Global regulation and on-chain innovation are compressing the survival space of offshore exchanges. The future will belong to compliant local CEXs and on-chain DEXs competing for global asset pricing power. This article is based on a piece written by Web3 farmer Frank and organized and composed by Foresight News. (Background: LBank exchange has reportedly launched plans for a U.S. listing, with invited full-time employees receiving 250 shares of original stock, while Chinese employees are excluded.) (Supplementary background: Vietnam will launch its first national-level digital asset exchange, with South Korea's leading Upbit providing technical support.) Have you ever thought that Crypto trading might be taxed in the future? Since this spring, many users from mainland China who trade U.S. stocks using Tiger Securities, Futu Securities, and others have gradually received tax retroactive notices. This is no coincidence. With the implementation of CRS global information exchange, from high-net-worth individuals to ordinary middle-class, overseas accounts and investments are being subjected to comprehensive monitoring. The logic is similar; the financial 'sovereignty vacuum period' is often very short. Today's U.S. stock brokers may very well be a rehearsal for tomorrow's Crypto trading: once the wild era is over, Liangshan will inevitably be incorporated into the regular army: From the invisible freedom of offshore U.S. stock accounts to global CRS information exchange, from the barbaric growth of third-party payments to the strict regulation by central bank licenses, financial innovations that are outside mainstream regulation are moving from gray to standardized—a one-way street that is irreversible. Especially this year, with the entry of Web3 and the arrival of power, Crypto exchanges can be said to be at a crossroads of fate. Compliant localizers are firmly seated, 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 within the current Crypto ecosystem. It can be said that CEXs, whose core revenue source is trading fees, have reaped the biggest dividends from the explosive growth of Crypto. According to public market estimates, leading offshore CEXs like Binance and OKX currently have annual revenues and profits in the billions or even over 10 billion dollars; for instance, Binance's annual 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 periods of global macroeconomic turmoil, offshore CEXs remain one of the most profitable businesses. Source: Fourchain. However, the golden age of the offshore model is clearly coming to an end. Compliance pressures and tax storms are extending from traditional finance into the Crypto realm. Similar to the recent uproar over tax retroactive assessments in U.S. stock trading, discerning users should notice that in the past year, offshore CEXs like Binance and OKX have also sparked various public controversies: including but not limited to restricting accounts by treating cryptocurrency assets as the sole source of income and requiring users to provide annual income and tax proof. Objectively speaking, the costs incurred by offshore giants like Binance and OKX to 'come ashore' cannot be considered low. In addition to the legal accountability faced by 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, with its internal compliance team expanding to 650 experts. Especially since 2025, various companies have accelerated their push for compliance and potential listings during the 'political dividend window period.' For example, Kraken first had the U.S. SEC withdraw its securities violation charges against Kraken, the FBI also concluded its investigation of its founder, and then hinted at potential IPO plans. Recently, there were also rumors of raising $500 million at a $15 billion valuation, signaling a complete pivot towards compliance. OKX is similarly engaged, having reached a settlement with the U.S. Department of Justice in February this year, paying over $500 million in fines, and is actively pursuing an IPO in the U.S., with reports suggesting that its compliance department in the U.S. has now become the highest priority across all departments. These actions send a clear signal that the survival space of the offshore model has shrunk to historic lows, with CEXs scrambling to rush through the last compliance window. It can be said that this political honeymoon period catalyzed by Trump's reshaped policy narrative, the 'balance sheetization' of BTC, and the craze for stablecoins is almost the last window for offshore CEXs to transform. Missing the opportunity to 'come ashore' could lead to a fall from top predator status in the ecosystem to being eliminated by the times. The foreseeable pattern of 'three divisions of the world.' If we compare today's Crypto market to the Hong Kong and U.S. stock markets in which Chinese investors participated ten years ago, then regulation and market evolution are merely a few years behind on the timeline. As global tax compliance, capital controls, and financial institutions enter the scene, the future landscape of exchanges can almost be foreseen as 'three divisions of the world': Licensed compliant local CEXs: represented by Coinbase, Kraken, HashKey, OSL, etc., with core features of having bank connections and compliance clearing capabilities, mainly 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, which will inevitably be compressed and marginalized under the current global compliance trends and the approaching on-chain experience; Pure on-chain decentralized exchanges (DEX/DeFi native): requiring no KYC, no licensed access, natively supporting on-chain asset settlement and multi-chain combination trading, which may become new global liquidity hubs in the future; Among them, compliant exchanges are undoubtedly the 'upward curve players' benefiting from policy dividends. In markets like the U.S. and Hong Kong, compliant exchanges not only can collaborate with institutions and banks but can also be incorporated into local tax systems. The strategic goal of these platforms is very 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 ushering in their golden moment: In 2024, Coinbase's revenue is projected to be $6.564 billion, more than doubling year-on-year, with a net profit of up to $2.6 billion, almost approaching 50% of offshore leader Binance (according to market estimates). More importantly, Coinbase hardly needs to worry about enforcement actions or bank freeze risks from major global jurisdictions, thus naturally becoming the preferred 'safe harbor' for institutions and high-net-worth individuals. On-chain DEXs belong to the most potential and high ceiling 'global market players.' They do not rely on national licenses and serve as 24/7 global liquidity hubs, especially as they natively support on-chain asset settlement and cross-asset combination strategies, with strong programmability. Although their current market volume is still less than 10% of CEXs, their 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 capital, arbitrageurs, and institutional liquidity migration. For instance, Hyperliquid saw explosive growth in assets in July, increasing from just under $4 billion at the beginning of the month to $5.5 billion, and at one point approaching $6 billion in mid to late July. Moreover, the DEX's gameplay is not only a vehicle for DeFi innovation but could also become the decentralized pricing foundation for global commodities and crypto assets, similar to how Fufuture has recently launched T... based on 'coin-based perpetual options.'

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