Paxful prolific in gift card issuance


An exchange called Paxful is making news today for its interesting business model where analysts find that a full half of operations involves making Bitcoin into gift cards that are sent to some unknown recipient.

In some ways, it looks like a sophisticated cryptocurrency version of any byzantine gift card setup, where the abstraction of assets leads to dark value that’s hard to trace.

The brainchild of two experienced software developers and businessmen, Ray Youssef and Artur Schaback, Paxful, which was founded in 2015, allows buyers and sellers to trade Bitcoin easily through a global platform. Paxful has 200 employees in the United States, Philippines, Hong Kong, and Estonia, and 3 million users, with over 12000 vendors on the platform, which some call the “eBay of the cryptocurrency world.”

“Paxful is a marketplace, just like eBay,” writes a guide at Cryptotips. “So the shown Bitcoin price is always higher than the current market price and the Paxful seller fees. Otherwise the seller would make a loss selling his BTC. If you want to pay with unusual payment methods like Western Union, MoneyGram, cash or PayPal, then you might want to pay these premiums.”

So what’s going on with all of these gift cards?

Some suggest that a lot of this activity involves U.S. migrant workers sending money back home to family in their countries of origin. However, the reality is that at the end of the day, we really don’t know. The untraceable nature of these gift cards looks suspiciously like money laundering in some ways, and creates some interesting concerns.

“Paxful emerged as the top peer-to-peer (P2P) Bitcoin marketplace after Localbitcoins introduced KYC requirements one year ago for users with more than $1,000 in annual trade volume,” writes Samuel Haig at Cointelegraph. “While western trading has shifted away from the P2P markets in favor of centralized exchanges since 2016, Arcane notes the volume from emerging “frontier” economies has consistently increased over recent years.”

An indication that Paxful grew popular partially as a vehicle for getting around KYC is a bit of a “tell” – look for any signs of agency scrutiny of this.