Another centralized exchange bites the dust, with Hotbit announcing that it will shut down its operations due to adverse trading conditions. As usual among these platform bankruptcies in recent months, the company cited FTX, the current crisis in the banking system, and even an investigation as reasons for its liquidity problems.
The Ledger wallet provider is also going through a rough time. The company decided to postpone its controversial recovery service amid backlash from the community. Security reputation is critical for a cryptocurrency wallet provider, but Ledger’s dilemma may go beyond a public relations crisis. The recovery service was also a pathway to subscription services, which could generate recurring revenue for the wallet provider. The feature is now being postponed until most of its code is open sourced, Ledger said.
In difficult times, there are also opportunities for others. Hong Kong is advancing its plans to become a cryptocurrency hub, with more than 150 cryptocurrency firms awaiting approval to operate as virtual asset trading platforms in the city.
This week’s Crypto Biz explores the shutdown of Hotbit, the licensing of cryptocurrency companies in Hong Kong, Ripple’s acquisition of Bitstamp, and the Ledger brand crisis.
Hotbit pauses its operations and urges users to withdraw funds
Cryptocurrency exchange Hotbit is shutting down and urging users to withdraw their funds by June 21. According to an announcement, Hotbit’s operations have deteriorated since an investigation of a former team member took place in August 2022. Authorities believe a former employee of the board was involved in a project that violated criminal laws. The investigation forced the exchange to halt its activity for weeks. Hotbit’s cash flow was also affected by the FTX crash and the banking crisis, incidents that caused a continuous outflow of funds from centralized exchanges, according to the company. The announcement was followed by phishing links appearing on Google posing as the official Hotbit website.
Ledger’s key recovery service paused due to community criticism and will open its source code
Ledger’s PR nightmare took a new turn this week, leading the company to put its seed phrase retrieval service tool on hold amid continued backlash from the community. Released on May 16, the Ledger Recover feature would allow users who lose their private seed phrase to recover it via an optional feature. Earlier in the week, Ledger CEO Pascal Gauthier confirmed that private seed phrases from users of the service could, in theory, be handed over to governments if necessary. In response to this concern, the company is accelerating efforts to open most of its source code, including core components of its operating system and Ledger Recover, the release of which has been postponed until this process is complete.
Ledger Recover will be launched as soon as the source code is auditable. We believe in these amendments to the project and will continue to build the industry together.
— Pascal Gauthier @Ledger (@_pgauthier) May 23, 2023
Hong Kong will open access to exchanges to retail users, but there is a detail
Hong Kong has taken another step towards its reputation as a global center for cryptocurrencies. Earlier this week, its Securities and Futures Commission announced that virtual asset trading platforms will soon be licensed to serve retail investors. Compliance guidelines will include security requirements for asset custody, cybersecurity standards, and segregation of customer assets. Other measures to protect investors could include increased due diligence in relation to tokens and regular disclosure of information. The legal framework was approved by local legislators in December 2022, seeking to give cryptocurrency exchanges the same market recognition as traditional financial institutions. Providing regulatory clarity to crypto businesses has been part of Hong Kong’s strategy to attract businesses and position itself as a Web3 city.
Ripple Acquires Pantera Capital’s Stake in Bitstamp
Digital payments network Ripple acquired a minority stake in cryptocurrency exchange Bitstamp in the first quarter of 2023. Galaxy Digital advised on the transaction, according to a transcript of Galaxy’s shareholder conference call on May 9. Ripple acquired shares previously owned by Pantera Capital, a US-based digital asset investment firm. It is unclear how much Ripple paid for the acquisition or how the deal was structured. Founded in 2011, Bitstamp was one of the first cryptocurrency exchanges to offer digital asset trading. Headquartered in Luxembourg, the company serves clients in more than 100 countries.
Crypto Biz is your weekly pulse on the businesses behind the blockchain and cryptocurrency space delivered straight to your inbox every Thursday.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.