Treasury Sanctions Eight Canadian Crypto Dealers as FinCEN Bans MEXC

The U.S. Treasury Department sanctioned eight Canadian currency dealers on Friday (Nov. 6), many of which had done business with Iranian exchanges Washington had already blacklisted, according to a press release. In a separate action the same day, the Financial Crimes Enforcement Network (FinCEN) hit offshore exchange MEXC Global with a transfer ban.

Treasury named names. Two firms, one in British Columbia and one operating in Ontario, used the name Amin Exchange; Treasury said digital asset addresses tied to Amin pulled in funds from Shelbit, an exchange sanctioned in August. An address linked to Ontario's Darvish Exchange transacted with four sanctioned Iranian exchanges, including Nobitex and Wallex. Several of the Canadian firms shuffled business names and addresses to dodge detection, Treasury said.

The MEXC order is the broader one. FinCEN said cutting off correspondent accounts alone wouldn't stop the exchange from reaching U.S. dollars through other foreign institutions, so the ban covers funds sent to or received from MEXC and its overseas operations, convertible virtual currency included. It kicks in 30 days after publication in the Federal Register. U.S. persons, banks among them, must freeze and report property they hold in which a designated Canadian firm has an interest.

Regulatory risk was already weighing on banks. A PYMNTS Intelligence report, 'Credit Unions Build for Digital Money's Next Chapter,' found in September that 41% of credit union executives called regulatory permissibility a barrier to crypto, while 52% flagged cybersecurity and fraud risk. Treasury had also warned foreign financial institutions that knowingly facilitating 'significant financial transactions' for designated Iranian exchanges could cost them U.S. correspondent accounts.

Payment instructions carry their own paper trail. Under the existing Travel rule, U.S. intermediaries generally pass along specified details on covered transfers of $3,000 or more, including the sender's name and the identities of the institutions at both ends. FinCEN guidance says an intermediary generally has no duty to chase information the previous institution didn't supply.

On Monday (Nov. 9), FinCEN and the Federal Reserve formally dropped a 2020 plan to cut the recordkeeping threshold for covered transfers starting or ending abroad from $3,000 to $250. The same reduction was proposed for the information institutions must pass along. The agencies blamed a changed crypto market and the need for fresh public comment. The new measures follow last year's Treasury sanctions on the Prince Group network and FinCEN's move to restrict correspondent banking access for Huione Group, a Cambodian financial services conglomerate accused of laundering crypto scam and theft proceeds.