Compliance is on the rise, DEXs are exploding, and offshore is being squeezed. The ultimate fate of crypto exchanges has no middle ground.
Written by: Web3 Farmer Frank
Have you ever thought that future crypto transactions could also be taxed?
Since this spring, many users from mainland China trading US stocks using brokers like Tiger Brokers and Futu Securities have gradually received back tax notices. This is no coincidence; following the implementation of CRS global information exchange, offshore accounts and investments are now under comprehensive surveillance, from high-net-worth individuals to ordinary middle-class citizens.
The reasoning is the same; the 'sovereign vacuum period' in finance is often very short. Today's US stock brokers are a prelude to tomorrow's crypto trading—once the chaotic era passes, Liangshan will inevitably be incorporated into the regular army.
From the invisible freedom of offshore accounts to CRS global information exchange, from the wild growth of third-party payments to the strict regulation of central bank licenses, financial innovations that drift outside mainstream regulation are moving from gray to standardized—a one-way street that is irreversible.
Especially this year, with the entrance of Web3 and the power dynamics, crypto exchanges have found themselves at a crossroads of fate. Compliance localizers are firmly on the fishing platform, offshore gray spaces are rapidly narrowing, and on-chain DEXs are gaining momentum.
There is no middle ground, only clear directional divisions.
Offshore CEXs, the feast is over.
Centralized exchanges (CEXs) remain the top predators in the current crypto ecosystem.
It can be said that CEXs, which primarily rely on trading fees as their core revenue source, have reaped the largest dividends from the explosion of the crypto market. According to public market estimates, the annual revenue and profits of leading offshore CEXs like Binance and OKX are in the tens of billions or even over $100 billion. For instance, Binance's revenue in 2023 reached a staggering $16.8 billion, with annual cryptocurrency trading volume exceeding $3.4 trillion.
This means that even during turbulent global macroeconomic periods, offshore CEXs remain one of the most profitable businesses.
Source: Fourchain
However, the golden age of the offshore model has clearly reached its end.
Compliance pressures and tax storms are extending from traditional finance into the crypto realm. Similar to the recent uproar about additional taxes on US stock trading, observant users should notice that in the past year, offshore CEXs like Binance and OKX have also faced ongoing public disputes.
Including but not limited to restricting accounts that use cryptocurrency assets as their only source of income, and requiring users to provide proof of annual income and tax compliance, etc.
Objectively, offshore giants like Binance and OKX have paid a considerable price to 'land'. Besides the judicial accountability faced by founders, significant funds have also been invested—Binance has publicly stated that it will invest hundreds of millions just in compliance and security in 2024, and its internal compliance team has grown to 650 experts.
Especially since 2025, various players have been accelerating their compliance and potential listings during the 'political dividend window'.
For example, Kraken first had the SEC withdraw its securities violation charges against them; the FBI also ended its investigation into its founder. Then, they hinted at a potential IPO plan, and recently there were rumors of raising $500 million at a valuation of $15 billion, completely turning towards compliance.
OKX is the same; first, it reached a settlement with the US Department of Justice this February, paying over $500 million in fines. Subsequently, it actively promoted its IPO in the US and even reported adjusting its compliance department in the US to the highest priority across all departments.
These actions release a clear signal that the survival space for offshore models has been compressed to historic lows, as CEXs are racing against the clock for the last compliance window.
It can be said that this crypto political honeymoon period, catalyzed by Trump's reshaping of policy narratives, BTC's 'balance sheetification', and the stablecoin boom, is almost the last window for offshore CEX transformation.
Once the opportunity to 'land' is missed, one may fall from being a top predator in the ecosystem to being an object of clearing by the times.
The foreseeable pattern of 'three-way division'
If we compare today's crypto market to the Hong Kong and US stock markets a decade ago, the evolution of regulation and markets has only lagged a few years.
As global tax compliance, capital controls, and the entrance of financial institutions compound, the future landscape of exchanges can almost be foreseen as a 'three-way division':
Localized licensed compliant CEXs, represented by Coinbase, Kraken, HashKey, OSL, etc., are characterized by their ability to interface with banks and provide compliant clearing, 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., serve global retail and some high-risk users. Under the current global compliance trends and the approaching on-chain experience, they will inevitably be compressed, eroded, and marginalized.
Pure on-chain decentralized exchanges (DEX / DeFi native): No KYC, permissionless access, natively support on-chain asset settlement and multi-chain trading, and may become the new global liquidity hub in the future.
Among these, compliant exchanges undoubtedly benefit from policy dividends as 'upward curve players'. In markets like the US and Hong Kong, compliant exchanges can not only collaborate with institutions and banks but also be included in the local tax systems. The strategic goal of such platforms is clear—to become the new generation of digital asset exchanges and clearinghouses.
For example, an easily overlooked signal is that compliant exchanges represented by Coinbase are now entering their golden moment—forecasting a revenue of $6.564 billion for the entire year of 2024, more than doubling year-on-year, with a net profit reaching $2.6 billion, nearly approaching 50% of offshore leader Binance (according to market estimates).
More importantly, Coinbase hardly needs to worry about enforcement from major global jurisdictions or the risk of bank freezes, thus naturally becoming the 'safe haven' for institutions and high-net-worth users.
On-chain DEXs are the 'global market players' with the greatest potential and highest ceilings. They do not rely on national licenses and serve as 24/7 global liquidity hubs, especially with native support for on-chain asset settlement and cross-asset portfolio strategies, with strong programmability.
Although their current market size is still less than 10% of CEXs, the growth elasticity is significant. Once the on-chain derivatives market matures, the market depth and strategy space of DEXs will attract a large influx of high-frequency funds, arbitrageurs, and institutional liquidity.
For instance, Hyperliquid saw its capital surge in July, growing from just below $4 billion at the beginning of the month to $5.5 billion, and at one point in the mid to late month, it approached $6 billion.
Moreover, DEXs' mechanisms not only serve as DeFi innovation carriers but may also become the decentralized pricing foundation for 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 pathways for tokenized US stocks but can also be extended 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 (such as SHIB, TSLA.M, etc.) that could only sit in wallets into available collateral, activating cross-asset liquidity, and forming a natural positive cycle of 'holding positions means participating in liquidity construction'. This also makes the on-chain market closer to the funding efficiency and depth of traditional derivatives markets.
In contrast, offshore CEXs have already peaked, and their survival space is rapidly shrinking. On one hand, they are caught between compliance and blockchain, leaving no long-term survival space; on the other hand, tightening global regulations, CRS tax information exchange, and the banking KYC system make gray traffic hard to sustain.
It can be said that the feast of the offshore model is coming to an end. What was once a 'gray buffer zone' that could accommodate regulatory arbitrage may now linger on the edge of policy for a long time, being eroded by both compliant and on-chain markets: either being integrated into tax and compliance systems to become localized licensed institutions, or completely transitioning to on-chain to become borderless global markets.
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 a battle of traffic and fees, but a struggle over the rewritten global market rules.
If the first phase of DEXs was more of a DeFi innovation testing ground, then with licensed localized exchanges in the US and Hong Kong taking on compliance demands, entering tax systems, and fully aligning with banking systems, the mission of DEXs may be completely reshaped.
It may assume the role of 'price discovery and pricing power' in the global unlicensed market.
Why does the pricing power of global assets belong to on-chain DEXs?
Because unlike stocks and bonds that have obvious geographical attributes (except for US stocks and bonds), commodities like gold, oil, copper, and crypto assets like BTC and ETH are inherently global trading targets.
At the same time, traditional commodity futures concentrate in places like Chicago, London, and Shanghai, facing time zone and trading hour limitations, while on-chain operates 24/7, providing seamless and permissionless liquidity.
Even better, stablecoins can serve as globally accepted settlement tools—users can open positions using stablecoins as collateral, and 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 expected to become the decentralized pricing foundation for crypto assets and commodities.
Source: CoinGecko
Of course, for DEXs, the true support for price discovery has never been solely from spot trading, but rather from the trading depth and price discovery mechanisms constructed by futures, options, and other derivative systems.
This is also why the derivatives DEX is expected to experience explosive growth in 2024, with total trading volume across Perp DEXs reaching $15 trillion, more than doubling from $647.6 billion in 2023.
Among them, the futures contracts are primarily dominated by Hyperliquid, with annual trading volume soaring from $21 billion in 2023 to $570 billion in 2024, achieving a growth of 25.3 times. Recently, Hyperliquid has also entered the top five derivatives platforms by daily trading volume, peaking over $10 billion in daily trading volume, on par with some mid-tier CEXs.
Source: Hyperliquid
At a more complex level of cross-asset strategies and on-chain derivatives pricing logic, Fufuture also provides a concrete case. 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 you have truly experienced Fufuture's perpetual options products, you can clearly feel their innovative aspects compared to traditional on-chain options products. For example, for users holding SHIB, this type of meme asset can hardly be used as 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 operations, as long as SHIB is deposited as 'available collateral', the entire trading process is almost indistinguishable from that of contract trading—no need for stablecoins as collateral, no need to weigh options for expiration dates, strike prices, and profit-loss curves. Just like daily contract trading, select the underlying asset, direction (long/short), and position size to begin trading.
At the same time, it theoretically allows any on-chain asset, including the latest tokenized US stocks, to be activated as available collateral—users can use TSLA.M, NVDA.M as collateral to participate in BTC, ETH perpetual options strategies (for further reading: (Liquidity Thoughts on Tokenized US Stocks: How Should On-Chain Trading Logic Be Reconstructed?)), forming a genuine cross-market speculation and hedging network, something traditional CEXs find hard to provide with such freedom of combination.
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 with trading mechanisms like Fufuture's that allow opening positions directly by selecting directions without prior conversion to stablecoins, maximizing the liquidity and strategy space of on-chain assets, not only does it approach the trading experience of CEXs, but objectively only on-chain derivatives DEXs can achieve this, having the potential to become the on-chain 'entry point for pricing power' of global assets.
In conclusion
The future exchange is not just a race against time, but a division between those rewriting global market rules.
One will be localized and compliant, one will be offshore and gray, and one will become the decentralized pricing foundation for the next round of global commodities and crypto assets.
There is no middle ground.
The future's fork in the road has been set, and the only thing left is a matter of time.
