Hong Kong-based crypto exchange Hotbit has announced that it would halt all its centralized exchange (CEX) operations as of May 22. Users must withdraw their funds from the exchange by June 21. - The firm cited several reasons, including the recent U.S. banking crisis causing the USD Coin (USDC) stablecoin to be de-pegged from the U.S. dollar (USD) and the major crypto exchange FTX's collapse in 2022, resulting in continuous fund outflows from centralized exchanges.
- The platform also counted an investigation in August 2022 as a contributor to its downfall.
- The investigation targeted a former Hotbit employee, causing the platform to suspend deposits and withdrawals for weeks since law-enforcement authorities froze some funds during the probe.
- Repeated cyberattacks and the exploitation of project defects by malicious users were similarly shown as reasons for Hotbit's decline.
- The company also implied that operating a centralized exchange under current conditions has increasingly become cumbersome, adding the only options left are to embrace new regulations or become more decentralized.
- Following the announcement, several users said they could not withdraw their funds from Hotbit.
- Hotbit currently has 5 million users worldwide.
- The U.S. banking crisis started in March with the consecutive collapses of crypto-friendly Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank within just a week, creating a contagion effect for other banks, including First Republic Bank.
- FTX, previously the third-largest crypto exchange, filed for Chapter 11 bankruptcy in November 2022, with all the 130 entities under the roof of FTX Group, following the claims that the former CEO Sam Bankman-Fried (SBF) used customer funds in FTX to compensate for losses at the sister company, Alameda Research.
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