Traders Flee Bitcoin Exchange Bitfinex As It Pauses Wire Transfer
Cointelegraph looks into why Bitfinex has issues with its banks and whether it may take some time to unravel the main reasons for the problem.
What is happening to the world’s third largest Bitcoin exchange in terms of trade volume, according to CoinMarketCap, is quite unclear.
Further to its notice of withdrawal delays last week, Bitfinex has announced on Monday that all incoming wires to its exchange will be blocked and refused by its banks in Taiwan.
Though no particular reason was given for the latest development, what it clearly shows is that all is not well with the exchange and its banking operation.
How long would existing funds on its platform last?
If Bitfinex can’t accept incoming wires, for how long would existing funds on its platform last? It announced last week that its normal channels that it has been operating through in the past are currently unavailable. Hence, customers requesting USD wires were advised to expect delays until the withdrawal process is normalized which has no definite estimated time of accomplishment.
In the announcement which came out late Thursday, Bitfinex had put out its previous notice about a four day bank holiday that will run from Friday, April 14 until Monday, April 17. As it's just before midnight on Tuesday, April 18 (Hong Kong time), the exchange put up the latest vague and somewhat impromptu notice saying that all incoming wires to its accounts that would be effective April 18 (Tuesday) would be blocked.
“This applies to all fiat currencies at the present time. Accordingly, we ask customers to avoid sending incoming wires to us until further notice, effective immediately. We continue to work on alternative solutions for customers that wish to either deposit or withdraw in fiat and are making progress in this regard.”
What could have possibly gone wrong?
Several thoughts come to mind. The exchange’s account could have been closed by the banks considering the fact that the announcement made no mention of outgoing non-USD withdrawals.
There is also the possibility that the exchange has violated any of the anti-money laundering regulations that may implicate the banks. Or it could be that the banks’ tightening their control is an indication of the start of a war against Bitcoin. There seems to be so much to say about the downside risk.
What is clear though from the information provided is that the unfolding situation does not point directly to the fact that Bitfinex is insolvent.
It is likely that the disruption to the exchange’s cash flow will cause panic and many customers will be forced to move their assets out of the exchange. At least for now, unless a remedy is sought on time.