The Financial Conduct Authority’s recent raids on eight London properties where illegal cryptocurrency trading was allegedly taking place are the latest sign that the regulator is taking a more muscular approach to the sector.
Last year, the agency successfully secured the UK’s first criminal conviction against an illegal crypto ATM network, resulting in a four-year prison sentence, while in February it launched High Court proceedings against HTX, a Panama-based exchange accused of unlawfully promoting cryptoassets to UK consumers.
The exchange has since been sanctioned by the UK government for alleged links to Russian sanctions-evasion activity.
Taken together, these developments suggest that the regulator is moving beyond warnings and compliance guidance towards active enforcement.
For businesses and individuals operating in the cryptoasset sector, the message is clear: regulatory scrutiny is increasing and failure to comply with the UK’s evolving framework may carry serious consequences.
Why is the FCA increasing scrutiny of cryptoassets?
Cryptocurrency has moved rapidly from a niche investment product to a mainstream financial asset. However, regulators have become increasingly concerned about its potential use in fraud, money laundering, sanctions evasion and other forms of financial crime.
The government’s most recent National Risk Assessment warned that cryptoassets are increasingly being used to launder the proceeds of crime. Law enforcement agencies have also highlighted concerns that certain crypto services may be exploited to move, disguise or spend criminal property.
As a result, the FCA has made crypto enforcement a growing priority.
What activity is attracting regulatory attention?
The FCA’s recent enforcement action demonstrates that its focus extends well beyond cryptocurrency itself.
Areas attracting particular scrutiny include:
- operating cryptoasset businesses without the required FCA registration
- peer-to-peer crypto trading carried on by way of business
- cryptoasset promotions aimed at UK consumers
- anti-money laundering compliance failures
- crypto ATM operations
- suspected money laundering involving digital assets
Cryptocurrency ownership and trading are not illegal in the UK. However, businesses operating within the sector may be subject to a range of regulatory obligations depending on the nature of their activities.
What happens when the FCA investigates?
Cryptoasset investigations often involve multiple agencies, including the FCA, HMRC, the National Crime Agency and regional organised crime units. Depending on the allegations, businesses and individuals may be required to provide information, attend interviews or respond to enforcement action.
Enforcement powers may include:
- searches of homes and business premises
- seizure of electronic devices and records
- production orders requiring information to be provided
- interviews under caution
- account freezing orders
- restraint orders
- confiscation proceedings
- recovery of cryptoassets
In serious cases, investigations can result in criminal prosecution and custodial sentences.
The importance of compliance
The FCA’s recent activity highlights the importance of understanding and complying with the UK’s evolving regulatory framework for cryptoassets. Whether establishing a new cryptoasset business or reviewing an existing operation, firms should ensure that they fully understand their regulatory obligations and exposure to enforcement risk.
Businesses should consider:
- whether FCA registration is required
- the adequacy of anti-money laundering procedures
- customer due diligence and source-of-funds checks
- transaction monitoring processes
- record-keeping obligations
- marketing and promotional activities aimed at UK consumers
As regulation of the sector continues to develop, businesses may need to review existing compliance arrangements and obtain specialist advice where uncertainty exists.
How Lewis Nedas Law can help
Lewis Nedas Law is at the forefront of the fast-developing field of cryptoassets, as highlighted in The Times and Daily Mail. Our founder, Jeffrey Lewis, and non-executive director, Siobhain Egan, have extensive experience representing clients in corporate crime investigations, regulatory proceedings and enforcement action, with Siobhain specialising in asset freezes, seizures and regulatory investigations.
We advise individuals and businesses facing FCA proceedings, money laundering allegations and other financial crime matters. Along with our specialists in Proceeds of Crime Act (POCA) and civil recovery matters, we provide strategic advice across a broad range of financial crime and regulatory issues.
Our team also assists firms seeking to understand their regulatory obligations and manage compliance risks in an increasingly complex enforcement environment.
About us
Lewis Nedas has been a top tier firm in the Legal 500 rankings for the past 14 years and has been voted into The Times Best Law Firms list eight times since its launch in 2019.
The firm is currently advising in multi-jurisdictional unexplained wealth order proceedings brought by the National Crime Agency concerning assets valued at more than £30 million.
Jeffrey Lewis and Siobhain Egan have a track record of successfully advising clients in UWO matters. They work alongside our highly regarded disputes litigation team, headed by Wilson Soares, and our specialist lawyers in Proceeds of Crime Act (POCA) and civil recovery matters.
Fees
We are committed to providing clear and transparent information about our legal fees. We do not operate on a ‘no win, no fee’ basis, but instead offer tailored fees that reflect the complexity and requirements of each case.
Our fee structure comprises our competitive hourly rates and in certain cases we may be able to seek litigation funding. Fees are discussed and agreed with clients at the outset to ensure clarity and avoid unexpected costs.
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Siobhain Egan, Director (Non-Executive)