HitBTC freezes customer accounts over withdrawal fears

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Multiple customers of the HitBTC cryptocurrency exchange are reporting that they have had their accounts frozen by the company. The exchange has confirmed the action, asserting that it is being done in anticipation of an annual “proof of keys” event that is scheduled to take place tomorrow, January 3. The event is designed to ensure that crypto exchanges are solvent and that they actually hold the funds they claim. 

According to one user on Reddit, PEDXS, he tried several times to withdrawal his funds, stating, ““After months of sending 40 plus emails, HitBTC finally unfroze my account. I immediately withdrew most of my funds but left a small amount to day trade. I did that because HITBTC promised that “No further automated restrictions will be applied.”

He added, “Over the months, from day trading I have built back my balance up to a couple BTC. With the proof of key date approaching, I felt that HITBTC is the prime suspect for being insolvent, so I tried withdrawing my BTC. Guess what, they blocked the withdrawal and froze my account again.”

Another Reddit user, LOOKATMYIQ, stated in a separate thread, “Submitted all my documents/evidence for KYC days ago and now support [is] going cold on me. Have I been scammed? I have been trading crypto for years on all kind of exchanges and never had my funds locked without warning like this. Support [was] fast to respond when asking for additional (over the top) information but since I have given them everything they have asked for they’ve just disappeared on me.”

The proof of keys concept was initiated by Trace Mayer, a crypto investor. The campaign seeks to have all traders withdraw their assets from third-party services each year on January 3 in order to ensure that the services hold all the funds, and aren’t using them for other purposes. 

Harsh Agrawal, a professional blogger and crypto enthusiast, said of HitBTC, “HitBTC was something that began as a promising crypto exchange and got lucky with the big crypto wave in 2016 and 2017, but it [definitely] failed to keep up with the innovation and user demands. They are barely surviving, and this can have a major impact on users who are using HitBTC as their crypto exchange.”

Whether or not the event gains traction remains to be seen. Odds are that it won’t be popular with crypto enthusiasts and it certainly isn’t popular with exchanges. The biggest concern is that all trading would halt until users replenished their accounts, which could have a devastating effect on crypto prices.