8 legal issues that Web3 entrepreneurs need to pay attention to

In recent years, the rapid development of blockchain technology has attracted many entrepreneurs to enter the Web3 field, hoping to find opportunities in this emerging market. However, domestic Web3 entrepreneurs not only need to solve the problems of the business itself, but also face complex legal compliance challenges. This article summarizes the common legal issues in Web3 entrepreneurship, aiming to provide reference and inspiration for entrepreneurs.

! Top 8 Legal Issues Web3 Entrepreneurs Need to Pay Attention to

1. Forbidden Zones for Domestic Web3 Startups

Currently, there are three clear restricted areas for engaging in Web3-related projects within China: issuing tokens, operating virtual currency exchanges, and mining activities. These activities may involve risks such as illegal fundraising and illegal financial activities, and entrepreneurs must be cautious to avoid them.

2. Legal Risks of Web3 Project Models

Some Web3 project models may involve criminal risks such as the crime of opening a casino or the crime of organizing or leading pyramid schemes. Taking Web3 games as an example, if in-game tokens are allowed to be freely traded or withdrawn, there may be gambling risks. If multi-level distribution and promotion methods such as attracting people are adopted, pyramid marketing risks may be involved.

3. Protect against the risk of financial crime

Web3 platforms can be exploited for money laundering activities. Due to the anonymity and cross-border nature of transactions, the Web3 industry faces higher requirements in terms of anti-money laundering regulation. Entrepreneurs need to establish an effective anti-money laundering internal control system and fulfill corresponding legal obligations.

4. Legal Applicability of Overseas Projects

Even if the project is registered abroad, if it mainly targets users in mainland China, it may still be subject to the jurisdiction of Chinese criminal law. Adding foreign-related factors to the business model does not completely avoid domestic legal risks.

5. Compliance of Overseas Capital Repatriation

For overseas operating income or financing funds, capital can be legally repatriated to the domestic market through Foreign Direct Investment (FDI). Currently, except for specific sectors, foreign investors can enjoy the same rights and obligations as domestic investors in most Web3-related fields.

6. Information Protection and Data Security

Despite blockchain's emphasis on decentralization, Web3 projects still need to pay attention to user information protection and data security. A comprehensive data security management system should be developed to ensure the security of data during storage, transmission and processing. At the same time, it is necessary to comply with the relevant laws and regulations of the country where the project is operated.

7. Risks of Virtual Currency Entrusted Investment Services

Although relevant policies classify virtual currency operations as illegal financial activities, there are still related disputes in practice. It is recommended to sign a written investment delegation agreement when engaging in such activities, clearly specifying the jurisdiction terms to mitigate potential risks.

8. The Issue of Overseas Companies Hiring Employees Domestically

If a company's business violates Chinese criminal law, there are still risks associated with employing staff domestically, even if registered overseas. These mainly include issues of employee stability and the risk of core company information being leaked due to employees being investigated.

Conclusion

Web3 entrepreneurs should fully understand the relevant laws and regulations and clarify the prohibitory provisions before starting their business. Even for overseas operations aimed at domestic users, it is necessary to comply with both domestic and international regulations. I hope this article can provide valuable legal references for Web3 practitioners and help them develop steadily in this emerging field.