The end of a regulatory grey zone: Why China is cracking down on offshore brokerages

China’s securities regulators, led by the China Securities Regulatory Commission (CSRC), announced a major crackdown on offshore brokerages on May 22, targeting platforms like Futu, Tiger Brokers, and Longbridge. The new measures prohibit mainland investors from opening new trading positions or transferring funds into accounts, though existing holdings can still be sold and withdrawn during a transition period. The campaign, involving seven regulatory agencies, seeks to ‘completely eradicate’ illegal cross-border securities activity within two years. Regulators claim the move protects investors and combats financial crime, but analysts argue it reflects Beijing’s broader effort to tighten oversight of outbound capital flows. Futu, Tiger Brokers, and Longbridge were specifically named for penalties, though the crackdown extends beyond these firms. The restrictions mark a shift from years of regulatory ambiguity, as Beijing previously tolerated these platforms to meet investor demand amid limited official outbound investment channels. Asia Society Policy Institute fellow Lizzi C Lee described the platforms as ‘unlicensed cross-border financial infrastructure’ operating outside state supervision. Regulators now classify these activities as illegal, linking them to anti-money laundering and financial security concerns. The crackdown forces investors like Elaine Liang, a 30-year-old finance researcher, to explore alternatives after relying on Hong Kong-based brokerage apps like Futu. Analysts predict the move will push overseas investing back through state-approved channels, reinforcing Beijing’s control over financial flows.