mostly on speculation and wealth preservation. We focus on the other five use cases.”
“But we’re working together because we can actually reach the people,” Ray explained; the goal is to “get all these people into the crypto economy.”
After that point, “Binance is hoping that they’ll trade on Binance… and we’re hoping that they use it to send money to their friends and family, or introduce their friends and family to an easier way to send money [back] to them, thereby getting more Bitcoin into their local economies, creating a base of vendors and entrepreneurs there, and of course, getting their money much cheaper and much faster.”
“It’s a good partnership,” Ray said, “it’s going to get better and better. We just started. –if they say they’re going to do something, they’ll do it.”
Challenges and obstacles
As such, Binance, Paxful, or another crypto platform could gain a major foothold in economies across Africa; the potential for growth there is significant.
But Ray hopes that crypto companies will operate ethically and work in partnership with the communities on the continent, and to adopt a “least-of-these” mindset: often, “[when it comes to] the unbanked or the poor, people run; they really don’t want to deal with them.”
“That’s just the truth–and this might be unpopular in the crypto community, but honestly, if you can help the poor use and move their money, they’re happy to pay you 30 percent, because the alternative is that they can’t do it at all.”
Indeed, the financial systems of some African countries have imposed significant restrictions on how citizens can spend their money. In Nigeria, for example, insolvency in banks has led to a harsh reality for indivudals: “if you can’t access foreign currency through official channels, you are left with no choice but to use the black market at much higher rates,” Quartz in 2015. Online spending limits have also in the country.
Of course, “there are challenges,” Ray said. “Working in Africa is extremely challenging. If you type ‘Paxul in Nigeria’ into a search engine, you’ll see articles that say ‘Paxful has stolen billions from the African people.’ We busted a huge ring of Nigerian scammers–Scarlet Widow, the Black Act; these are huge operations. We found them operating on our platform–we have a very tight AML compliance structure, and we shut them all down.”
“They went crazy,” he continued. “They came after us with everything [they had]. And that’s what you’re going to get into in Africa…they personally slandered me and my wife all over social media…but if you want to make a change, you’re going to have to go through that.”
This is an excerpt. To hear more about Paxful’s initiatives in Africa, including the #BuiltWithBitcoin initiative, listen to the full interview on or . Special thanks to Ray Youssef and the Paxful teamTo hear Finance Magnates’ interview with Ray Youssef from 2018, . 

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