The UK Financial Conduct Authority (FCA), which is responsible for anti-money laundering and counter terrorism financing and financial services licensing in the UK, has secured a lengthy custodial sentence for an individual who operated an unregistered bitcoin ATM operation, as part of a campaign to rid the British Isles of any such machines.
The FCA has been seeking to outlaw bitcoin ATMs since 2022. As part of the announcement concerning the sentencing in this matter, and the initial prosecution, the FCA stated that there are now no bitcoin ATMs operating in the UK and talked of 'disrupting' illegal bitcoin ATM operations. But with no one seemingly able to obtain a licence to operate bitcoin ATMs in the UK, is this a shadow ban via regulation by enforcement?
The Case
The accused in this case had sought registration with the FCA to operate his 28 machine ATM network. After being refused, likely due to the FCA's ban on bitcoin ATMs, the accused transferred ownership of the ATMs and continued operating 12 of them under a false name, and created fake bank statements to pass KYC checks with a crypto exchange as well as false identity documents to incorporate a company. This is of course very illegal and not something that should have been done.
The FCA charged the accused with failing to carry out required KYC checks for users of his ATMs (it is not clear if those checks were even feasible to comply with), and stated that he had made between 30 - 60% markups on the crypto sold using the ATMs, with over USD$2M in transactions having passed through the machines.
The FCA charged the accused in September 2024, noting "There are no legal crypto ATM operators in the UK". The accused pled guilty and was recently sentenced to four years prison. His Honour Judge Perrins said as part of sentencing:
Your decision to continue to operate illegally was an act of deliberate and calculated defiance to the regulator... You knew full well that you were acting unlawfully... You went to great lengths to create a false identity to conceal your involvement... Your actions were deliberate and carefully planned... It cannot be said that it is a mere regulatory breach.
This case is an example both of the importance of meeting licensing requirements and following AML compliance strictly, but in the context of the FCA proudly stating that there are no bitcoin ATMs in the UK, might also be an indicator that the application of traditional licensing laws to this new technology has led to a shadow-ban on bitcoin ATMs.
The USA is home to over 29,000 bitcoin ATMs, Canada over 3,000, and Australia more than 1,500. This is a stark contrast to none in the UK, and it does seem curious that so many thousands of machines operate everyday in the USA without there being widespread problems and harm of the kind the FCA says they are protecting UK residents from being exposed to in stamping out unlicensed bitcoin ATMs there.
There are indications of a similar crackdown underway in Australia with AUSTRAC increasingly talking tough on Bitcoin ATMS, digital currency and remittance services generally. Last month, the regulator announced the results of "a campaign" targeting remitters and DCEs. While AUSTRAC has been increasing its engagement with DCEs, including in relation to transaction monitoring and on and off-chain activity, there appears to be less to the announcement than meets the eye. In fact, ASIC records show that only two DCE registrations were cancelled or suspended last year, both involving entities which had been insolvent for nearly two years.
As more jurisdictions regulate crypto with fit for purpose regulation, and move away from licensing requirements which are practically impossible to comply with, perhaps bitcoin ATMs will once more grace fair England's shores. For the time being, it appears that the cryptocurrency industry will continue to face targeted scrutiny and often unfair headlines which deepens operational challenges like de-banking for those seeking to comply with the law and feeds false narratives undermining the innovative potential of blockchain technologies to fight financial crime in new ways.
By Michael Bacina and Steven Pettigrove
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