Futu and Tiger Brokers tighten the "account opening restrictions" for residents of mainland China, facing regulatory obstacles for cross-border free investment.

Futu Securities and Tiger Brokers have recently updated their account opening terms, imposing restrictions on investors from mainland China: mainland Chinese residents without permanent residency status in Hong Kong, Macau, or other regions can hardly open the door to overseas trading through Futu and Tiger. (Background: China's Regulatory Heavy Hand! Reuters: Beijing Halts Chinese Brokerages' "RWA Tokenization Business in Hong Kong," Highlighting Regulatory Conflicts in One Country, Two Systems) (Additional Background: Is the Chinese Government Taking Action to Cool Down? Potential Restrictions on "Large Internet Companies Involved in Crypto Business") Futu Securities and Tiger Brokers have recently updated their account opening terms, imposing restrictions on investors from mainland China: mainland Chinese residents without permanent residency status in Hong Kong, Macau, or other regions can hardly open the door to overseas trading through Futu and Tiger. This is a thunderbolt for countless retail investors in the mainland who wish to invest in Hong Kong and US stocks. Sudden Changes in Account Opening Standards, Exclusion of Mainland Identities According to reports from Yicai, Futu Securities stated that according to the latest regulatory requirements, mainland Chinese customers wanting to open accounts need to hold overseas permanent residency proof; Futu's customer service also emphasized that currently, Futu is upgrading its platform system, and at this stage only customers with Hong Kong and Macau identity cards can open accounts. After the system upgrade, mainland users will need to provide both their mainland identity cards and overseas permanent residency proof to open accounts. Tiger Brokers' customer service also clearly replied that unless customers hold non-mainland Chinese identity documents, their account opening requests will no longer be accepted. Regulatory and Taxation Dual Line of Netting It is worth mentioning that as early as 2022, cross-border brokerages like Interactive Brokers and Long Bridge have gradually tightened their account opening channels for Chinese customers, and now Futu and Tiger are further strengthening their reviews, which actually implies the regulatory stance of the Chinese authorities: it is almost impossible to invest overseas without overseas identity. Further analysis of this phenomenon reveals two "invisible hands" behind it. The first is the China Securities Regulatory Commission's crackdown on illegal cross-border activities. At the end of 2022, regulatory authorities defined the customer acquisition behavior of Futu Holdings and Tiger's parent company UP Fintech as illegal operations and proposed the requirement to "effectively curb the increment and orderly resolve the stock." The second hand is in the taxation system. Since the second quarter of this year, many mainland residents investing in Hong Kong and US stocks have reported receiving tax payment notices, which is the result of the CRS information exchange mechanism at work. Note: CRS stands for Common Reporting Standard, an international tax standard issued by the Organization for Economic Cooperation and Development (OECD) in July 2014, aimed at promoting global tax transparency through the automatic exchange of financial account information to combat cross-border tax evasion and avoidance. Crypto Assets Also Hard to Escape Strict Control With the rise in account opening thresholds, investors without overseas identities can only turn to compliant channels. If they want to invest in Hong Kong stocks, they can use the Stock Connect or track ETFs based on the Hang Seng Index; for US stocks, they can only indirectly invest through products like QDII funds. However, although these compliant channels provide certainty in taxation and reporting processes, the handling fees and fund management fees have also increased the cost for investors. Additionally, apart from cross-border stock investments and securities account openings, with the rising heat of Crypto Assets, the mainland market also has imaginations regarding emerging models like DeFi and RWA tokenization. Unfortunately, at present, mainland China has yet to introduce a specific regulatory framework, and recently, the authorities have sequentially imposed restrictions on enterprises exploring stablecoins and RWA, increasing the compliance risks for the mainland market's engagement in related fields. Related Reports A Chinese Party Media Article Discusses "The Technical Principles and Trust Logic of Stablecoins"—What Signals Might This Release? Chairman of Apple iCloud's Only Partner in China, "Yunshang Guizhou Big Data," Seriously Violates Discipline and is Arrested Chinese Internet Giants are Hunting Down the Crypto World Exchanges (Futu and Tiger Brokers Tighten Account Opening Restrictions for Mainland Residents, Cross-Border Free Investment Faces Regulatory Obstacles) This article was first published on BlockTempo, the most influential blockchain news media.