LocalBitcoins, a peer-to-peer cryptocurrency exchange, has announced that it will be shutting down. This news has come as a shock to the cryptocurrency community as LocalBitcoins has been a popular platform for buying and selling bitcoin since its launch in 2012.
LocalBitcoins was founded in Helsinki, Finland, and has since expanded to over 200 countries. The main schtick is facilitating peer to peer transactions, without the need for a middleman. Oftentimes this looked like handing someone a bag of cash and hanging out with them in a Walmart parking lot until the Bitcoin showed up in your wallet. This feature made it particularly appealing to users in countries with strict capital controls or limited access to traditional financial institutions.
In recent years, LocalBitcoins has become especially popular in countries with high levels of inflation, such as Venezuela. The platform provided a way for users to protect their savings from devaluation and exchange their local currency for a more stable one, like bitcoin. The platform’s impact on the Venezuelan economy was significant, with some reports estimating that LocalBitcoins facilitated up to 50% of the country’s bitcoin trading volume.
However, despite its popularity and success, LocalBitcoins has decided to shut down due to market conditions. In a statement, the company said that "the changing regulatory environment and increased competition" have made it difficult to continue operating. The company also mentioned that it has become increasingly difficult to maintain its compliance with global anti-money laundering and counter-terrorism financing regulations.
I personally find it hard to believe volume is the reason LocalBitcoins is shutting down. They’ve seen just about every crypto winter that has been, and there is no reason they would have high expenses for what is essentially a forum. I believe this is almost entirely a regulatory story.
LocalBitcoins was really a reminder of what Bitcoin used to be–a grassroots, for the people, unregulated money. These days Bitcoin has drifted very far from the original image of a completely unregulated money, for better and for worse. When I first entered the space, the options for getting Bitcoin were very limited. Maybe you could try an exchange, but tons of those things are getting hacked. Or you could use LocalBitcoin and basically just hope some guy with a gun doesn’t just take your cash.