Tradehill, the U.S.-based Bitcoin exchange, has temporarily suspended trading due to “banking and regulatory issues” that appear to be linked to the service’s credit union partner.
Tradehill has suspended operations before. The company’s original incarnation, partly-based in Chile, shut up shop in 2012, also citing regulatory reasons, and blaming a processing partner who pulled the rug out from under the Bitcoin operation.
This time, according to Tradehill’s homepage:
“We have recently made the decision to temporarily suspend trading on the Tradehill platform, due to banking and regulatory issues. This decision has not been made lightly and we regret having to take such action. However, we embrace the silver lining of our situation and plan to take this opportunity to upgrade, improve, and polish our trading platform.”
Tradehill added that it had registered with the U.S. financial crimes authority FinCEN earlier this month and was “actively engaging with banks and regulators to continue development of future business products and practices.”
So what went wrong? Tradehill recently moved its customer accounts to the Internet Archive Federal Credit Union, which is run by Internet Archive founder Brewster Kahle. Bloomberg reported that this would have allowed federally insured accounts, something that would have given customers more confidence in the platform.
However, Tradehill CEO Jered Kenna said in a Reddit post on Friday that Kahle’s credit union “has experienced operational and regulatory issues and we are no longer able to continue our relationship at this time.”
Tradehill, which says it hopes to resume trading soon, also told me:
“Tradehill’s integration with IAFCU had allowed for clients to buy Bitcoin with a balance in an account with their own name. This allowed clients to trade Bitcoin with funds that were stored in a federally insured institution.
“Our clients still have full access to their funds. We are consulting with regulators to define the most appropriate licensing strategy for our current and future business practices. We are also actively engaging with banks and regulators to continue development of best practices for Bitcoin regulation and compliance.”
In a separate post, the Internet Archive Federal Credit Union wrote:
“Starting three months ago we have enjoyed serving some individuals and companies involved in bitcoin that are within our field of membership. While exciting, this has also been during a period of increased interest from the press, regulators, and other financial services entities that make up the financial community. In doing this, certain operational and regulatory issues came up including some that apply to new credit unions like ours.
“Our credit union has worked within the evolving regulatory environment, which has not always been easy. This is a long not a short road and sometimes with detours. Until we have further clarity, we are unable to service some of our corporate members.
“On a positive note, we are finding all involved are interested in a stable environment for bitcoin and other innovative technologies.”
Kenna had told us Tradehill had 8 attorneys to ensure compliance in the U.S. It seems ensuring compliance on its partners’ side is a recurring problem, though — not that we’re any the wiser as to the specific nature of the problem this time.
Note: This story was updated at 7am PT to add in context derived from Kenna’s Reddit post, and again at 9.30am PT to reflect an added answer from Tradehill.