LocalBitcoins Bans Cash Payment; LocalEthereum Reduces Cash Fee to Zero in Response
LocalBitcoins is the largest globally run OTC service for buying Bitcoin online through an escrow mechanism and recently, the operator has decided to ban cash payments amid regulatory worries regarding cryptocurrency transmission. In an attempt to capitalize on this, LocalEthereum reduced cash fees to zero, June 1, 2019.
Is LocalBitcoins OTC Dominance Over?
Most LocalBitcoins transactions are done via bank transfers, so most people aren’t worried about liquidity constraints arising on the platform. However, a significant amount of money will be routed to other OTC platforms given certain users propensity for cash.
Weekly volume on LocalBitcoins has been steadily rising for the last few months. That is expected to gradually dwindle now that users cannot use cash to purchase BTC, but their loss is another platform’s gain – or rather another network’s gain.
LocalEthereum’s nil cash fee may now incentivize users to transact with ETH, or at the very least use their cash to buy ETH and transfer that for BTC. On June 3, 2019, Roger Ver backed local.bitcoin.com, that facilities P2P exchange of Bitcoin Cash (BCH), will launch and offer cash as a method of payment.
By shunning cash payment on LocalBitcoins, BTC may be losing a certain amount of transaction volume to ETH and BCH amid reports that merely 1.3 percent of BTC volume are actual payments.
OTC as a Frontrunner
The 2018 bear market managed to push several narratives to keep positivity in the space flowing, of which the most prominent was the rumor that institutions and large traders we’re slowly loading up on crypto through OTC exchanges.
Now with Chinese investors using WeChat groups to get their money out of the grasp of the government, the rumor may actually be playing out in reality. OTC exchanges help users keep the government out of their hair, but regulators are likely to come down heavy on these platforms.
In countries that have a banking ban like India or harsh capital restrictions like China and Afghanistan, purchasing cryptocurrency with a bank account is an exhausting process with a risk of your bank account being closed entirely. The ability to purchase and sell for cash was a huge benefit to people receiving and sending money abroad.
The Middle East and Southeast Asia are rife with remittances from residents of developed countries to their families back home. Bitcoin was the cheapest and fastest way to send this money and cash was the easiest way to withdraw it given the magnitude of unbanked citizens. With cash removed from LocalBitcoins, these people will invariably move to BCH or ETH to send money back home that can be withdrawn in cash.