Kukoin is implementing measures to block indirect transactions involving 17 sanctioned platforms

KuCoin announced on August 27, through a compliance notice, that it is expanding the scope of its sanctions-related screening to include indirect transactions. This measure affects a total of 17 platforms, including HTX (Huobi Global SA), which is associated with Justin Sun, as well as Shellbit, Avan Tether, A7 Nigeria, A7 Africa, Pilot Finance, Lapira, Ipori Pro, ABCeX, Whitebird, Nowin Crypto, Tradex, Monix, Bitpapa, Xnode, Xnode Pay, and EXMO. The implementation of this policy was rolled out in three phases, on August 7, 13, and 23. The core of this policy is that sanctions may be applied even if a user does not directly conduct transactions on the platform. KuCoin stated that it will review the source of funds, the sending and receiving addresses, and all intermediate service providers. If indirect connections are identified, transactions may be suspended, and wallets or accounts may be temporarily restricted. In cases of repeated or severe violations, the user's eligibility to use the service may be revoked. However, KuCoin has not disclosed how many levels of transaction paths (hops) it will track, or what criteria it uses to determine on-chain attribution. The most influential platform on the list is HTX. Binance also suspended the processing of transactions related to 11 platforms, including HTX, as part of its own sanctions compliance measures, starting on August 23. As a result, the pathways for funds linked to HTX to move between major exchanges have been significantly narrowed. HTX claims that the "HTX (Huobi Global SA)" mentioned in EU regulations is a separate legal entity from the actual online HTX exchange that is operating, and has raised objections to the sanctions. HTX is currently in legal and compliance discussions with British and EU authorities, and reports have emerged of users having their funds frozen on third-party platforms such as Kraken. HTX stated that it has submitted information related to 17 cases of user funds being frozen on Kraken to the court and is working to minimize customer losses. Molly, the head of market operations at HTX, stated that during the two-day period, over 100,000 deposit and withdrawal transactions were processed, and no new cases of indiscriminate freezing were detected. Furthermore, HTX explained that it recently upgraded its wallet infrastructure and introduced a withdrawal address rotation mechanism, which are security measures aimed at reducing risks associated with third parties and confusion caused by on-chain labeling. This move by KuCoin demonstrates that sanctions enforcement is expanding beyond direct transaction counterparties to encompass the entire flow of funds. As exchanges increasingly comprehensively review the source, destination, and intermediary services involved in transactions, compliance standards across the industry are being raised.