No, if you want to sell some crypto to a friend of your, that's fine. I don't know why localbitcoins shut down, but it's perfectly consistent for "facilitating transactions at scale" to be illegal while "doing a single peer to peer transaction" is legal.

That's how unregistered securities work, right? I am allowed to buy half of your small business, even though it isn't registered with the SEC. That doesn't mean you're allowed to sell stock in your small business and advertise that on the internet.