In a coordinated regulatory push, authorities in Beijing, Shanghai, Shenzhen, and other cities have launched inspections targeting cryptocurrency exchanges, ordering many small and mid-sized platforms to shut down. Facing this crackdown, numerous exchanges have disbanded or gone offline. BISS (Bishì) Exchange is under investigation by Beijing police for suspected illegal fundraising; Bithumb Global and Biger have blocked access from Mainland China IP addresses; while exchanges like GGBTC, Newton, Mgex, Bibit, and IDAX are suspected to have ceased operations.
Blockchain technology was conceived as a distributed ledger system, a contrast to centralized accounting. Ironically, as regulatory scrutiny intensifies, reporters from China Business Herald have observed that some cryptocurrency exchanges are now adopting their own form of "distributed office operations."
Xiao Sa, a partner at Beijing Dacheng Law Offices, told reporters: "Any exchange, regardless of where it is registered globally, violates relevant laws and regulations if it conducts promotional activities or roadshows in China to solicit cryptocurrency trading from Chinese citizens."
Exchanges Gradually Liquidated
A source familiar with the matter, who requested anonymity, stated: "BISS has been formally placed under investigation. Under standard procedures, such cases typically take one to two years before preliminary results emerge. All individuals involved will be apprehended; this is being treated as a 'group offense.'"
A former BISS employee said that all non-involved staff had resigned, with some leaving the crypto industry entirely to return to the broader internet sector. The employee added that BISS may fade out of the crypto space altogether.
According to an announcement from blockchain data website Feixiaohao, data for four exchanges—GGBTC, Newton, Mgex, and Bibit—was delisted on November 12, 2019. This followed an inability to contact their official teams for three consecutive business days starting November 6.
GGBTC's official Weibo account announced on November 22, 2019, that all servers would undergo maintenance to ensure stability. However, after posting a token listing promotion on November 29, the account fell silent.
A visit to GGBTC's official website revealed that maintenance had ceased. Aside from major cryptocurrencies like BTC, nearly all other tokens had fallen below their initial offering prices. One token named DEFI plummeted from a peak of $0.107 to $0.029, a drop of 73%.
Zhao Yu (a pseudonym), a former GGBTC employee, disclosed: "Beyond regulatory pressure, GGBTC's halt stemmed mainly from users being unable to withdraw funds and its platform token failing to appreciate. With no profitability, the company could no longer sustain operations or even pay salaries."
According to reports by Caijing.com.cn, multiple users stated they were unable to withdraw funds from GGBTC, leaving significant assets unrecoverable.
Regarding allegations that "GGBTC ran away," Zhao Yu said: "As a former employee, calling it a 'rug pull' isn't inaccurate—since neither the founder nor the company can compensate users. But if you claim the founder fled irresponsibly, I'd disagree: he actually sought funding to reimburse users, though I don't know how much of the shortfall he intended to cover."
Public records show GGBTC was founded in early 2019 and received investment from several institutions including Bisheng Capital, Consensus Lab, Huike Capital, Zhuoyue Capital, Shanshui Capital, and Insight Capital.
Zhao Yu added that before its collapse, GGBTC had attempted to obtain financial licenses in countries like Singapore but encountered unresolved hurdles abroad before its domestic issues escalated.
Cryptocurrency Exchanges' "Hiding Techniques"
In a twist inspired by blockchain's distributed architecture, some cryptocurrency exchanges have begun adopting "distributed office operations."
Zhang Haiyang (a pseudonym) works at a second-tier exchange. "Since facing renewed regulatory scrutiny, we've shifted to a distributed model: our technical team is in one city, while other teams are scattered across several others—all coordinating online."
The exchange has now pivoted its focus overseas, targeting international users. "We do list domestic projects, but never fraudulent ones," Zhang Haiyang explained. "Project whitepapers must truthfully disclose team information and private sale details; we reject fake projects outright."
This distributed approach isn't unique to Zhang Haiyang's exchange.
Li Chun (a pseudonym) recently joined another similarly sized second-tier exchange. Her office is merely one of the company's semi-public locations—accessible only to investors and select large clients, while kept confidential from outsiders.
Li Chun added: "We maintain offices across multiple Chinese cities, including two in Beijing, though I don't know their exact addresses, and colleagues don't proactively share them."
Zhang Haiyang noted: "Many exchanges today adopt distributed models for departments beyond development, largely driven by the current regulatory crackdown."
In fact, within the crypto industry, this "distributed office" model was pioneered by Binance and has increasingly become mainstream among domestic exchanges.
Public records show Binance employs over 600 people globally—a modest team—but its staff hail from more than 30 countries and regions, serving users across over 180. Co-founder He Yi once stated: "Binance has colleagues in over 40 countries. Historically, most worked remotely; occasionally, teammates in the same city met at cafés or WeWork. Distributed operations let us better serve users across diverse geographies and cultures."
An industry insider, who requested anonymity, said that since November 2019, to evade scrutiny, some exchanges relocated operations, marketing, and finance teams overseas—keeping only technical teams domestically. Others dispersed departments across different cities or operated fully remotely.
Insiders point out that centralized exchanges are vulnerable to being "shut down en masse" during regulatory sweeps. To avoid detection, smaller exchanges have adopted distributed models—registering legal entities overseas while maintaining operational teams domestically.
The Globalization of Cryptocurrency Regulation
"Any cryptocurrency exchange, regardless of its global registration, violates relevant laws if it conducts promotions or roadshows in China to entice Chinese citizens into trading," Xiao Sa told reporters. "The definition of 'enticement' is broad. While promoting token projects may skirt gray areas, directly advertising price surges or guaranteed returns clearly breaches the law."
Hu Xuewen, Director of the Beijing Municipal Financial Regulatory Bureau, recently told media that cryptocurrency regulation will only grow stricter. The Bureau maintains a "zero-tolerance" stance toward token issuance: every violation will be discovered and punished. Cryptocurrencies cannot function as legal digital currencies; only the People's Bank of China may issue an official central bank digital currency (CBDC). "No individual or entity may legally issue, sell, or trade cryptocurrencies domestically. Moreover, exchanges facilitating token promotion to domestic users or enticing investors through any channel violate the law."
Cryptocurrency regulation is a global trend. Overseas, the United States and Japan represent two of the strictest regulatory environments.
In the U.S., Bitcoin is classified as a digital currency, while Ethereum's status—as a security token or digital currency—remains contested. However, all tokens issued via ICO/IEO must register with the SEC; otherwise, issuers risk penalties for unregistered securities offerings. Effectively, all ICO/IEO-issued tokens—except Bitcoin and Ethereum—are categorized as security tokens.
From June 2017 to June 2018, Block.one—the developer behind EOS—raised $4.2 billion by selling 900 million tokens globally via ICO. On September 30, 2019, the U.S. Securities and Exchange Commission fined Block.one $24 million.
Japan enforces one of the world's strictest regulatory frameworks for virtual currencies. The country's Financial Services Agency (FSA) maintains a strict ban on ICOs. To operate a cryptocurrency exchange, entities must secure both derivatives trading and financial licenses, and are subject to regular compliance inspections by local financial bureaus.
These inspections are grounded in rigorous KYC requirements, designed to protect user privacy and combat money laundering and terrorist financing. Whether in the U.S. or Japan, operating a crypto exchange requires a valid license and strict adherence to KYC obligations.
Globally, the Financial Action Task Force (FATF)—the international body for anti-money laundering and counter-terrorist financing—has recently sharpened its focus on the risks associated with cryptocurrency transactions. It has developed a comprehensive regulatory guidance framework. Notably, China currently holds the FATF presidency and, as a member state, is responsible for implementing its anti-money laundering and counter-terrorist financing standards.
Worldwide, national oversight of virtual currencies is tightening. Illegally operated or non-compliant exchanges are finding their room to operate increasingly constrained.
According to data from DeadCoins, a total of 1,840 cryptocurrency projects have "died" since September 2017. Among these, scams and exit schemes made up 58% of failures in 2018 and 55% in 2019.
These defunct cryptocurrencies once traded on hundreds of exchanges worldwide, ranging from large platforms to smaller ones.
The first half of 2019 saw the rise of the IEO (Initial Exchange Offering) trend, which attracted a wave of speculators. An IEO involves a cryptocurrency exchange leading a token issuance, allowing the token to bypass the traditional ICO process and list directly. According to incomplete statistics, major exchanges like Binance, OKEx, KuCoin, MXC, and Gate.io launched over 85 IEO projects in 2019. Several of these tokens saw their prices drop immediately upon listing, with some even falling below their initial offering price.