LocalBitcoins, one of the oldest cryptocurrency exchanges, has begun to suspend the accounts of long-term users without notice.
It was recently reported that across at least three regions, including Asia, Africa, and the Middle East, accounts were being “deactivated,” as LocalBitcoins users received messages from the exchange operator telling them they could take out their Bitcoin holdings by deleting their account.
Some users were not able to access their funds, as one Nigerian user who manages a three-year-old account said that his customer’s account had been shut down with no warning or notification that it might be reactivated. He said:
One of my customers was due to travel out of the country and had to sell some of his bitcoin to be able to go only to notice on his way to the airport that he cannot even access his funds.
The exchange required users in specific countries to pass through an “enhanced due diligence process,” with no clarification as to what specifically that process entailed.
Unlike the centralized Bitcoin exchanges, LocalBitcoin works as a peer-to-peer platform, allowing traders to directly buy and sell Bitcoins. The popularity of the decentralized exchange skyrocketed with the restriction on centralized exchanges in many countries. According to its website, the exchange is operating in “7916 cities and 248 countries.”
Launched in 2012, the exchange also allowed traders to physically meet with one another to complete the transaction involving cash. The platform however, quietly removed its “in-person: cash” option last year.
Established as an anonymous platform, LocalBitcoins changed its priority after years of operations and in April 2018, and made it mandatory for high volume traders to disclose their identity, halting anonymous trading.
Though not confirmed, the recent move could be linked to the Fifth European Anti-Money Laundering Directive (AMLD5) which came into effect on 10 January, strengthening global AML/CTF regulations.
This would not be the first time an exchange has been crippled by a new Directive, with crypto derivative trading platforms such as Deribit, announcing that from 10 February they would restructure out of British Virgin Islands, due to increased oversight and the costs of having to "demand an extensive amount of information from our current and future customers" stated as the main reasons. U.K based custodial waller provider Bottle Pay and crypto mining pool Simplecoin, have also shut down in anticipation of the AMLD5 implementation in their countries.