Patricia token crypto — Image source: NODO

The day is May 16, 2023. Adebayo Adebowale sits in the living room of his two-bedroom flat in Lagos, Africa’s crypto hotspot. His wife stares at him from the room’s corner. When their eyes lock, Bayo gives a hurried smile and throws his head back into his phone. Just a few more taps on an app, Patricia, and a deal will be done. His Bitcoin balance on the exchange held more than enough to settle the transaction he was processing: a naira request from a creditor who’d sent Bitcoin the week before. Eventually, however, Bayo did not complete this transaction, thanks to an in-app asset freeze. Then, it seemed like a slight temporary glitch, but it’s been four months now, and nothing has changed for him and about 850,000 Patricia users; the funds are still frozen. “My life is in shambles. I have huge debts I can’t pay. All my money is in Patricia, and what they are telling me is stories. I’m beginning to regret this crypto thing,” Bayo cried.

Bayo told NODO that he’s been an active user of Patricia since 2018, the company’s early beginnings when transactions were done through WhatsApp, but had never experienced an issue such as this. The so-called issue is a decision by Patricia to freeze customers’ assets in response to its declining liquidity position. Patricia announced in May that a breach of its retail trading app had compromised bitcoin and naira assets, and a response “internal restructuring” would mean that all customer assets, even those that were not affected by the hack, would be temporarily suspended.

“Patricia gave us a funny story about them being hacked and at some point, told us to wait for about eight weeks to get our monies back,” said a Patricia user, Gbolahan, who chose to be identified with a pseudonym to avoid public awareness of his situation. But you have seen the stunt they pulled towards the end of the eighth week: introducing a worthless token as a replacement for our Bitcoin!”

Patricia’s latest announcement that its native token, PTK—described as a dollar-backed stablecoin—will replace users’ outstanding BTC and naira balances was the latest of the company’s move to ruffle the market and inflame investors. The post shared that the company will move all operations to the new Patricia Plus app, where investors will access their BTC and Naira only as PTK. The news sent Patricia’s already aggravated users into a frenzy as they repulsed at having their assets exchanged for a “stablecoin” that is neither listed on any exchange nor backed by any known reserve.

“Where is the tokenomics? Where is PTK’s whitepaper? Patricia thinks it can just tell us that its random stablecoin from the blues is equal to a dollar and that will make us happy. I really hope this is not an exit strategy—or this might mark a downward spiral for crypto adoption in Nigeria,” Gbolahan said.

Trust hanging by a thread
Four cryptocurrency experts interviewed by NODO characterised Patricia’s recent announcements as following a playbook commonly associated with scam projects. A digital assets consultant, who chose to be identified by his X handle, @kidbold, said Patricia either has limited liquidity or is trying to exit with customers’ funds in a grand scam. “Patricia found a way into the hearts of Nigerians and onboarded thousands of first-time crypto users. If the exchange goes down, we’re definitely going to witness a huge drop in the interest for crypto. People will generally be crypto averse, and Patricia will be their reference point,” he said.

Kidbold’s point is contextualised when you consider the fragility of Nigeria’s crypto market. The country’s apex bank has an active ban on cryptocurrencies and has, at some point, ordered banks to block the accounts of individuals suspected to be trading crypto. This criminal treatment is compounded by the flawed association of internet fraudsters with crypto handling. Last year, the Economic and Financial Crimes Commission, Nigeria’s anti-graft agency, arrested an internet fraudster and seized bitcoins worth over $90,000 from him. Cases like this are rampant and have continued to smear the outlook of crypto adoption in the country. The last thing Nigeria needs now is another daylight crypto scam that could further nettle regulators.

“I have washed my hands off anything crypto,” said Tobi, another aggrieved Patricia user who used the platform to trade BTC. “I cannot keep putting my money into something that requires me to keep one eye open while I sleep. Today, it’s a protracted dip, tomorrow, it’s money gone. I’ll stick to banks and companies’ stocks now,” she shared.

Timi Olagunju, a policy consultant and partner at Groundswell, told NODO that Patricia’s decision to switch users’ assets without their permission could lead to serious trust issues within the ecosystem, and could invite legal troubles.“ It’s essential to know how [Patricia’s] stablecoins are backed; PTK must have real assets behind it. Failing to prove this could harm their reputation,” he said in a text to NODO. Meanwhile, the legality matter is blurred by Patricia’s status as a Lithuanian company, which means it may not be subject to the digital assets issuing regulations by Nigeria’s Securities and Exchange Commission (SEC), especially if it can prove that its tokens are not securities.

Gabriel Eze, a tech lawyer at Infusion Partners maintained that Patricia’s methods of recovering assets for users are lacking in accountability and transparency, the very principles that blockchain technology is hailed for. PTK’s rollout strategy notably stands in contrast to the precedent set by Buycoins, another crypto upstart in Nigeria that released NGNT, a stablecoin token backed by USDC and pegged to the naira. NGNT is available on the Ethereum blockchain and listed on multiple exchanges including Busha and Paxful.

“I will not leave crypto because of Patricia; crypto is not the problem,” is how one Patricia user responded to how the company’s latest actions will affect her interest in crypto. Lydia*, a crypto native, said she’s seen too much good in crypto for Patricia to wash away. But she acknowledged that people with such disposition may not be the majority. “I introduced several of my friends to crypto through Patricia because it was the most popular local brand and had several celebrity endorsements. I regret it now though. My friends blame me for their situation and have cancelled crypto for life,” she said.

In April, Rest of World highlighted the story of Chiamaka, a former product manager at a Nigerian crypto startup, who, after losing savings worth 4,603,500 naira ($9,900), swore off cryptocurrencies. Chiamaka’s case is not isolated. For many Nigerians—and this includes the earlier referenced Bayo—losing money from something could be the universe’s loud warning to avoid it for life. This puts Patricia in an interesting position with regard to Nigeria’s crypto adoption story. Already, some Nigerians’ trust in crypto has been shaken by Patricia’s latest moves, but an exit of the company with users’ funds will be equal to pulling the rug from under a whole country: regulators will rage, and more and more Nigerians will lose trust in the prospect of cryptocurrencies.