Major global peer-to-peer (P2P) crypto exchanges platform LocalBitcoins is allegedly suspending user accounts with little fanfare, citing an “enhanced due diligence process.”
On Jan. 25 Forbes reported that Finland-based, bitcoin exchange platform, LocalBitcoins, has reportedly been suspending user accounts in some countries in Africa, the Middle East, and Asia without warning, with some users being unable to withdraw their Bitcoin.
According to the report, users in countries like Afghanistan, Iraq, Nigeria, Syria, and Pakistan claimed that they were not able to withdraw their Bitcoins without deleting their accounts.
Meanwhile, LocalBitcoins tweeted on Jan. 28 that they have some planned website maintenance work, which reportedly lasted for one hour:
Following the suspensions, one of the alleged affected users of LocalBitcoins suggested on Reddit that the action must be connected with the European Union’s new Anti-Money Laundering (AML) law, which is known as 5th Anti-Money Laundering Directive (5AMLD). The user claimed that new accounts users were not able to send Bitcoin that they received in their wallets, while customer support not responding “at all.” :
In a separate Jan. 22 personal blog post, the Redditor reported the issue in detail, noting that those users who got their LocalBitcoins accounts suspended were shown the following message:
“Customers residing or otherwise located in the following countries are required to have an enhanced due diligence process. The countries are defined by EU commission: Afghanistan, American Samoa, The Bahamas, Botswana, Democratic People’s Republic of Korea, Ethiopia, Ghana, Guam, Iraq, Libya, Nigeria, Pakistan, Panama, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, US Virgin Islands, Yemen.”
Other Redditors reported that the affected LocalBitcoins users will have to wait for at least 14 days to delete their accounts in order to withdraw their Bitcoin while having to request the deletion of his account in order to get access to his crypto, noting that he was likely to have been affected by the new unannounced policy by LocalBitcoins:
Another Redditor, who claimed to represent a crypto-related business in Lebanon said that LocalBitcoins suspended his account without sending any email before blocking the account. The user, a co-founder of a local crypto business, complained that the account suspension has led to termination of his whole business despite him having set up the account almost 3 years ago as well as verified his account with the passport:
Founded in 2012, LocalBitcoins emerged as one of the most popular Bitcoin exchanges for allowing safe P2P transactions directly between retailers and customers without any involvement by a third party. However, the exchange started seeing a notable drop in trading volumes after it abruptly terminated the option for users to perform local cash trades in June 2019.
As LocalBitcoins continued to tighten its AML policies in 2019, its global Bitcoin trading volumes gradually dropped to touch a multi-year low in early 2020. According to data from Bitcoin statistics website Coin Dance, global Bitcoin trading volumes on LocalBitcoins dropped more than 50% since September 2019 by early January 2020.
LocalBitcoins’ proprietary AML and Know Your Customer policies are not the only reason for the massive decline of BTC trading on the platform. On Jan. 10, the European Union’s AML law 5AMLD officially came into force, forcing some companies to cease or relocate operations before the beginning of 2020.