It is not only LocalBitcoins, there are some P2P platforms closed their services too like Paxful, 2 months after LocalBitcoins.
Paxful is shutting downThey did it by stricter regulations. Even Kucoin required mandatory KYC a few months after that.
Before LocalBitcoins and Paxful, there is another one in October 2022, Localcryptos.
LocalCryptos is shutting downStricter regulations are the easiest to use as a reason, but it might not be the real one. Although I think it's indeed the reason as far as Localcryptos are concerned, it probably wasn't as to the case of LocalBitcoins. LocalBitcoins complied with regulatory demands. Therefore, they didn't have to shutdown. Localcryptos remained principled until the end; they had to shutdown.
As to Paxful, although they also mentioned it, the shutdown wasn't really about stricter regulations. It was more of internal disagreement on ownership and control. It reopened later with another CEO.