Bittrex, a global cryptocurrency exchange, files for Chapter 11 bankruptcy in the US. Bittrex’s international business continues to work regularly.
The Bittrex US subsidiary has applied for Chapter 11 bankruptcy protection. Although Bittrex is a US-based business, it also has operations abroad. The US subsidiary, which oversees the platform for US clients, was the one to file for bankruptcy. As a matter of fact, the exchange’s international division continues to run normally, seemingly unaffected by the bankruptcy.
Bittrex: from inception to collapse
Bittrex is one of the oldest cryptocurrency exchanges, founded in 2013 following bitcoin’s first halving and amid the first major post-halving speculative boom.
Due in part to the collapse of Mt.Gox in 2014, during the second cycle of Bitcoin, which came to an end with the currency’s halving in 2016, it has grown to become one of the largest cryptocurrency exchanges globally.
However, as more significant companies entered the market during Bitcoin’s third cycle, it started to lag behind. As of late, its daily trading volume was barely $5 million, compared to Coinbase’s daily trading volume of over $700 million, for instance.
The company had kept expenses relatively high, and the decline in volumes brought on by the bear market must have had a significant effect on its capacity to retain its economic and financial viability.
United States and rest of globe
Although the corporation was founded and has always operated in the US, it is probable that the majority of the volumes were produced abroad.
Bittrex declared its plan to leave the US a few weeks ago, citing the political and business climate there.
One can reasonably assume that internal concerns about Bittrex’s survival in the US market and competition also motivated the concept, considering the events that followed.
However, in a challenging phase for the cryptocurrency markets that has now lasted a year, Bittrex must have found it extremely challenging to compete with a major US exchange like Coinbase and another top-performing US exchange like Kraken.
Even though Bittrex’s issues might have existed prior to FTX’s demise, it does not appear that it has made much of a difference.
Due to the bankruptcy of the business that operated the exchange platform for US consumers, the exchange has, in effect, given up on the US market, but it is still active outside.
Difficulties in the US
October 2018, the exchange paid $53 million to the US Treasury Department for violating anti-money laundering and sanctions on particular countries.
In other words, the issues went beyond only the regulatory or economic/financial context. In actuality, laws against money laundering apply to both fiat money and cryptocurrencies in a quite similar way.
It’s possible that the US simply enforces these regulations more strictly, which makes running crypto exchanges there a little riskier and more challenging.
Cryptocurrency exchanges may be subject to stricter anti-money laundering laws in other countries, postponing the issue.
Even Coinbase, the primary US cryptocurrency exchange now that FTX has shut down, plans to divide its business into two, with one platform exclusively for US consumers and another one for users from abroad.
Bitcoins as a kind of security
The actual sword of Damocles hanging over all of this is the possibility that the US government will decide to classify most cryptocurrencies, particularly tokens, as securities.
The SEC has accused Bittrex of permitting the purchase and sale of tokens and cryptocurrencies that are unregistered securities. For the time being, this also has an impact on other US-based cryptocurrency exchanges, but it may also affect those that are located abroad in the future.
Given this situation, Bittrex’s desire to leave the US market was already very comprehensible, and the bankruptcy filing on Monday has just accelerated this exodus.
Bittrex: the declaratory judgment
The Chapter 11 filing has prevented the company from going out of business entirely. In actuality, it appears that foreign trade is still going strong.
Although there is a chance the business will be able to restructure and perhaps continue operations in the US in the future, this is essentially a bankruptcy.
Given that Bittrex’s economic and financial issues were severe and well-known, it is difficult to believe that the filing for Chapter 11 status and bankruptcy declaration is just a ploy to leave the US market immediately.
However, it is undeniable that the schedule has been accelerated, and the evacuation has been made effectively instant.
Despite being the original firm that founded the exchange in 2013, it bears repeating that only Bittrex’s US division has declared bankruptcy and that the international subsidiary will continue to run for the time being.
Even though it was created later and has fewer historical issues, the latter may still be encountering similar economic and financial problems as the bankrupt US subsidiary.