KuCoin, one of the world’s largest cryptocurrency exchanges, has formally appealed a C$19.6 million administrative monetary penalty imposed by Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC). The penalty, the largest of its kind in Canadian history, was levied after FINTRAC alleged that KuCoin’s operating entity failed to report nearly 3,000 large virtual currency transactions exceeding C$10,000, neglected to flag 33 instances of suspicious activity and did not register as a Foreign Money Services Business (FMSB) between June 2021 and May 2024.
In its appeal filed in the Federal Court of Canada, KuCoin disputes the regulator’s characterization of its business model. The exchange argues that it does not meet the definition of a money services business under Canadian law and asserts that the penalty is disproportionate. KuCoin’s submission contends that its internal controls and compliance processes have evolved significantly since the period under review, including enhancements to its know-your-customer (KYC) and anti-money laundering (AML) procedures. The company emphasizes that it voluntarily restricted services in jurisdictions where it lacked clear registration and licensing, aiming to align operations with local regulations.
FINTRAC’s enforcement action cited failures in three key areas: registration, transaction reporting and suspicious transaction reporting. The agency alleged that KuCoin did not enroll as an FMSB when it began offering services to Canadian residents and that it disregarded statutory obligations to identify and report transactions deemed suspicious. Under Canadian law, reporting entities must submit an entity information report, report large cash and virtual currency transactions and file suspicious transaction reports, including those linked to illicit operations such as darknet marketplaces or ransomware payments.
KuCoin’s appeal outlines procedural and substantive grounds. On procedural grounds, the exchange claims that FINTRAC did not provide adequate notice of its compliance deficiencies or an opportunity to remedy before imposing the penalty. On substantive grounds, KuCoin questions the methodology used to identify reportable transactions, maintains that it engaged with FINTRAC on interpretative questions and asserts that any reporting omissions were unintentional and have since been corrected.
The appeal follows earlier regulatory and enforcement actions taken against KuCoin globally. In January 2024, KuCoin pleaded guilty in a U.S. federal court to operating an unlicensed money transmitting business and agreed to pay nearly $300 million in fines and forfeitures, including a $112.9 million criminal fine and $184.5 million in forfeiture. That settlement required KuCoin to implement robust compliance measures and barred it from serving U.S. customers for at least two years. Additionally, the Seychelles-based exchange settled related matters with the U.S. Department of Justice and the Commodity Futures Trading Commission, highlighting ongoing cross-border regulatory risks for digital asset platforms.
Industry observers view the Canadian action as part of a broader trend of intensified scrutiny on cryptocurrency service providers. Canadian authorities have signaled stricter enforcement under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to align with global standards. The record fine on KuCoin underscores FINTRAC’s intent to deter non-compliance and enhance transparency in the sector. Other exchanges have also faced Canadian enforcement: Vancouver-based Shakepay was fined C$3.5 million in 2023 for similar AML reporting lapses.
KuCoin’s legal team argues that a successful appeal could establish important precedent for the classification of international digital asset platforms under Canadian law. The outcome may influence future regulatory expectations around registration, transaction monitoring and reporting. Observers note that if the court upholds FINTRAC’s penalty, other overseas exchanges could face comparable sanctions unless they preemptively secure FMSB registration and implement enhanced AML controls.
For stakeholders and customers, the appeal represents a critical test of Canada’s approach to cryptocurrency oversight. As digital asset markets mature, the balance between innovation and compliance remains a central policy challenge. KuCoin has pledged to maintain operations during the judicial process, reaffirming its commitment to security, user protection and regulatory collaboration. The Federal Court is expected to schedule a hearing within the coming months, with a written decision potentially shaping the regulatory landscape for crypto service providers across Canada and beyond.
Comments (0)