China's securities authorities decided to wind down over 2 years the mainland China operations of Tiger Brokers, Futu Holdings and Longbridge, raising the possibility that some mainland investors' funds could move into the cryptocurrency market.

According to blockchain media outlet BeinCrypto on Thursday, the China Securities Regulatory Commission (CSRC) began sanction procedures after concluding the online brokerages provided stock orders, public fund sales and futures brokerage services to mainland China clients without approval in China.

Those subject to sanctions are Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) Limited and Longbridge Securities (Hong Kong) Limited. The CSRC determined they violated the Securities Law, the Securities Investment Fund Law and the Futures and Derivatives Law. Any illegal profits by domestic and overseas entities involved in the business will be subject to confiscation, and a hearing process may be held before final sanctions.

Existing mainland users can only sell holdings and withdraw funds during the wind-down period. New deposits and new buy orders were halted immediately. Once the wind-down period ends, the platforms must also stop operating websites, apps and servers targeting Chinese users. Qualified Domestic Institutional Investor (QDII) channels, cross-border wealth management connect schemes and the Hong Kong stock connect programme will continue to operate.

Chinese retail investors have had limited legal channels to move funds overseas because of an annual $50,000 foreign exchange limit. This has led to expectations that some funds locked in accounts could move to over-the-counter desks and peer-to-peer transactions. USDT is being cited as a key conduit for such routes.

Cryptocurrencies are also not a safe alternative route. The People's Bank of China and the CSRC in February included stablecoins and tokenisation activities within the scope of regulation and also targeted overseas issuers providing services to China residents. If funds move significantly into USDT or on-chain U.S. stock products, they could face similar monitoring. After the news was reported, Futu and Tiger Brokers shares traded at $123.84 and $5.84, respectively.

The measure is another case of narrowing offshore investment channels for mainland Chinese funds. It also showed that stablecoins such as USDT can absorb demand for workarounds when existing brokerage platforms are blocked. It means the intersection between traditional financial regulation and digital-asset inflow routes has become clearer.