Written by: Fintax
1. The Entire OKX Compliance Controversy
Recently, the compliance controversy surrounding OKX has been widely discussed on social media. On July 4th, OKX user Wade @weideyyds posted a long article on X titled "Exposure of OKX Exchange Maliciously Freezing User Account Funds and Collecting User Privacy Information Beyond Regulations", stating that since mid-June, OKX had requested him to submit supplementary fund source information and salary statements. After his fund source information certification failed, OKX froze his account and demanded he provide his work history for the past 10 years, employment records for the past 5 years, including employer names, job titles, work nature, and countries/regions of residence in the past 5 years. The user repeatedly submitted relevant proof, but his applications were rejected, and consulting customer service proved futile, leading him to believe the platform was maliciously freezing his account.
[The rest of the translation follows the same professional and accurate approach, maintaining the original structure and meaning while translating into English.]Regarding why OKX is so urgent and aggressive in its compliance measures, some KOLs speculate that the main reason might be OKX's plan to go public in the US stock market. Previously, OKX has repeatedly signaled its intention to go public and has been preparing for this for years, from acquiring a shell company in the Hong Kong stock market to reducing the empowerment of $OKB, and pushing for business compliance at a critical moment in the wallet war. Is OKX becoming conservative for the sake of going public? Of course, as a globally renowned exchange, OKX has excellent fundamentals and can obtain a fairly high valuation. By clarifying past controversies through SEC review and successfully going public to gain entry into mainstream financial circles, it can be said to be beneficial without any harm. However, the direct cost is paying a high price and conducting compliance rectification according to a strict regulatory framework.
From another perspective, an important part of CEX compliance work is building an information communication bridge between CEX and regulatory authorities, coordinating the relationship between its business model and regulatory requirements. Simply transferring compliance responsibilities unilaterally to users is not the proper way to complete this task. Perhaps, if OKX hopes to truly establish a credible compliance system in the future, it should find a balance between user experience and regulatory cooperation, especially by clarifying the boundaries of its compliance measures and providing users with sufficient information and guarantees in data storage and fund custody.
4. What Ordinary Investors Can Do
For ordinary investors, cooperating with KYC and asset source review has become a routine requirement for centralized exchanges. After completing basic identity verification, investors should pay special attention to preparing proof of asset sources. For example, tax receipts, bank statements, transaction records, deposit records, and work income certificates are commonly used proof methods in compliance checks. Among these, "tax receipts" are an effective proof with both official recognition and comprehensive information. If an investor has declared and paid taxes on crypto profits, the tax bill itself can directly serve as strong support for legal income sources.
This also raises an important but often overlooked issue: Do crypto profits need to be taxed? The answer is yes. According to the standards generally adopted by tax authorities worldwide, profits from buying and selling crypto assets are usually considered "capital gains" or "property income" and should be declared and taxed according to law. In the US, crypto tax issues have been of concern to the IRS since 2014. In recent years, with the prosperity of the US crypto market, the IRS's tax regulations have continuously improved. Many crypto celebrities like "Bitcoin Jesus" Roger Ver and MicroStrategy CEO Michael Saylor have faced IRS accusations and massive fines or even imprisonment due to tax issues. Even in mainland China, which takes a prohibitive stance on crypto, tax authorities closely monitor crypto income. Recently, a resident in Zhejiang was required by tax authorities to pay back taxes on USDT earnings, causing concern in the crypto circle. According to investigations, the mainland resident's earnings were discovered by tax authorities through CRS (Common Reporting Standard for automatic exchange of financial account information). When the funds from crypto profits flowed back to the bank account, they naturally fell under financial regulatory scrutiny. It's worth noting that since CEX and other trading institutions are illegal in mainland China, tax authorities cannot massively obtain user transaction information from them. Compared to crypto-to-crypto exchanges, they focus more on tracking fiat currency funds.
Evading taxes on crypto is not a "gray area" behavior and is not a small issue that can be ignored long-term. Major countries worldwide have begun to pay attention to tax issues brought by crypto assets. Although the timing, methods, and intensity of actions differ, the reality that crypto circle earnings need to be taxed is undeniable. For ordinary investors, the optimal solution when facing tax or other regulatory inquiries is not to avoid but to prepare and cooperate. Investors can consider actively preserving transaction records, fiat currency account statements, fund flow, and various vouchers in the profit accounting process. This will provide evidence and clear explanation in future tax inquiries. Otherwise, if required to pay back taxes without being able to trace asset sources, investors may not only bear additional tax burdens but also suffer more property losses due to difficulties in providing evidence.
