Offshore "Feast is Over": From US Stock Tax Replenishment to On-Chain Pricing Power, the "Route Struggle" of Crypto Exchanges

Author: Web3 Farmer Frank

Have you ever thought about whether Crypto trading will also be taxed in the future?

Since this spring, many users from mainland China who trade US stocks using platforms like Tiger Brokers and Futu Securities have received back tax notices one after another. This is no coincidence. With the implementation of the CRS global information exchange, offshore accounts and investments are being monitored from a comprehensive perspective, affecting everyone from high-net-worth individuals to ordinary middle-class citizens.

The reasoning is similar; the "sovereign vacuum period" in finance is often very short. Today's US stock brokers may well be a rehearsal for tomorrow's Crypto trading—once the era of chaos passes, Liangshan will inevitably be incorporated into the regular army:

From the invisible freedom of offshore US stock accounts to the global information exchange of CRS, from the wild growth of third-party payments to the strict control of central bank licenses, financial innovations that drift outside mainstream regulation are moving from gray areas to standardization, and this is an irreversible one-way street.

Especially since the beginning of this year, with the entry of Web3 and power into the scene, Crypto exchanges are at a crossroads of fate. Compliant local players are firmly in control, the offshore gray space is rapidly shrinking, and on-chain DEXs are gaining momentum.

There is no middle ground, only clear directional distinctions.

Offshore CEX, the feast is over

Centralized exchanges (CEX) remain the top predators in the current Crypto ecosystem.

It can be said that CEXs, which primarily rely on trading fees for revenue, have reaped the largest dividends from the explosive growth of Crypto. According to public market estimates, the annual revenue and profits of leading offshore CEXs like Binance and OKX are in the tens of billions to even over a hundred billion dollars. For instance, Binance's revenue in 2023 reached as high as $16.8 billion, with an annual cryptocurrency trading volume exceeding $3.4 trillion.

This means that even during turbulent global macroeconomic cycles, offshore CEXs remain one of the most profitable businesses.

Source: Fourchain

However, the golden age of the offshore model has clearly come to an end.

Compliance pressures and tax storms are extending from traditional finance into the Crypto realm. Similar to the recent uproar over back taxes on US stock trading, observant users should note that over the past year, offshore CEXs like Binance and OKX have also faced various public controversies:

Including but not limited to restricting accounts that use cryptocurrency assets as their sole source of income and requiring users to provide proof of annual income and tax payments, among other things.

Objectively speaking, offshore giants like Binance and OKX have paid a high price to "go onshore." In addition to the legal accountability faced by their founders, significant funds have also been invested—Binance has publicly disclosed that it invested hundreds of millions of dollars in compliance and security alone in 2024, and its internal compliance team has grown to 650 experts.

Especially since 2025, various companies have been accelerating their compliance efforts and potential IPOs, taking advantage of the "political dividend window."

For example, Kraken first saw the US SEC withdraw its securities violation charges against it, and the FBI ended its investigation into its founder. It then hinted at potential IPO plans, with recent reports suggesting it is seeking to raise $500 million at a valuation of $15 billion, fully pivoting towards compliance.

OKX has similarly reached a settlement with the US Department of Justice this February, paying over $500 million in fines, and is actively pushing for an IPO in the US, with reports indicating that its compliance department in the US has been adjusted to the highest priority across all departments.

These actions send a clear signal that the survival space for the offshore model has been compressed to a historical low, and CEXs are racing to seize the last window of compliance.

It can be said that this Crypto political honeymoon period, catalyzed by Trump's reshaping of policy narratives, the "balance sheetization" of BTC, and the stablecoin boom, is almost the last window for offshore CEXs to transform.

Once the opportunity to "go onshore" is missed, they may fall from top predators in the ecosystem to targets of regulatory cleanup.

The foreseeable pattern of "three kingdoms"

If we compare today's Crypto market to the Hong Kong and US stock markets that Chinese investors participated in ten years ago, then the evolution of regulation and the market is merely a few years behind schedule.

As global tax compliance, capital controls, and the entry of financial institutions overlap, the future landscape of exchanges can almost be predicted as a "three kingdoms" scenario:

• Localized licensed compliant CEXs: Represented by Coinbase, Kraken, HashKey, OSL, etc., characterized by their ability to connect with banks and comply with clearing requirements, primarily serving local users and institutions/high-net-worth individuals, building long-term brand value through compliance moats;
• Offshore gray CEXs: Represented by Binance, Bitget, Bybit, etc., serving global retail and some high-risk users, will inevitably be compressed, eroded, and marginalized under the current global compliance trends and the approaching on-chain experience;
• Pure on-chain decentralized exchanges (DEX/DeFi native): No KYC required, permissionless access, natively supporting on-chain asset settlement and multi-chain composite trading, which may become the new global liquidity hub in the future;

Among them, compliant exchanges are undoubtedly the "upward curve players" benefiting from policy dividends. In markets like the US and Hong Kong, compliant exchanges can not only engage in partnerships with institutions and banks but also be incorporated into local tax systems. The strategic goal of such platforms is very clear—becoming the next generation of digital asset exchanges and clearinghouses.

For instance, a signal that is easily overlooked is that compliant exchanges represented by Coinbase are entering their golden moment—projected revenue for Coinbase in 2024 is $6.564 billion, more than doubling year-on-year, with a net profit of $2.6 billion, nearly approaching 50% of offshore leader Binance (according to market estimates).

More critically, Coinbase hardly needs to worry about enforcement actions from mainstream jurisdictions or risks of bank freezes, making it a natural "safe haven" for institutions and high-net-worth individuals.

On-chain DEXs, on the other hand, belong to the category of "global market players" with the greatest potential and highest ceilings. They do not rely on national licenses and serve as a 24/7 global liquidity hub, especially with strong programmability supporting on-chain asset settlement and cross-asset composite strategies.

Although their current market size is still less than 10% of CEXs, the growth elasticity is enormous. Once the on-chain derivatives market matures, the market depth and strategic space of DEXs will attract a large influx of high-frequency funds, arbitrageurs, and institutional liquidity.

For example, Hyperliquid saw its capital grow rapidly in July, increasing from just below $4 billion at the beginning of the month to $5.5 billion, and at one point nearing $6 billion in mid to late July.

Moreover, the DEX model is not only a vehicle for DeFi innovation but may also become the cornerstone for decentralized pricing of global commodities and crypto assets, just like Fufuture's newly launched TSLA.M/BTC index trading pair based on "coin-based perpetual options":

Allowing users to use TSLA.M as collateral to participate in BTC/ETH perpetual options trading not only explores new liquidity paths for tokenized US stocks but can also be used to help build pricing pools for tokenized gold/oil products or other small-cap meme assets.

Overall, the strategic significance of Fufuture's DEX derivatives mechanism, which integrates options and perpetual contracts, lies in transforming long-tail assets (like SHIB, TSLA.M, etc.) that could only sit in wallets into usable collateral, activating cross-asset liquidity, forming a natural positive cycle of "holding positions equals participating in liquidity construction," and making the on-chain market closer to the capital efficiency and depth of traditional derivatives markets.

In contrast, offshore CEXs have already reached their peak, and their survival space is being sharply compressed. On one hand, they are caught between compliance and on-chain requirements, leaving no long-term survival space; on the other hand, the tightening of global regulations, CRS tax exchanges, and bank KYC systems make it difficult for gray traffic to sustain.

It can be said that the feast of the offshore model has come to an end. In the past, it served as a "gray buffer zone" accommodating regulatory arbitrage space, but in the future, it may linger on the edge of policy, being eroded by both compliant exchanges and on-chain markets: either being incorporated into tax and compliance systems to become localized licensed institutions; or completely transitioning to on-chain, becoming a borderless global market.

The middle ground is destined to be cleared.

New Proposition for DEX: Decentralized Pricing of Global Assets

From a longer-term perspective, the future competition among exchanges is not just about traffic and fees, but a battle over the rewritten rules of the global market.

If the first phase of DEXs was more of a testing ground for DeFi innovations, then with licensed localized exchanges in the US, Hong Kong, and elsewhere accommodating compliance needs, integrating into tax systems, and fully aligning with the banking system, the mission of DEXs may be completely reshaped:

They may take on the role of "price discovery and pricing power" for global permissionless markets.

Why should the pricing power of global assets belong to on-chain DEXs?

• Because unlike stocks and bonds, which have obvious regional attributes (except for US stocks and bonds), commodities like gold, oil, copper, and crypto assets like BTC and ETH are inherently globally tradable assets;
• At the same time, traditional commodity futures are concentrated in places like Chicago, London, and Shanghai, facing time zone and trading hour limitations, while on-chain operates 24/7, providing time-zone-free and permissionless liquidity;
• Even better, stablecoins can serve as universally accepted settlement tools—if users open positions using stablecoins as collateral, all profits and losses are settled in stablecoins, meaning price discovery will no longer be limited by geography or banking systems;

With these three characteristics, DEXs are naturally poised to become the decentralized pricing cornerstone for crypto assets and commodities.

Source: CoinGecko

Of course, for DEXs, what truly supports price discovery is never just spot trading, but rather the trading depth and price discovery mechanisms built by futures, options, and other derivatives systems.

This is why the derivatives DEX market is expected to experience explosive growth in 2024, with total trading volume for all Perp DEXs reaching $1.5 trillion, more than doubling from $647.6 billion in 2023.

Among them, futures contracts are primarily driven by Hyperliquid, with annual trading volume soaring from $21 billion in 2023 to $570 billion in 2024, achieving a 25.3-fold increase. Recently, Hyperliquid has even entered the top five derivatives platforms by daily trading volume, peaking at over $10 billion in daily trading volume, comparable to some mid-tier CEXs.

Source: Hyperliquid

In terms of more complex cross-asset strategies and on-chain derivatives pricing logic, Fufuture also provides a concrete example. Its "coin-based perpetual options mechanism" has no fixed expiration date and dynamically charges premiums based on holding time, balancing the non-linear returns of options with the trading rhythm of perpetual contracts.

If one has truly experienced Fufuture's perpetual options products, they can clearly feel the innovations compared to traditional on-chain options products. For example, for users holding SHIB, this type of meme asset is almost unusable as any form of trading collateral in traditional on-chain derivatives protocols, but on Fufuture, simply depositing SHIB into the platform allows it to be used as collateral for trading.

In practical terms, as long as SHIB is deposited as "usable collateral," the entire trading process is almost indistinguishable from contract trading—no stablecoins are needed as collateral, no need to weigh expiration dates, strike prices, or profit and loss curves. Just like regular contract trading, users can select the underlying asset, direction (long/short), and position size to start trading.

Moreover, it theoretically allows any on-chain asset, including the latest tokenized US stocks, to be activated as usable collateral—users can use TSLA.M and NVDA.M as collateral to participate in BTC and ETH perpetual options strategies (see further reading: "Liquidity Considerations for Tokenized US Stocks: How Should On-Chain Trading Logic Be Rebuilt?"), forming a true cross-market speculation and hedging network that traditional CEXs find difficult to provide.

From an industry perspective, on-chain derivatives DEXs like Hyperliquid and Fufuture not only avoid compliance restrictions but also provide a 24/7, borderless trading and settlement network for global commodities.

Especially for new trading mechanisms like Fufuture, which allow users to open positions directly by choosing directions without needing to exchange stablecoins in advance, maximizing the liquidity and strategic space of on-chain assets, not only does the trading experience come close to that of CEXs, but objectively, only on-chain derivatives DEXs can achieve this, making them more likely to become the on-chain "entry point for pricing power" of global assets.

In Conclusion

The future of exchanges is not just a race for immediate gains, but a distinction between the rewriters of global market rules.

One will become localized and compliant, another will become offshore and gray, and one will become the cornerstone for decentralized pricing of the next round of global commodities and crypto assets.

There is no middle ground.

The future crossroads are set, and the only remaining question is time.