UK Police Raid Illegal Crypto Traders: FCA Cracks Down on Unregistered Peer-to-Peer Deals

UK authorities have executed their first coordinated operation against suspected illegal peer-to-peer (p2p) crypto trading, signaling a firm stance on financial accountability. The Financial Conduct Authority (FCA) collaborated with police and tax officials to conduct raids at eight London addresses linked to alleged illegal p2p crypto trading. During these inspections, cease-and-desist letters were issued at each location.

Evidence collected during the raids is now supporting criminal investigations, according to the FCA. Reuters reported that there are currently no FCA-registered peer-to-peer crypto traders operating in the UK.

When Does Crypto Trading Cross into Illegality?

The legal distinction in the UK is straightforward. Occasional person-to-person crypto trades do not equate to running a business. The line is crossed when individuals or entities engage in activities such as:

• Regularly exchanging crypto for cash;
• Arranging exchanges for others;
• Swapping one cryptoasset for another as a business;
• Operating automated machines for crypto exchanges “by way of business.”

The FCA’s anti-money-laundering regime explicitly includes “cryptoasset exchange providers,” such as p2p providers, under its regulatory scope. Activities that qualify as a business include:

• Repeatedly buying and selling crypto for others;
• Advertising crypto trading services;
• Handling customer funds;
• Acting as a recurring intermediary.

Under the UK’s Money Laundering Regulations, in-scope crypto businesses must register with the FCA before commencing operations. The regulator emphasizes that registration is not optional but a legal requirement.

Why Registration Matters: AML and Beyond

Unregistered crypto businesses pose significant risks, including money laundering, sanctions evasion, fraud, and terrorist financing. Registered firms are obligated to:

• Verify customer identities;
• Monitor transactions;
• Keep detailed records;
• Report suspicious activities.

These measures ensure transparency and reduce the ability to convert illicit funds into spendable value while obscuring identities. The FCA views unregistered p2p desks as equivalent in risk to any unregistered money-services business.

Financial Promotions and Legal Consequences

Since the UK extended its financial promotions regime to crypto, companies marketing crypto activities to UK consumers must adhere to strict rules. Valid routes include:

• Communication by an authorized firm;
• Approval by an authorized firm;
• Communication by an FCA-registered crypto business under a relevant exemption;
• Another valid exemption.

Promotions outside these routes violate Section 21 of the Financial Services and Markets Act and are treated as criminal offenses.

Tax Authorities Join the Crackdown

The involvement of tax officials underscores the broader implications of informal crypto services. While not all targets may have undeclared income, authorities highlight that businesses earning fees, spreads, or gains through repeated dealing create taxable income. Avoiding registration, customer checks, and proper accounting can escalate enforcement into broader financial crime supervision, including tax compliance issues.