Canada Imposes Record Fine on Cryptocurrency Company
In a significant enforcement action, Canada’s financial regulatory body has imposed its most substantial penalty to date on a cryptocurrency company based in Vancouver. Xeltox Enterprises Ltd., which operates under the name Cryptomus, has been fined C$176.96 million (approximately $126 million) due to severe violations of financial compliance regulations. This hefty fine, announced on October 16, 2023, arises from the company’s failure to report over 1,500 suspicious transactions within a single month, many of which are allegedly linked to illicit activities such as child sexual abuse material trafficking and terrorism financing.
Regulatory Breaches and Consequences
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) pointed to a troubling breach of mandatory reporting requirements that are integral to Canada’s anti-money laundering strategy. Their investigation indicated that Cryptomus failed to adequately monitor and report transactions that met or exceeded the C$10,000 threshold, raising red flags regarding the effectiveness of their oversight mechanisms.
FINTRAC CEO Sarah Paquet emphasized the seriousness of these violations, particularly given the connections to high-stakes criminal activities, including fraud and ransomware.
Such substantial non-compliance not only jeopardizes financial integrity but also poses a risk to national security due to potential sanctions evasion, especially with respect to transactions connected to Iran, where Cryptomus neglected to report over 7,500 transactions from mid-2024.
Implications for the Cryptocurrency Sector
This latest penalty underscores a broader trend within Canada’s cryptocurrency sector, which has seen increasing scrutiny as regulators aim to ensure compliance with evolving laws. The record fine imposed on Cryptomus serves as a stark warning to other digital asset platforms following the previous year’s largest penalty of around C$20 million against KuCoin’s operator, Peken Global Ltd. The severity of this fine signals that regulators are now taking a firmer stance on compliance failures, indicating a turning point in the regulatory landscape for cryptocurrency in Canada.
