On May 22, Hotbit, a China-based cryptocurrency exchange, announced that it would suspend all operations by 04:00 UTC. Users of the platform were advised to withdraw their assets before June 21. Hotbit cited several factors that led to its decision to halt operations, including ongoing regulatory challenges, cyber attacks, and significant losses.
Hotbit explained that the crypto industry had experienced several crises that had led to a continuous outflow of funds from centralized exchanges. According to the exchange, investigations in August 2022, along with FTX’s collapse and USD Coin (USDC) depeg, had all contributed to the deterioration of its operating conditions.
Furthermore, Hotbit noted that the collapse of large centralized institutions had changed the trend in the crypto industry, with centralized entities left to embrace regulation or become more decentralized. The exchange stated that centralized exchanges were becoming increasingly cumbersome, with highly complex and interconnected businesses that were difficult to comply with.
The collapse of several centralized crypto entities like FTX, Celsius, and BlockFi, among others, had led to increased regulatory scrutiny of the crypto industry by financial regulators worldwide. Hotbit mentioned that it was also folding up because it had suffered numerous cyber attacks and the exploitation of project defects by malicious users. The firm noted that its operation model of supporting a diverse range of assets was unsustainable from a risk management standpoint.
Several crypto exchanges like Beaxy and Bittrex were forced to exit the U.S. due to regulatory actions. Binance canceled its derivatives license with the Australian Securities and Investments Commission (ASIC) and closed its Canada operations. Others like Coinbase and Gemini have expanded their operations abroad due to the uncertain regulatory environment in the U.S.
Hotbit had operated for five years and four months, serving 5 million users, according to its statement. The platform holds an Estonian MTR license, an American MSB license, an Australian AUSTRAC license, and a Canadian MSB license, according to CoinMarketCap.
Hotbit’s decision to halt operations is a reflection of the ongoing challenges facing the crypto industry, including regulatory scrutiny, cyber attacks, and significant losses. The collapse of several centralized crypto entities has led to increased scrutiny of the industry by financial regulators worldwide. As the industry continues to evolve, centralized exchanges will have to embrace regulation or become more decentralized to survive.