The Financial Conduct Authority worked with other agencies on its first operation against illegal peer-to-peer crypto trading. Rahman Ravelli’s Syed Rahman considers the significance of the action taken.
In what was its first action against those suspected of involvement in illegal peer-to-peer crypto trading, the Financial Conduct Authority (FCA) teamed up with other agencies and targeted eight London locations.
Working with HM Revenue & Customs (HMRC) and the South West Regional Organised Crime Unit (SWROCU), the FCA issued cease and desist letters at each site, telling traders to stop illegal activity immediately. The evidence obtained during the operation is now set to be used in a number of ongoing criminal investigations.
The action can be seen as notable for being the first operation against peer-to-peer crypto trading; the practice whereby individuals buy and sell crypto directly with each other. Anyone doing this as a business in the UK requires appropriate registration. At the time of the operation, there were no FCA-registered peer-to-peer crypto businesses active in the UK.
While this was its first operation against peer-to-peer trading, the FCA has previously taken action against other unregistered cryptoasset activity in the UK, including prosecuting an individual operating an illegal network of crypto ATMs and working with police to arrest two individuals suspected of running an illegal cryptoasset exchange.
Steve Smart, executive director of enforcement and market oversight at the FCA, said: “Unregistered peer-to-peer crypto traders operating in the UK are doing so illegally and pose a financial crime risk. We will use our powers and work with partners to disrupt them.’’
The government’s National Risk Assessment of Money Laundering and Terrorist Financing has outlined how cryptoassets are increasingly being used to launder the proceeds of crime.
More operations
It is highly likely that we will see more of these operations. There are a number of reasons for this. The main one is that (as mentioned above) cryptoassets have become a clear and established means of laundering the proceeds of crime.
Peer-to-peer trading does not require any form of KYC (know your customer) or AML (anti-money laundering) documentation and, as a result, is a favoured method of money launderers. The huge financial significance of money laundering to organised crime will ensure that where one peer-to-peer trading network is closed, another will pop up. As a result, government operations will continue to be needed.
Furthermore, the UK government plans to introduce a new crypto licensing gateway in September 2026 and a new cryptoasset regime is planned for October 2027 under the Financial Services and Markets Act (FSMA). To legitimise this, and the actors that undergo all regulatory checks and requirements, enforcement against illegal actors must be maintained.
The FCA itself does not have arresting powers so civil enforcement or cease and desist letters are a natural first step for it. If money laundering is not confirmed and the peer-to-peer trader is simply making use of a technology not permitted by the UK, then a cease and desist letter presents a reasonable first step to be taken. If the trader does not stop, then further action can be taken.
The action taken is certainly a significant first. More is almost certain to follow.
