Canada is currently grappling with a significant challenge as unregistered cryptocurrency firms create channels for large-scale money laundering, leading to unprecedented regulatory actions and law enforcement seizures.
The Scale of the Problem
A growing network of unregistered crypto-to-cash services is operating across Canada, from Halifax to Vancouver, facilitating anonymous financial transactions on a massive scale. These businesses exploit regulatory gaps by offering to convert digital currencies into cash without requiring identity verification, effectively creating a parallel banking system with minimal oversight.
The magnitude of these operations is staggering. For instance, the Ukraine-based service 001k, which operates illegally in Canada without registration, has received over $14.8 billion in cryptocurrency transfers since August 2022. Investigations have revealed that such services have offered to deliver up to $1 million in cash to locations in Montreal in exchange for cryptocurrency transfers, all without asking for identification. Richard Sanders, an expert on these operations, starkly summarized the risk: “If you have this way to move money with absolutely zero checks on it, you’re facilitating an unlimited amount of crime”.
How the Laundering Networks Operate
These unregistered firms employ various methods to obscure the movement of funds. The typical process involves converting illicit physical cash into digital assets through services that ask no questions, allowing the funds to be reintegrated into the legitimate economy or used to finance further criminal activity.
Recent undercover investigations have exposed how easily these transactions occur. In one documented case in Toronto, an individual collected $1,900 in U.S. cash from a FINTRAC-registered money transfer business using only a $5 bill’s serial number as verification, after first transferring cryptocurrency to a foreign exchange. This transaction violated Canadian anti-money laundering regulations requiring recipient identification for transfers exceeding $1,000.
To complicate tracing, these networks often use obfuscation techniques like chain-hopping between transparent and privacy-focused assets, using mixers to obscure provenance, and fragmenting flows through multiple transactions and services. The Royal Canadian Mounted Police (RCMP) has noted that platforms offering anonymous trading with no Know Your Customer (KYC) requirements become magnets for illicit finance, with the majority of funds flowing through them often criminal in origin.
The Regulatory Crackdown Intensifies
Canadian authorities have responded with escalating enforcement actions, resulting in record-breaking penalties and seizures.
In October 2025, FINTRAC imposed a historic C$176.9 million penalty against Xeltox Enterprises Ltd. (operating as Cryptomus) for systemic compliance failures. The violations included failing to submit 1,068 suspicious transaction reports related to activities like trafficking in child sexual abuse material, fraud, ransomware payments, and sanctions evasion. The company also failed to report 1,518 large virtual currency transactions exceeding $10,000.
This was followed by another major enforcement action in September 2025, when the RCMP dismantled the offshore exchange TradeOgre and seized CAD $56 million (approximately USD $40 million) in digital assets—the largest cryptocurrency seizure in Canadian history. Investigators found that TradeOgre had operated without FINTRAC registration and without conducting customer identification, making it a hub for criminal organizations to launder money.
Implications for the Crypto Ecosystem
The escalating enforcement underscores several critical points for traders, treasury managers, and institutional investors. There is now significant legal and operational risk in using unregulated or non-compliant services, as exposure can lead to frozen or seized assets. Furthermore, the regulatory message is clear: crypto firms must play by the same rules as traditional financial organizations, with compliance becoming non-negotiable.
However, enforcement challenges remain. Joseph Iuso of the Canadian Money Services Business Association has pointed out that FINTRAC lacks the resources to properly oversee all 2,600-plus registered money-services businesses, let alone police unregistered ones. This resource gap has likely contributed to the proliferation of unregistered agents.
The combined efforts of regulators and law enforcement have made it clear that the perceived anonymity of cryptocurrency does not guarantee impunity. As these cases demonstrate, even platforms designed for secrecy can leave forensic trails that lead to significant penalties and operational shutdowns.
