The US subsidiary of crypto exchange Bittrex has filed for Chapter 11 bankruptcy protection.
Bittrex is a US company, but also operates outside the US. It was the US subsidiary that filed for bankruptcy, i.e. the one that manages the platform for US customers.
In fact, the international version of the exchange is still operational, as the bankruptcy does not appear to affect the international branch.
Bittrex: from creation to bankruptcy
During the second cycle of Bitcoin, which ended with the halving of 2016, it had become one of the biggest crypto exchanges internationally, partly due to the failure of Mt.Gox in 2014.
However, with the arrival of other big players in the industry, during Bitcoin‘s third cycle, it had begun to lose ground, so much so that recently its trading volume was only $5 million per day, compared to Coinbase‘s over $700 million, for example.
The company had maintained relatively high costs, and certainly the collapse in volumes due to the bear market must have had a major impact on its economic and financial sustainability.
The USA and the rest of the world
It is possible that most of the volumes were made in the US, where the company was born and has always operated, but certainly some were made abroad.
A few weeks ago, Bittrex announced its intention to withdraw from the US, citing the current US regulatory and economic environment.
Given what has happened since, it is safe to assume that this idea was also driven by internal issues relating to competition and the sustainability of the business in the US market.
On the other hand, in a difficult period for the crypto markets that has now lasted 12 months, competition from a giant like Coinbase in the US, coupled with that of another high-performing US exchange like Kraken, must have made things very difficult for Bittrex.
The failure of FTX does not seem to have helped matters much, not least because it is possible that Bittrex’s problems predated it.
So on the one hand the exchange has effectively abandoned the US market due to the bankruptcy of the company that ran its exchange platform for US customers, while on the other it is still operating abroad.
Problems in the US
It should not be forgotten, however, that in October last year the exchange agreed to pay a $53 million fine to the US Treasury Department for violating sanctions against certain countries and anti-money laundering laws.
In other words, the problems were not just related to the economic/financial or regulatory environment. In fact, anti-money laundering regulations apply almost identically to both fiat currencies and cryptocurrencies.
Perhaps the US is simply stricter in enforcing these rules, which makes operating crypto exchanges in the US a little more difficult and risky.
They are not necessarily as lax abroad in enforcing anti-money laundering rules on crypto exchanges, so perhaps the problem has just been pushed a little further down the line.
Even Coinbase itself, the main US crypto exchange now that FTX is gone, is planning to split its operations into two, with one platform for US customers only and an international platform for foreign customers.
Cryptocurrencies as security
To all of this must be added the real sword of Damocles of a possible decision by the US authorities to declare as securities most cryptocurrencies, and especially token.
Bittrex itself has been accused by the SEC of allowing the buying and selling of tokens and cryptocurrencies that would be unregistered securities, and this also affects other US crypto exchanges, for now, and perhaps in the future those operating abroad.
In such a context, it was already perfectly understandable that Bittrex would want to exit the US market, and the bankruptcy declared on Monday only makes that exit more immediate.
Bittrex: the bankruptcy filing
Thanks to the Chapter 11 filing, the company is not shutting down completely. In fact, the international exchange seems to be still active.
However, this is effectively a bankruptcy, although there is a possibility that the company will be able to restructure and perhaps resume operations in the US in the future.
It is difficult to imagine that the declaration of bankruptcy and filing for Chapter 11 status is simply a move to make an immediate exit from the US market, given that Bittrex’s economic/financial problems were serious and already well known.
However, it certainly accelerates the timetable and makes the exit de facto immediate.
It is worth reiterating that only Bittrex’s US subsidiary has filed for bankruptcy, despite being the original company that launched the exchange in 2013, and that the international subsidiary will continue to operate for the time being.
It is not certain, however, that the latter is not suffering from similar economic/financial problems to the bankrupt US subsidiary, even if it has fewer historical problems as it was born some time later.