Bitcoin Exchange Paxful Plans To Target Venezuela’s Unbanked
Paxful, a P2P Bitcoin exchange, has been trying to find new markets and it looks like Venezuela might be one of them. The company has recently revealed to the media that it has plans to open an office in Venezuela, a country that is currently ridden by hyperinflation. The company will enter the market in September and then release its Android app there in October.
Ray Youssef, co-founder of Paxful, has explained that the move is part of a wider plan of the exchange to reach developing nations where there many mobile phones and remain to the crypto market is still somewhat scarce. He believes that the underbanked are people in a desperate situation in countries with inflation and this is why Paxful can add value to these communities.
About The Paxful Exchange
The company currently has 2 million users over the world and a total of 65 employees. The biggest market of Paxful is in Africa, which already has the highest rates of unbanked adults in the world according to a study made in 2010.
According to data from the company, Nigeria made 772,000 trades of Bitcoin averaging $64 USD each and Ghana made 50,000 trades averaging $56 each only in June 2018.
The people from the company believe that companies like Paxful and LocalBitcoins, Binance, KuCoin and Luno, other popular crypto exchanges from the region, are so popular in the country because there is a lot of unbanked people combined with high inflation because of lack of stability in the region. Also, there is a harsh problem of liquidity to send remittance money.
Paxful In Venezuela
According to Paxful, Venezuela faces a similar problem to some African nations, as it has a high inflation and a very unstable economy at the same time that a lot of people are unbanked and vulnerable to these problems, so it has a great market to be explored.
There is a trade market being developed in Venezuela because cash is becoming scarce and most people do not want to use what they have because they can get huge discounts if they use it, so they prefer to save it for when they need it the most.
To help in this national situation, the upcoming app that will be launched on the country in October will have some important features like an in-app calculator that helps people who use volatile currencies like the Venezuelan Bolívar.
The Issues Of Attending The Unbanked
One of the main problems that Paxful has found on the road is that the communities that could benefit the most from crypto exchanges are exactly the ones that have problems that get in the way of using them. According to the company, in these poorer nations it is not uncommon that bank wire transfers are too expensive for people to pay.
Also, many of the poorer population do not have government-issued IDs, which makes the job of whitelisting them to use the platforms considerably more difficult than it would be in other situations. It does not matter whether a traditional bank or an exchange, international regulations for anti-money laundering practices require financial institutions to take the ID of its clients.
Because of this, from September onwards, Paxful will have to require IDs from buyers of Bitcoin as a way to fight fraud and keep the company legal in most countries. Until now, the company only required sellers to upload their IDs, but that had to change.
According to Youssef, most Paxful users were female for a long time and they are more vulnerable segment of society. Because of this, they lacked IDs and bank accounts. However, not requiring IDs can cause many problems for a business that is 100% online.
Unsurprisingly, the company attracted a lot of scammers over time, so it had to take this attitude to stop the problem, as it was proving difficult to weed them out individually. Because of this, Youssef told the media that the company would be redoing the whole KYC process in order to fix these problems.
However, there is still hope for the unbanked. Beyond the traditional ID system, Paxful will accept the Nigerian BVN Code, a form of biometric ID, fingerprint scanning or third-party KYC providers like NetVerify, Jumio, Onfido and Veriff. AI will be also used to detect criminal behavior in the next version of the app.