After Futu Securities was banned, will buying stocks on-chain be the new remedy?

Author: Lawyer Liu Honglin

In the past few days, many friends who have purchased Hong Kong and U.S. stocks have been sharing the same news.

On May 22, 2026, the China Securities Regulatory Commission (CSRC) announced that it has launched an investigation into Tiger Brokers, Futu Securities, Changqiao Securities, and related domestic and foreign entities for illegal securities business operations in China, and has issued a prior notice of administrative penalties. Let me clarify a detail here: this is not the final penalty decision; the parties involved still have the right to make statements, defend themselves, and request a hearing.

On the same day, the CSRC and eight other departments also issued the "Implementation Plan for Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Operations." The focus of this plan is not simply to punish a particular internet brokerage, but to comprehensively rectify the entire chain of foreign securities, futures, and fund institutions conducting business targeting domestic investors without approval. According to the plan, the regulatory focus includes not only the marketing, solicitation, account opening, receipt or processing of trading instructions, and fund transfers by foreign institutions within China, but also the support provided by domestic entities for such businesses, including website development, trading software operation, and customer service. The plan also sets a two-year concentrated rectification period, during which existing businesses are generally only allowed to sell and transfer funds outwards.

Many ordinary users in the past understood this matter as "which app to choose to buy Hong Kong and U.S. stocks." However, the regulatory concern is not which trading software is installed on users' phones, but whether there are unauthorized securities services being provided behind that software. As long as there is a factual closed loop formed by customer acquisition, processing of trading instructions, system operation, customer support, and fund inflow and outflow within China, it is no longer just an ordinary internet product issue.

So after the news came out, some people have already asked me: since the traditional cross-border brokerage path is becoming narrower, can we trade Hong Kong and U.S. stocks on-chain?

I am not surprised by this question.

Last year, I went to Singapore and talked with several investment friends. One friend, who previously had little interest in cryptocurrencies, started paying attention to Web3 last year, not because Bitcoin had risen again, nor because a new story was told about a public chain, but because of on-chain U.S. stocks. His idea was very straightforward: if in the future, assets like Apple, Nvidia, Tesla, and S&P ETFs can all be held, transferred, and settled using on-chain accounts, and even enter DeFi portfolios, then blockchain will no longer just be an asset game within the crypto circle, but could become a new interface for global financial assets.

This is a very interesting phenomenon.

On-chain U.S. stocks make it relatively easy for traditional investors to understand Web3 because it does not require everyone to first believe in a strange new asset, but instead places stocks, ETFs, and index products that everyone already knows into the context of wallets, stablecoin settlements, and smart contracts. For some investors, this is much more intuitive than listening to a bunch of public chain performance, consensus mechanisms, and ecological incentives.

However, this matter is not as simple as everyone imagines. For mainland Chinese investors, on-chain U.S. stocks are not a "cure" to bypass regulation. If a person only wants to replace the account opening, deposit, trading, and holding originally completed in a cross-border brokerage app with wallets, USDT, and on-chain tokens, the risk may not be lower.

A more accurate statement should be: on-chain U.S. stocks address the issue of "how traditional assets go on-chain and how qualified users access U.S. stock exposure on-chain"; it does not solve the issue of "whether domestic residents can bypass securities, foreign exchange, and virtual currency regulations to buy U.S. stocks."

For compliant institutions and technology service providers, this is a foundational infrastructure direction worth serious consideration. For ordinary investors, if they just want to find a new avenue, it is advisable to remain calm.

Where Does the Demand for On-Chain U.S. Stocks Come From

Why do on-chain U.S. stocks exist? The traditional securities market is already very mature, but for many non-U.S. investors, buying U.S. stocks is not as simple as opening a page and clicking buy. How to prepare account materials, how to get funds in, how to handle tax documents, who to communicate with when the account is risk-controlled—these steps are familiar to professional institutions, but for ordinary users, each step requires dealing with banks, brokerages, and compliance processes. When the experience is not smooth enough, the market will naturally seek new entry points.

For crypto users, this gap is even more pronounced. They are already accustomed to wallet transfers, on-chain settlements, and 24/7 fund flows. But once they want to allocate some stocks or ETFs, they have to return to bank accounts, brokerage accounts, and traditional clearing systems. The connection between on-chain assets and traditional assets is not that it cannot be connected technically, but that the connection experience is very fragmented.

The appeal of on-chain U.S. stocks lies here: it attempts to make the economic exposure of U.S. stocks or ETFs into on-chain certificates. What users see is a stock token, such as the on-chain version of a certain U.S. stock or ETF; behind it may be issuers, brokerages, custodians, market makers, oracles, smart contracts, and distribution platforms. Products with relatively complete information disclosure and higher compliance requirements usually emphasize underlying asset support, isolated custody, qualified investor restrictions, redemption arrangements, and legal documents.

It can be viewed in two layers: on-chain, you see accounts, tokens, and trading entry points; off-chain, what truly determines is the underlying assets, custody arrangements, legal documents, user access, and exit paths.
On-chain U.S. stock product structure: on-chain entry and off-chain rules

To judge an on-chain stock product, you cannot just look at whether it has Apple, Nvidia, or Tesla in its name. You need to look deeper to see if the underlying assets have been genuinely purchased, who is holding the assets, how the issuance documents are written, whether users have purchasing qualifications, and whether they can redeem, sell, or assert rights later.

This is also where on-chain stocks are most easily misunderstood. It does not necessarily mean that you directly own a share of a U.S. listed company.

Currently, there are roughly two types of paths in the industry.

One type is where issuers turn underlying stocks or ETFs into on-chain financial certificates. For example, xStocks under Backed is described in its official legal documents as a type of on-chain transferable security, specifically in the form of "tracking certificates," which are structured products that track the price of underlying stocks or ETFs. It emphasizes that each xStock tracks publicly listed stocks or ETFs on a 1:1 basis and is fully collateralized by the corresponding underlying assets, but it also clearly states that holders do not obtain voting rights or shareholder rights for the underlying stocks. In other words, what you receive is a financial certificate supported by underlying assets, not a direct transformation into a shareholder of a listed company.

The other type is where large platforms use stock tokens as investment entry points for users in specific regions. For instance, Robinhood plans to launch U.S. stock and ETF tokens for EU users in 2025, focusing on allowing qualified European users to gain exposure to U.S. stocks within the app, supporting dividends and a longer trading experience. Ondo Global Markets also aims to move over 100 U.S. stocks and ETFs on-chain in 2025, targeting non-U.S. qualified users. Their commonality is not that "anyone can buy," but that they are trying to place the products within a specific compliance distribution framework.

The scale of the on-chain stock market is also growing. According to CoinGecko's 2026 RWA report, the market value of on-chain stocks grew from approximately $2.09 million on June 30, 2025, to about $487 million on March 31, 2026; the on-chain stock spot trading volume in the first quarter of 2026 was about $15.1 billion, already exceeding the total trading volume in the second half of 2025.

However, this should not be misinterpreted as "on-chain U.S. stocks have replaced traditional brokerages." The same report also reminds that even though leading on-chain stocks have connected to multiple centralized exchanges, their trading volume relative to the real U.S. stock market is still very small. This direction is growing rapidly, but it is not yet the mainstream securities market itself.

I prefer to view it as an ongoing infrastructure experiment rather than a mature investment shortcut.

What Should Investors Pay Attention To

For individual investors, the most important caution regarding on-chain U.S. stocks is not technical jargon, but the illusion created by "the page looks very much like a stock." Many products display stock codes, real-time prices, price changes, and buy/sell buttons on the front end, making it easy for users to mistake it for U.S. stock trading in traditional brokerages. However, in legal terms, what you may have purchased could be a certificate supported by underlying stocks, a structured product, synthetic asset, or even just a price exposure recorded in the platform's internal ledger.

The first thing to look at is rights. Is there a redemption right? How are dividends handled? Are there voting rights? How are underlying assets disposed of in the event of issuer bankruptcy? Who do you contact if the custodian has issues? These questions are not in the token's name but in the legal documents and product structure. If a project only emphasizes "can be traded" and "price follows U.S. stocks," but cannot clarify the underlying assets, custody, and exit arrangements, investors should be very cautious.

The second thing is to look at identity and regional restrictions. Currently, on-chain U.S. stock products with relatively transparent information in the market will clearly state which regions can use them, which cannot, and what identity verification or qualified investor checks users need to go through. Many products emphasize targeting non-U.S. users, but "non-U.S." does not equal "anyone in the world can buy freely," nor does it mean "mainland Chinese residents can buy directly through wallets." If users bypass platform restrictions using false identities, nominee identities, VPNs, foreign phone numbers, or other means, it may seem like they can enter the market in the short term, but there will often be two problems later: the platform may freeze, restrict, or expel them upon discovery; once a dispute arises, it will be difficult for users to claim full protection with an access path that was already non-compliant.

The third thing is to look at the source of funds. Mainland individuals' foreign exchange purchases require a real and legal transaction basis, and the personal foreign exchange application clearly states that it cannot be used for overseas real estate, securities investments, and other capital projects that have not been opened. If a person originally could not use their personal foreign exchange quota to buy overseas stocks, changing to first convert to stablecoins and then buy on-chain U.S. stocks does not make the fund's purpose compliant just because it added an extra layer of wallet routing.

Regulation of virtual currencies in mainland China can be said to be continuously tightening. On February 6, 2026, the People's Bank of China and eight other departments issued a notice titled "Further Preventing and Addressing Risks Related to Virtual Currencies" (Yin Fa [2026] No. 42). It continues to clarify that virtual currencies do not have the same legal status as legal tender, and activities such as conducting foreign currency and virtual currency exchanges, token issuance financing, and trading of virtual currency-related financial products within China are illegal financial activities that need to be strictly prohibited and banned by law; foreign entities and individuals are also prohibited from illegally providing virtual currency-related services to domestic entities in any form. It also includes the tokenization of real-world assets into the regulatory framework, clearly stating that conducting related activities and providing intermediary and information technology services within China without specific consent will also face risks of illegal financial activities. In the context of on-chain U.S. stocks, if a domestic user uses stablecoins to access foreign stock tokens, the risk is not just "buying a foreign asset," but may also involve securities investment, foreign exchange use, virtual currency trading, anti-money laundering, and cross-border disputes.

In addition to the issues mentioned above, there are many other concerns that investors need to pay attention to regarding on-chain U.S. stocks.

First is price and liquidity. Traditional U.S. stocks have opening, closing, centralized bidding, market making, regulation, and clearing systems. On-chain tokens can be transferred around the clock, but the underlying stock market is not open all the time. How are on-chain prices anchored during non-trading hours? Who will provide market making? To what extent can price deviations be accepted? During market volatility, can redemption and arbitrage mechanisms function properly? If these issues are not clarified in advance, what users buy may not be a stable exposure to U.S. stocks, but rather an on-chain trading product that looks very much like U.S. stocks.

Stocks can undergo dividends, stock splits, mergers, delistings, tender offers, tax withholding, and a host of backend matters. Traditional brokerages usually handle these tasks for users. If on-chain U.S. stocks are to be done properly, they must also answer these questions: how are dividends distributed, how are stock splits adjusted, what happens to certificates after delisting, who provides tax documents, and do users need to bear additional reporting obligations? Otherwise, users may superficially obtain "exposure to U.S. stocks," but when actual corporate actions occur, they may find their rights boundaries very vague.

Then there is dispute resolution. On-chain transfers may seem clear, but the legal relationships may not be. The issuer may be in one jurisdiction, the custodian in another, and the distribution platform in a third, while the user may be in mainland China. When problems arise, which country's laws apply, where to file a lawsuit, whether one can obtain proof of assets, and whether one can trace custodial assets are all issues that cannot be resolved by a blockchain explorer.

Thus, on-chain is merely the front end; what truly determines security is the entire set of off-chain rules regarding underlying assets, custody arrangements, issuance documents, user access, redemption mechanisms, audit disclosures, and dispute resolution. Without this framework, no matter how grand the narrative of stocks going on-chain may be, it is difficult to truly attract buyers.

What Should Web3 Entrepreneurs Pay Attention To

For entrepreneurs, on-chain U.S. stocks are certainly worth paying attention to, but they should not be understood as "traditional brokerages being compressed by regulation, so on-chain opportunities have arisen."

The most important takeaway from this cross-border brokerage rectification is not just that Futu, Tiger, and Changqiao have been named, but the overall illegal cross-border operations. Foreign institutions are certainly regulatory targets, but domestic related entities, partners, illegal intermediaries, internet platforms, self-media, account opening tutorials, experience sharing, marketing, trading software, customer service, and fund transfer support may also come under regulatory scrutiny.

This serves as a direct reminder for on-chain U.S. stock entrepreneurs: if you promote on-chain U.S. stocks to domestic investors, guide account openings, teach people how to deposit funds, do commission-based marketing, provide Chinese customer service, organize community investment advice, help users process trading instructions, or provide trading software, website operations, customer service, and marketing support for foreign platforms, even if the entry point changes from a brokerage app to a wallet, and the settlement currency changes from U.S. dollars to stablecoins, the nature of the risk will not automatically change.

A more realistic entrepreneurial position is not to create "a new channel for retail investors to buy U.S. stocks," but to focus on a more B-end, infrastructure-oriented, and compliance service-oriented position.

Issuers need custody and proof of underlying assets, independent audits, and disclosure of reserves; they need user identity verification, anti-money laundering, and sanctions list screening; they need on-chain address risk scoring, oracles, trading monitoring, abnormal price alerts, corporate action handling systems, tax reporting, and user reconciliation tools. Trading platforms and wallets also need compliance distribution capabilities, such as how to display products in different regions, how to make access judgments for different users, which assets require additional risk disclosures, which operations trigger suspicious transaction monitoring, and which on-chain addresses cannot interact.

These tasks may not sound as exciting as "buying U.S. stocks on-chain," but they are closer to a business that can be operated long-term.

If a licensed foreign brokerage, asset management institution, custodian, or fund platform wants to explore securities tokenization business, it may not necessarily understand on-chain wallets, smart contracts, security audits, on-chain data, cross-chain bridges, asset proofs, and stablecoin settlements. If the entrepreneurial team can provide clear technical modules and does not touch user funds, does not engage in transaction matching, does not market to the domestic public, and does not make yield promises, the compliance space will be much larger than directly engaging in C-end trading channels.

On-Chain Is Not a Universal Cure

Returning to the initial question: is on-chain stock a new cure?

If the so-called cure is to find a way for mainland investors to bypass cross-border securities regulation, foreign exchange regulation, and virtual currency regulation, the answer is very clear: no. It is not only not a cure, but it may also turn an original securities account issue into a problem that overlaps securities, foreign exchange, virtual currency, anti-money laundering, and cross-border disputes.

But if viewed from another angle, could on-chain U.S. stocks become an important entry point for global financial assets going on-chain? I believe so.

Market demand truly exists. Global users want to access U.S. assets with lower friction, crypto users want stablecoins to extend beyond trading and payments, and traditional financial institutions are also looking for more efficient issuance, clearing, and distribution methods. U.S. stocks and ETFs are already among the most universally recognized assets globally, making it easier for ordinary investors to understand them as on-chain interfaces than to create a new token out of thin air.

The watershed is not whether to "go on-chain," but "what is the purpose of going on-chain." If going on-chain is to bypass identity verification, foreign exchange, securities licenses, and investor suitability, this path will not go far. If going on-chain is to make the issuance, custody, transfer, auditing, settlement, and risk control of compliant assets more transparent, automated, and globalized, then it is a foundational infrastructure worth building long-term.

For ordinary investors, the most important thing is not to confuse "looking like a stock" with "being a stock," nor to equate "on-chain" with "no regulation." For entrepreneurs, the opportunity lies not in "helping retail investors find a way to buy U.S. stocks," but in providing legitimate funds, qualified users, compliant issuance, clear custody, verifiable reserves, restricted distribution, risk disclosures, trading monitoring, corporate action handling, tax, and other commercial services.

Market demand will not disappear because of regulatory documents, but demand will not automatically turn into a compliant business either.

On-chain U.S. stocks have value, but they are not a new outlet for old problems. What they truly test is whether technological innovation can reconnect with financial regulation once real-world financial assets enter the on-chain space.

If it progresses steadily, it may become an important stop for financial assets going on-chain; if treated as a tool for bypassing regulations, it will become the next risk hotspot.