What is the real danger of buying US stocks on a crypto exchange?

Recently, many readers have noticed that the largest exchange has started trading on U.S. stocks, and are paying close attention to how this event might impact the crypto ecosystem and users.

First, let me answer a reader’s comment:

The third-largest exchange I mentioned is H; I haven’t used these three major exchanges for a long time. In fact, I haven’t used any exchange for a long time. But I still pay attention when they release new things or products, though I don’t participate.

Regarding the event of the largest exchange listing U.S. stocks, many people's first reaction is excitement, but my first reaction is quite complicated.

Before sharing my feelings, let me talk about the potential impact this might have on exchanges:

• It benefits the platform tokens of exchanges;

• It helps exchanges attract more traffic;

But I believe most people are still concerned about how this might affect participants.

From this perspective, my feelings are quite complex.

Why?

Because few media outlets mention the risks this poses to participants.

The root of this risk lies in the exchange’s KYC mechanism.

In today’s unusually complex environment, failing to understand the risks for participants can lead to serious consequences—it's no longer just about making or losing money, but about whether you get your skin peeled off.

Let’s start with a basic fact:

Many European and Asian countries allow their citizens to trade foreign stocks on exchanges, as long as the exchange is legally registered in their country and the trader has completed KYC in their country; otherwise, it’s basically up to them.

But in some regions, due to restrictions on currency convertibility, all external financial activities are strictly limited.

Recently, some areas have implemented extremely strict capital controls, such as banning other regional exchanges from attracting residents to buy and sell U.S. stocks, and strict legal supervision over individual residents’ foreign investments, with clear penalties and measures.

With clear regulations and strict rules in place, the sword of Damocles hangs overhead.

As soon as someone is involved, when, how, and what kind of control measures are implemented, it’s only a matter of time.

Small-scale violations can lead to skin peeling, and larger-scale actions could be deadly.

What kind of users will the actions of the largest exchange satisfy the “urgent needs” of?

Residents of European and Asian countries who already have the freedom to buy and sell U.S. stocks?

Obviously not.

I don’t deny that some users in those countries might find it troublesome to trade U.S. stocks legally using fiat currency on their local exchanges, and prefer to use stablecoins for trading instead.

But those users are probably not the main group.

Who are the real main users with such urgent needs?

Those whose currencies cannot flow freely, and whose outbound capital is strictly controlled, but who are eager to find investment opportunities abroad.

Originally, these users traded U.S. stocks through institutions in global financial centers, but now, due to regulatory measures, the heavy hand has targeted the institutions that used to serve these users, forcing their funds to seek new channels.

So, the largest exchange is opening its arms wide.

But the problem is:

If regulators can strike hard at institutions providing U.S. stock trading in global financial centers, could they also someday target the largest exchange?

It’s certainly possible.

Regulations are being introduced one after another for a reason.

And the current bold moves by the exchange are openly competing with regulators for user funds.

They are gambling on whose fist is stronger in the end.

When gods fight, it’s always the little guys who suffer.

Some might say that these funds seeking new channels have long already registered with the exchange in a “compliant” way through other means, avoiding regulatory triggers.

I think that underestimates regulators—they are not unaware, they just didn’t regulate much before.

But times have changed. In today’s sensitive environment, regulators can no longer turn a blind eye to capital outflows in this manner.

Otherwise, why are we seeing a series of measures and regulations being introduced now, tightening outbound capital flows?

So, it’s best not to hold such wishful thinking.

Unless these funds are truly not tax residents of any particular region legally.

Let’s speculate: when the heavy hand strikes the largest exchange, how might they respond?

There are basically three possible actions:

• Ignore it and confront directly;

• Appear righteous on the surface but actually cooperate with regulators, driving away these traders;

• More extreme, to ease relations with regulators and appease their emotions, secretly handing over the list of some traders—leaving a line of retreat for future dealings.

Based on past history and experience, readers can guess what the exchange might do.

Here, I’ll analyze the second option.

In the past, if these displaced funds were simply looking for other channels, they could continue to “legally” register with KYC elsewhere. But under such strict regulatory pressure now, I estimate it’s much harder for these funds to escape, and the consequences of being caught would be much more severe.

Therefore, for the largest exchange’s move into U.S. stocks, ordinary users, considering the risks, should carefully think through the potential consequences and dangers before planning their actions.