LocalBitcoins, after operating for 10 years, announces closure! The era of P2P trading comes to an end

Bitcoin peer-to-peer trading platform LocalBitcoins announced on Thursday that it will cease operations due to the crypto winter. The company has suspended new user registrations, and trading will end on February 17, 2023, with a 12-month withdrawal window for users. Following Affirm and tZERO, LocalBitcoins becomes another crypto platform to exit the market.

LocalBitcoins Unavoidably Ends 10 Years of P2P Trading Service

(Source: LocalBitcoins official website)

According to the official announcement released on Thursday, this peer-to-peer trading platform, which has actively served customers for the past decade, has decided to shut down permanently due to unfavorable market conditions. “We regret to announce that despite our efforts to overcome the challenges brought by the current crypto winter, we have come to the conclusion that LocalBitcoins can no longer provide Bitcoin trading services,” the company stated in the announcement.

Founded in 2012, LocalBitcoins was one of the earliest peer-to-peer trading platforms in the Bitcoin ecosystem. In the early days before centralized exchanges became widespread, LocalBitcoins provided a marketplace for users worldwide to buy and sell Bitcoin directly. Buyers and sellers could match through the platform and choose cash face-to-face, bank transfers, or other payment methods. This decentralized model offered unique advantages in privacy and avoiding KYC (Know Your Customer) verification, attracting many users who valued anonymity.

The platform peaked during the Bitcoin bull market of 2017-2018, with daily trading volumes surpassing tens of millions of dollars. In many developing countries, LocalBitcoins even became a primary channel for ordinary people to access Bitcoin, as these regions often lacked compliant centralized exchange services. Countries experiencing hyperinflation such as Venezuela, Argentina, and Nigeria saw particularly active trading volumes on LocalBitcoins, with citizens using the platform to exchange local currency for Bitcoin to preserve value.

However, as regulatory environments tightened and centralized exchanges matured, LocalBitcoins’ competitive edge gradually diminished. AML (Anti-Money Laundering) regulations in the EU and US required all crypto platforms to implement strict KYC procedures, leading LocalBitcoins to introduce identity verification in 2019. This change alienated many privacy-focused core users, causing trading volumes to decline. Meanwhile, centralized exchanges like Binance and Coinbase offered more convenient trading experiences and deeper liquidity, attracting users who might have previously used LocalBitcoins.

The market crash of 2022 became the final straw for LocalBitcoins. The collapse of FTX, Terra/Luna fiasco, and chain reactions from multiple hedge fund bankruptcies caused trading volumes across the crypto market to plummet. For platforms relying on trading fees for revenue, sustained low volumes made operational costs unsustainable. Clearly, LocalBitcoins could not find a viable business model in this environment and ultimately decided to exit.

LocalBitcoins Closure Timeline

New user registration: Officially suspended

Trading cessation date: February 17, 2023

Withdrawal window: Up to 12 months after account closure

Service termination: Complete shutdown of trading and wallet services

Customer notification: Official announcement sent to all users

Users Only Have 12 Months to Withdraw Assets

LocalBitcoins has officially halted new user registrations and strongly encourages existing users to withdraw their assets promptly. After registration termination, all Bitcoin trading activities will cease on February 17, 2023. However, the platform offers a relatively generous withdrawal period, giving users up to 12 months after account closure to retrieve their Bitcoin.

“Starting from February 17, 2023, LocalBitcoins users will only be able to log in to withdraw Bitcoin. Trading and wallet services will be discontinued at that time. Thank you for choosing LocalBitcoins over the years, and we sincerely apologize for any inconvenience caused,” the company stated in the announcement.

This gradual shutdown approach contrasts with some crypto platforms’ abrupt exits. The 12-month withdrawal window indicates LocalBitcoins’ attempt to protect user interests during the closure process, providing ample time for users to arrange asset transfers. Such a responsible exit strategy is commendable, as some platforms in the past only offered a few days or weeks for withdrawals, causing some users to lose assets permanently due to missed deadlines.

However, the 12-month period also hints at underlying legal and technical complexities. As a platform operating for 10 years, LocalBitcoins likely has many dormant accounts, whose owners may have forgotten login credentials or may not even be aware of the platform’s impending closure. The 12-month timeframe might serve as a buffer to handle potential legal disputes and asset liquidation procedures.

Users should pay attention to several key points during the withdrawal process. First, ensure all pending transactions are completed before trading stops on February 17, 2023, to avoid funds being locked in escrow. Second, withdraw Bitcoin as early as possible rather than waiting until the deadline, since last-minute withdrawal requests could cause processing delays. Third, verify that withdrawal addresses are correct, as blockchain transactions are irreversible—sending to an incorrect address means assets are lost forever. Fourth, keep all transaction and communication records for future tax reporting or dispute resolution.

Chain Reaction of Closures Amid Crypto Winter

While the closure of LocalBitcoins is unfortunate, it is not an isolated case. Many crypto companies ceased services after the 2022 market crash, and this trend continues into 2023. On February 8, 2023, payment network Affirm announced plans to shut down its digital asset business by March 2, 2023. According to a letter to stakeholders, this closure is part of a larger layoff plan, with the company also planning significant staff reductions.

Last week, another crypto firm, tZERO, announced it would stop offering trading services to clients. tZERO is a digital asset trading platform and fintech company providing security token issuance services for private companies planning to go public. Headquartered in New York and supported by online retailer Overstock, it announced on March 6 that after shutting down trading operations, it would focus on securities issuance.

In January this year, fintech firm Mode Global Holdings PLC said it would close operations of some subsidiaries, Fibermode, JGOO, and Greyfoxx, due to lack of funding support for its financial health. According to the press release, clients will be notified in due course to withdraw their crypto assets from each platform.

2022-2023 Crypto Platform Closures List

2022: BITFRONT, Midas Investments cease operations

January 2023: Mode Global closes Fibermode, JGOO, Greyfoxx

February 2023: Affirm closes digital asset business, LocalBitcoins announces termination

March 2023: tZERO ceases trading and shifts focus to securities issuance

This wave of closures reflects a deep industry adjustment. The 2022 market crash was not only a price decline but also a blow to many business models. During the bull market, high trading volumes and asset appreciation masked operational inefficiencies and risk management flaws. As the market entered winter, these issues surfaced, forcing companies unable to adapt to exit.

From a broader perspective, this industry shakeout may be healthy. Unsustainable business models and poorly managed companies are being eliminated, making room for truly valuable enterprises. Surviving platforms tend to have stronger capital bases, more mature risk controls, and clearer strategies. While LocalBitcoins’ exit is regrettable, it also marks a maturation process from speculation-driven to fundamentals-driven growth in the crypto industry.

For platforms still operating, LocalBitcoins’ closure offers important lessons. First, relying solely on transaction fees as a revenue model is fragile; diversification is necessary. Second, in an increasingly regulated environment, compliance costs are rising, and platforms need sufficient economies of scale to absorb these costs. Third, user experience and technological innovation must keep pace; otherwise, they risk being overtaken by more agile competitors. Lastly, ample capital reserves are crucial to weather market downturns—companies without financial buffers are the first to fail in crises.

Rise and Fall of P2P Trading and Its Future

The closure of LocalBitcoins symbolizes the end of an era for Bitcoin peer-to-peer trading. In Bitcoin’s early history, P2P was the primary way to acquire Bitcoin. This model embodied the original vision of the Bitcoin white paper—“peer-to-peer electronic cash system”—where buyers and sellers trade directly without trusting intermediaries.

However, as the crypto industry became more institutionalized and regulated, the advantages of P2P diminished. Centralized exchanges offered better liquidity, narrower spreads, and more user-friendly interfaces. Regulatory enforcement of KYC/AML made it difficult for P2P platforms to maintain their anonymity advantage. This structural shift has eroded the viability of platforms like LocalBitcoins.

Despite the impending closure, the spirit of P2P trading persists. Decentralized platforms like Bisq and Hodl Hodl are still operational, employing non-custodial architectures that do not require users to deposit funds into the platform. Additionally, Layer 2 solutions like the Lightning Network are opening new possibilities for small-scale P2P transactions. However, these alternatives have much smaller user bases and trading volumes compared to LocalBitcoins’ heyday, indicating that the overall P2P model is in decline.