Nowadays, everyone is discussing how platforms like OKX and Coinbase are complying and clearing out non-compliant users, but it seems they have forgotten the initial direction of the industry. What I want to say is: there is indeed a compliance path for crypto exchanges in China.
Specifically, it involves subscription and redemption in RMB, with the net value of overseas crypto assets settled in RMB, and no physical delivery allowed. In simple terms, it means participating in crypto investments using RMB and earning profits, but not being able to withdraw the physical assets.
QDII, RQDII, cross-border ETFs, etc., all adopt similar models. For example, the QDII products from E Fund, which I have invested in for many years. Under the current regulatory framework, it is entirely possible to transform crypto exchanges into 'closed entry and exit' models similar to QDII funds and RMB-denominated cross-border ETFs.
Within China, users deposit in RMB, exchange it for stablecoins within the platform, conduct long and short trading on-site, and ultimately settle profits and losses only in RMB, with no allowance for withdrawing crypto assets to on-chain wallets. This is consistent with the logic of QDII funds and US stock ETFs—able to participate in overseas asset investments with RMB, but unable to conduct physical delivery.
Two mature cases of direct RMB investment in overseas financial products can be referenced:
- QDII securities investment funds: The regulatory basis is the (Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors) (CSRC Order No. 124) and the quotas system of the State Administration of Foreign Exchange, with an operating model of RMB subscription/redemption, overseas asset net value settled in RMB, and no physical delivery allowed. Representative products include E Fund S&P 500 Index (QDII) 001592 and Huaxia Nasdaq 100 (QDII) 000011.
- RMB-denominated cross-border ETFs (RQDII/Shanghai-Hong Kong Stock Connect ETFs): The regulatory basis is the (Cross-border ETF Pilot Notification) (issued by the CSRC/SAFE in 2020), with an operating model of buying and selling on-site in RMB, corresponding overseas fund shares are held by custodians, and investors cannot withdraw overseas stocks. Representative products include Huatai-PineBridge Nasdaq 100 ETF 159941 and Jinshi Hang Seng Technology ETF 513130.
Translating this logic to crypto exchanges, it can be specifically designed as:
- RMB deposits and stablecoin exchanges: Operated by licensed third-party custodians or clearing institutions, corresponding to the foreign exchange purchasing process of QDII fund custodians;
- On-site matching transactions: Users can conduct spot or derivative transactions, but assets only circulate within the platform, similar to how QDII and ETFs only trade within the venue;
- RMB withdrawals: When settling, profits and losses are converted back to RMB and transferred to the user's bank account, equivalent to QDII funds settling at daily net value;
- Banning on-chain transfers: Not providing on-chain withdrawal interfaces can satisfy the regulatory bottom line of 'no physical delivery'.
The question is: since the model is so clear, why have mainstream exchanges never been able to implement it? This design of 'RMB in, RMB out, no withdrawal support' is not impossible on the regulatory and practical levels; it is essentially a crypto version of QDII/ETF.
Huobi didn’t do it, OKX didn’t do it, Binance didn’t do it, and even HashKey didn’t do it. The only reason I can think of is that the qualification threshold is too high—requiring licenses for QDII, custody, and clearing, meeting compliance requirements from multiple departments such as the central bank, the foreign exchange administration, and the CSRC.
But compared to the 'half-hearted' swings of the Chinese crypto industry over the years, is it really so difficult to connect these links? Is it that the industry cannot let go of its 'decentralized fundamentalism' obsession, or is it that the regulators have not allowed it?
