LocalBitcoins closing trader accounts without warning

Getting your Trinity Audio player ready...

Peer-to-peer cryptocurrency exchange LocalBitcoins has begun shutting down the accounts of longstanding users without warning, according to reports.

The closures have so far been isolated to accounts in Africa, the Middle East, and Asia. Users were sent a message instructing them to withdraw crypto from their accounts, but many report their accounts had already been deactivated.

One user from Nigeria said the issue was having a significant impact on LocalBitcoins users: “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 account closures have come without any official announcement or acknowledgement from LocalBitcoins, but appear to have begun taking effect around January 20.

As a peer-to-peer exchange, users on LocalBitcoins transact with each other—unlike centralized crypto exchanges, where users buy from and sell to the exchange directly. With increasing regulation on centralized exchanges, the decentralized exchange has grown significantly, operating across some 7,916 cities and 248 countries.

The Finland-based exchange platform initially allowed users to meet in person to transact for cash. However, this option has since been removed, with the exchange moving towards compelling higher volume traders to disclose their identity.

The recent closures are thought to be related to the Fifth European Anti-Money Laundering Directive (5AMLD), which took effect from January 10.

It comes against a backdrop of increasingly restrictive regulation for cryptocurrency exchanges, designed to eliminate criminality, fraud and illegal transactions. Stricter anti-money laundering regulations in particular are forcing crypto exchanges to collect more information about their users.

At the same time, tightening provisions against terrorism financing are restricting the operation of crypto exchanges in some notable countries. In the case of the LocalBitcoins account closures, users in Afghanistan, Iraq, Nigeria, Syria, and Pakistan have been more significantly affected.

There is no indication whether the exchange is planning more account closures, or how many of its users could ultimately be affected by the decision.