Gatecoin Finally Shuts Down

The Hong Kong-based cryptocurrency exchange Gatecoin announced on Thursday, March 14 that it was finally closing its doors and entering liquidation after it was unsuccessful in recovering funds that had been lost to a former payment service provider in a dispute.

The closure of the company was announced via Gatecoin’s corporate website, where the team explained that it had tried for many months to stay afloat. Unfortunately, the exchange finally received a court order to cease its operations with immediate effect.

Financial Difficulties

Gatecoin was founded in 2013 and, as a cryptocurrency exchange, focused its trade operations only on BTC (Bitcoin), ETH (Ethereum) and Ethereum-based tokens.

The company’s troubles began in 2016, when it reported that it had been the victim of a hack attack and had lost 250 BTC as well as 185,000ETH of investors’ money. In 2016, that amount was worth $2.14 million.

Sadly, those funds were never recovered. However, the exchange stated that the hack was not the reason why it was finally forced to shut shop. Gatecoin put the blame of its financial troubles squarely on its former PSP (payment service provider).

French PSP to Blame

The exchange explained that it had stated facing major financial challenges with banking services from September 2017 onwards. This is because its bank in Hong Kong suddenly froze the company’s accounts.

Despite the freeze, the exchange struggled on. It started working with an unnamed French PSP that was reportedly a completely regulated payments institution.

According to the company, this PSP did not process most of the transactions in a timely fashion, which led to most of their operations being paralyzed for many months. The company stated that it also caused them to incur substantial financial losses.

By September 2018, Gatecoin replaced its PSP, however, the exchange’s financial situation continued to deteriorate. This, according to the exchange, was because the French PSP retained most of the company’s funds. Gatecoin initiated legal action against the PSP, but was informed that its chances of recovering the funds from the provider were very slim. Due to so many successive losses, the company could not longer sustain its operations.

Banking Challenges in the Crypto Industry

Having their bank accounts suddenly frozen has become an all-too-common problem for cryptocurrency companies. In fact, according to mainstream media reports, crypto startups still face massive issues in trying to open even standard bank accounts.

This holds true even more the more established businesses, with many of them stating that banking services are simply denied to them.