Crypto Entrepreneurs Face TikTok-Style Crackdown: Survival "Secrets" Under U.S. Regulatory Pressure
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Crypto Entrepreneurs Face TikTok-Style Crackdown: Survival "Secrets" Under U.S. Regulatory Pressure
Under stricter regulation, Huobi accelerates its journey toward crypto compliance.
Navigating Web3 tides with focused insightsThis article is reprinted from PANews, author Nancy
From the internet to the crypto space, Chinese-founded projects and entrepreneurs are facing a major regulatory test from the United States. Recently, an increasing number of companies and executives with Chinese roots have been sued by U.S. regulators, suggesting that the U.S. appears to be attempting to curb and suppress technological and financial innovation through heavy-handed tactics.
Chinese-Backed Projects Face Successive Regulatory Scrutiny in the U.S.
Amid ongoing tensions between China and the U.S., TikTok—ByteDance's key product for overseas expansion—faces regulatory crackdowns in the United States despite efforts such as database segmentation, local data storage, and third-party monitoring to meet increasingly stringent compliance requirements.
On March 23, a congressional hearing was held in the U.S. on whether TikTok poses a threat to national security. During the five-hour grilling session, TikTok CEO Shou Zi Chew faced dozens of lawmakers who launched into a series of prejudiced and hostile questions. His responses were repeatedly interrupted mid-sentence, and TikTok was accused of being a "spy weapon." This political "feast" targeting TikTok—and more broadly, Chinese tech firms expanding abroad—saw no concrete evidence presented by U.S. authorities to substantiate any of the allegations.
From initial executive orders to congressional hearings, from joint summonses with other U.S. tech firms to being singled out, the repeated scrutiny centers fundamentally on one fact: ByteDance is a Chinese company. The Chinese Foreign Ministry has criticized the TikTok hearing as a “carefully orchestrated political performance,” accusing the U.S. of repeatedly overextending the concept of national security and abusing state power to suppress foreign enterprises.
Similarly, non-U.S. crypto firms are also under intense regulatory scrutiny. According to data analysis by blockchain analytics firm Elliptic, since Bitcoin’s inception in 2009, U.S. regulatory enforcement actions have imposed fines totaling $2.5 billion on companies and individuals involved in cryptocurrency transactions. Besides domestic crypto firms, some overseas companies have often had to pay hefty settlements to resolve cases—such as Dubai-based Telegram, which was charged by the SEC for issuing unregistered securities and forced to return over $1.2 billion to investors plus an $18.5 million civil penalty. Russian-based exchange BTC-e was fined $110 million by FinCEN for deliberately violating U.S. anti-money laundering laws.
Recently, Chinese blockchain entrepreneurs have also come under regulatory scrutiny from the U.S. On March 27, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its CEO Changpeng Zhao at a federal court in Chicago. The nearly 10,000-word complaint alleges that Binance and Zhao violated regulatory requirements and failed to fulfill their oversight duties, seeking civil monetary penalties and ancillary equitable relief including trading and registration bans, forfeiture, and pre- and post-judgment interest. However, Binance argues that the complaint contains incomplete factual claims and disagrees with the CFTC’s characterization of its compliance practices, restrictions on U.S. user access, cooperation with law enforcement, and insider trading allegations.
In its case against Binance, the CFTC claimed that most of Binance’s revenue and profits originated from U.S. users and referenced an anonymous “trading firm A” allegedly used by Binance to evade U.S. regulation. Subsequently, Radix Trading identified itself as this firm and stated that conducting crypto trades via such arrangements on Binance did not violate any laws, adding that “this type of arrangement is common among U.S.-based traders active in the cryptocurrency sector.”
Additionally, Justin Sun, founder of TRON, has been formally sued by the SEC, which accuses him and his companies of illegally selling securities, fraud, and market manipulation, while separately charging celebrity endorsers associated with his crypto assets for violations. In response, Sun said these accusations lack foundation and described the SEC’s civil complaint as another example of the regulator targeting prominent figures in the blockchain and crypto industry. He emphasized that the SEC’s regulatory framework for digital assets remains in its infancy and requires further development.
Clearly, Chinese entrepreneurs are now under intense scrutiny from U.S. policy makers.
Aggressive Regulation Sparks Backlash and Skepticism in the Crypto Community
Cryptocurrency is one of the most dynamic, innovative, and rapidly evolving financial products, posing higher demands on regulatory systems to balance risk prevention and innovation promotion.
The U.S. exhibits fragmented oversight in the crypto space, with differing stances among regulatory bodies. SEC Chair Gary Gensler stands out as one of the most aggressive regulators, asserting that existing securities laws “cover most activities conducted in the crypto market,” treating most cryptocurrencies as securities and requiring foreign entities selling crypto to U.S. investors to comply with securities regulations.
While many crypto projects opt to settle lawsuits financially, not all firms can survive regulatory challenges. For instance, crypto-friendly Signature Bank was shut down by regulators, with acquisition terms mandating the complete abandonment of its cryptocurrency operations.
The U.S.’s aggressive regulatory moves have sparked growing discontent within the crypto community, who view current policies as outdated and unclear. For example, Coinbase CEO Brian Armstrong, recently receiving a Wells Notice from the SEC, sees the enforcement action as an opportunity to go to court and expose what he describes as unfair, unreasonable, and unserious behavior by regulators when dealing with digital assets. Circle CEO Jeremy Allaire warned that U.S. regulatory actions are already driving market participants to leave America for jurisdictions with weaker regulation, higher risks, and looser controls. He urged policymakers to proceed cautiously and called on regulators to adopt “clear, coherent, and practical policies.” Justin Sun expressed a desire to collaborate with governments and regulators worldwide to establish transparent guidelines for regulating and working with the crypto industry, emphasizing its significant potential.
CoinDesk commented on the U.S. government’s regulatory actions, stating that most are punitive rather than constructive, exceeding the legal authority granted to regulators and contradicting the spirit of freedom and innovation underpinning both the U.S. and the crypto world.
Beyond industry players, several former regulators have voiced criticism. Former SEC Chair Jay Clayton described the current state of U.S. digital asset regulation as “garbage” due to its lack of clarity. CFTC Chair Timothy Massad noted that the current U.S. regulatory framework for crypto is insufficient to protect investors, with even regulated U.S. exchanges operating under outdated state money transmission laws that fall short in establishing robust investor protections.
The absence of clear regulatory guidance and heavy-handed enforcement reflects an underlying power struggle over crypto jurisdiction. With no federal legislation currently governing the crypto market, agencies like the CFTC and SEC are competing for control. For these regulators, whoever gains authority over the crypto market will shape its future trajectory.
Meanwhile, following the collapse of Democratic Party backer FTX and revelations about SBF’s close ties to Democrats, the Biden administration has intensified its crackdown on the crypto market—a stark reversal from just a year ago, when it pledged U.S. leadership in global digital asset governance. This shift raises profound questions.
However, this overly strict approach has neither effectively protected investors nor provided sufficient clarity for the crypto industry or room for technological innovation. Instead, it risks driving more crypto businesses out of the United States.
Under Heavy Regulation, Huobi Accelerates Its Path Toward Global Compliance
In recent years, amid an increasingly complex and severe global regulatory environment for crypto assets, long-term sustainability lies only in compliant operations. Cryptocurrency firms like Huobi are continuously enhancing their compliance frameworks to adapt to evolving regulations and expand their market presence.
Huobi has consistently pursued business compliance. Beyond regular third-party audits, implementing Merkle tree proofs, and committing to 100% redeemability to ensure asset custody transparency and compliance, Huobi has obtained multiple international operating licenses, including Canada’s MSB license, U.S. MSB trust license, BVI’s SIBA license, and Gibraltar’s DLT license, enabling compliant operations across jurisdictions.
In late November 2022, Huobi achieved a historic breakthrough in global expansion and compliance, launching its Web3.0 and metaverse globalization initiative. Authorized by the government of Dominica, Tron, Huobi, and DMC Labs jointly launched the world’s first government-issued token, DMC (Dominica Coin), followed in December by the first nationally recognized decentralized digital identity (Dominica DID).
As countries like the U.S. tighten their crypto regulations, Hong Kong’s new strategic opportunities in crypto policy may further accelerate Huobi’s journey toward global compliance and transparency. After Hong Kong opened its doors to the crypto industry last year, Huobi quickly advanced its compliance strategy. In February this year, Huobi launched TCNH (TrueCNH), an offshore RMB stablecoin, leveraging Hong Kong’s status as a major hub for offshore RMB circulation. This move brings new financial opportunities to global users and helps expand Hong Kong’s footprint in the crypto space.
Moreover, beyond planning to relocate its Asian headquarters to Hong Kong, Huobi is preparing to apply for a Hong Kong cryptocurrency exchange license—an important step forward and a clear signal of its commitment to compliant and standardized operations. Huobi will also launch a new exchange, Huobi Hong Kong, focused on serving institutional investors and high-net-worth individuals in Hong Kong.
Looking ahead, Huobi plans to deepen its crypto presence in Hong Kong. Justin Sun revealed that Hong Kong is “one of the testing grounds for cryptocurrency development,” and Huobi will continue expanding its operations there, fully supporting Hong Kong’s new policies, closely monitoring future developments, and aiming to cooperate with the Hong Kong government in areas such as stablecoins, NFTs, and exchange services, positioning itself as the preferred partner for clients and Web3 startups in the region.
Regulation remains an essential component of technological innovation. As crypto continues to expand into traditional domains, the industry faces greater demands to build safer and more compliant operational systems—meaning crypto firms and entrepreneurs face heightened litigation risks, especially under the U.S.’s stricter scrutiny of non-American entities. Regulators, meanwhile, must establish clearer industry standards and avoid stifling technological innovation through excessive regulation, fostering a healthier environment for industrial growth.
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