The Story

Local Bitcoins was one of the pioneers of the peer-to-peer cryptocurrency exchange model. It was created to facilitate the exchange of digital coins and tokens between people in their local area as well as internationally. However, with the rise of centralized cryptocurrency exchanges like Binance, Local Bitcoins lost their market dominance. Its only advantage at that time was the privacy it offered to its users. This, unfortunately, caused its customer base to skew towards individuals engaged in questionable activities.

As a result, Local Bitcoins came under regulatory scrutiny, and it started implementing KYC (Know Your Customer) requirements on larger peer-to-peer trades in 2019. In 2020, it announced that it would require KYC from all users to comply with Europe’s anti-money laundering regulations. While this move increased the platform’s regulatory compliance, it alienated its privacy-oriented customer base, and worse still, it made the platform more regulated than centralized exchanges. To add insult to injury, most offshore cryptocurrency exchanges still did not require KYC then.

Despite these unprecedented restrictions, Local Bitcoins did not die. The cryptocurrency bull run, which began in late 2020, was likely beneficial for Local Bitcoins as it managed to release a new mobile app for its 1.7 million users in October 2021. However, the crypto market crash in November 2021, which accelerated in the spring of 2022, was the beginning of the end for Local Bitcoins. Russia’s invasion of Ukraine, which led to sanctions and Local Bitcoins’ exit from the country, was the final nail in the coffin. Moreover, it was revealed that the platform had sent and received transactions from the criminal Russian crypto exchange Bits Lotto prior to exiting Russia.

What Next?

Despite the sad news about Local Bitcoins, the future of peer-to-peer platforms looks optimistic. There are still many peer-to-peer platforms available, and some of them still protect users’ privacy. As crypto adoption grows, and with it, the demand for privacy, these platforms will likely become even more popular.

One of the reasons for this is that privacy-killing regulations like KYC do not have a measurable impact on illicit financial activity, according to statistics from anti-money laundering organizations like the Financial Action Task Force (FATF). This is because human corruption cannot be regulated. Therefore, the need for privacy is a significant factor that should be considered by crypto users.

Conclusion

In conclusion, Local Bitcoins was a pioneer of the peer-to-peer cryptocurrency exchange model, but it lost its market dominance when centralized cryptocurrency exchanges started becoming popular. While it implemented KYC to comply with anti-money laundering regulations, this move alienated its privacy-oriented customer base. The future of peer-to-peer platforms like Local Bitcoins is optimistic as the demand for privacy grows with the adoption of crypto. Nevertheless, crypto users should be aware of the regulations that might kill their privacy and look for platforms that prioritize their privacy.