Crypto Exchange That Fled Nigeria Plans Maiden Fundraising
(Bloomberg) -- Patricia Technologies Ltd., a cryptocurrency exchange, plans to tap investors for the first time as it recovers from a clampdown in Nigeria that decimated its business and forced it to move its headquarter to Estonia.
Founder Hanu Agbodje bootstrapped Patricia -- meaning he hasn’t taken on institutional investors -- for the past four years after starting out with less than $2,000. The company is now planning to raise as much as $50 million to upgrade its technology, hire blockchain engineers and keep up with regulatory requirements. Agbodje expects to raise the funds in the next six months.
“The crypto space is heavily frowned upon by regulators so we need to be 100% compliant as we enter new markets,” Agbodje, 25, said in an interview from London. To help people understand the technology, a lot of the funds “will go into marketing. We need to find ways to break it down and reach as many people as we can.”
The central bank’s opposition and lack of coherent laws haven’t deterred Nigerians from using virtual currencies as a hedge against the nation’s capital controls and to remit money. Demand is so large that individuals in the West African nation hold the world’s highest proportion of such assets per capita, according to a survey by Statista. That’s spurring crypto exchanges such as Patricia to expand.
|Cryprocurrency developments in Nigeria:|
Jan. 12, 2017 : Central Bank of Nigeria publishes circular warning lenders about digital currencies.
Sept. 11, 2020: Nigeria’s Securities & Exchange Commission classifies virtual currencies as securities.
Feb. 5, 2021: The central bank orders banks to close accounts of cryptocurrency exchanges.
Aug. 17, 2021: Court orders lenders to temporarily freeze accounts of six online investment firms at the central bank’s plea.
Oct. 25, 2021: Court asks banks to unblock accounts, adding that central bank’s Feb. 5 circular isn’t law.
Just nine months ago the industry in Nigeria was foundering as it went through its “darkest moment ever,” Agbodje said.
That’s when the nation’s central bank blocked lenders from transacting with cryptocurrency exchanges. The restrictions saw trading volumes of digital currencies on Patricia’s platform plunge to just 5% of normal at a “blink of an eye,” Agbodje said.
Trouble on a Friday
On the afternoon of Feb. 5, Patricia’s employees were preparing for a Friday office party when the central bank’s circular was published. Agbodje’s phone was inundated with calls from his bankers. He didn’t answer any on that day.
“I knew that we were in trouble, and I knew what they were going to say,” Agbodje said. “We spent that day to the next trying to figure out the next step. It was like I almost did not want to be Nigerian at that point.”
Agbodje ended up buying three rivals as business dried up for many in the industry. That helped Patricia, which offers three crypto coins for trading on its platform, boost its user base to 700,000. And he packed up his company and moved to Estonia.
Moving the company’s headquarter to the Baltic nation that’s an euro-area member helped Patricia acquire a license and expand its operations. Business has since surpassed the levels it had on Feb. 5, he said. Estonia was among the first in the European Union to license the industry in late 2017.
“There is incredible demand in the global investor community for crypto related investments” even for companies from Africa, said Adesoji Solanke, London-based director at Renaissance Capital Ltd.. Pivoting away from Nigeria helps platforms “capture revenue pools across a wider range of countries that are also climbing the crypto adoption curve.”
Nigeria has traded 60,215 Bitcoins since 2017 to the end of last year -- valued at about $3.9 billion at Monday’s price -- in the largest volume outside the U.S., according to Paxful, a peer-to-peer Bitcoin marketplace. The country also has the largest proportion of retail users conducting transactions under $10,000, according to Chainalysis.
The exponential growth has Patricia planning to expand in a bid to emulate larger rival Binance Holdings Ltd., the world’s biggest crypto exchange.
Abodje says that the Nigerian central bank could reverse its crackdown, at which time the country’s crypto industry would just get “bigger and bigger.”
That may not happen any time soon given the regulator, like Warren Buffett, feels that Bitcoin is “ratpoison squared.”
“Our financial system does not have a space for cryptocurrency,” central bank spokesman Osita Nwanisobi said in response to an email on Tuesday.
©2021 Bloomberg L.P.