Author: Liu Honglin
In the past few years, Lawyer Honglin has encountered many friends interested in the Web3 industry during offline sharing and closed-door courses. Almost every discussion ends with someone asking me a highly similar question:
Under the existing legal and regulatory framework in mainland China, what can Web3 entrepreneurs do if they want to avoid crossing the red line?
This question is truly a soul-searching inquiry, striking at the real situation of many mainland Web3 entrepreneurs. On one hand, we see the rapid evolution of DeFi, NFTs, stablecoins, RWA, and AI+Crypto in overseas markets, while on the other hand, we must face the regulatory reality in mainland China: the narrative of Web3 centered around financial innovation and token mechanisms does not have a direct space for replication and implementation in mainland China.
It is precisely because of this "visible magic and gap of seeing that Web3 is undoubtedly the future, but looking down seems like there is nothing to be done" that everyone repeatedly doubts and gives rise to the same question: What other ways can Web3 continue to develop without touching the legal red line?
To save everyone’s mobile data, let me put the conclusion upfront: In mainland China, Web3 entrepreneurship is not "impossible," but it cannot revolve around "issuing tokens, trading tokens, fundraising, or transactions." Once you completely detach these four actions from your business model, the remaining space will become much clearer.
The first category that still has real space is pure technology and infrastructure-level Web3.
If you treat blockchain as a "new type of distributed database, collaboration tool, or system architecture," rather than a financial tool, then it has not been denied in mainland China. Whether it is consortium chains, permissioned chains, or solutions under the names of "blockchain technology services," "distributed ledger systems," or "trusted data infrastructure," they essentially fall under the category of information technology services.
At this level, what entrepreneurs can do is very specific and traditional: building systems for enterprises, platforms for governments, and middle platforms for industries. Data rights confirmation, data circulation, evidence tracing, cross-entity collaboration, supply chain collaboration, judicial evidence preservation, and administrative evidence preservation are not new scenarios, but using blockchain to do so can indeed provide a clearer structure in terms of responsibility division, audit tracking, and post-event evidence.
The key here is not whether "you use blockchain," but rather: who your clients are, what your charging method is, and whether you are selling anything with investment expectations to the general public. As long as the business model is B-end payment, project-based, or subscription-based, this path is relatively clean.
The second category is Web3 applications that clearly de-financialize but retain the "digital asset" shell.
The evolution path of NFTs in mainland China has already provided a clear demonstration. As long as it does not involve secondary market transactions, does not emphasize investment returns, and does not promise appreciation space, but instead returns to the usage scenarios of "digital content, digital rights, digital certificates," the regulation has not outright denied it.
Digital collectibles, brand membership certificates, event passes, digital copyright identifiers, and digital identity badges are essentially "using the chain to issue an unalterable, verifiable certificate." What these projects really need to do is not "tell the Web3 narrative," but to solidly solve issues related to brand operation, user relationships, and content rights confirmation.
Many entrepreneurs get stuck here, often not due to legal issues, but rather business judgment issues: Is using the chain really better than not using it? If the answer is merely "it looks more Web3," then this project is likely not to last long.
The third category is Web3 peripheral businesses centered around compliance, risk control, and industry services.
As regulations become clearer, a large number of "service demands" will emerge. Exchanges, project parties, overseas teams, content platforms, and technology companies all need legal, compliance, risk control, auditing, data analysis, on-chain monitoring, and anti-money laundering support.
A notable feature of this type of business is that it does not stand at the center of the wind, but exists long-term and is increasingly essential. For those familiar with the industry and able to explain complex logic clearly, this is a typical "slow business."
So everyone should understand why Mankun Law Firm has been deeply engaged in such a niche track in Web3 for a long time and plans to work on it for another ten or twenty years.
From legal consulting, compliance framework design, overseas entity establishment, to on-chain fund path analysis, risk assessment, and system construction, these tasks are not glamorous but very real.
The fourth category is Web3 entrepreneurship that is based on "going overseas" but completes non-core processes in mainland China.
This type of path often tests the structural design ability and legal boundary awareness of entrepreneurs. Its core logic is not "pretending not to do Web3 domestically," but rather clearly splitting: which processes belong to technology and service activities that mainland law can accommodate, and which processes must be completed under overseas compliance frameworks.
From a practical operation perspective, the areas that mainland teams can legally undertake often focus on R&D, product design, protocol auditing, system operation and maintenance, risk control models, data analysis, compliance research, and content support. These tasks essentially belong to technical services or intellectual services and do not directly touch on the issuance, trading, or fund circulation of virtual currencies. As long as they do not directly promote tokens to the general public, do not participate in fundraising, and do not engage in transaction matching, these roles are relatively controllable legally.
What truly needs to be "moved outside" are the front-end parts involving financial attributes: token issuance, stablecoin design, on-chain transactions, clearing and settlement, user fund custody, and profit distribution mechanisms. Once these actions occur in mainland China, the risks are almost indisputable. However, if completed by overseas entities, with service targets, market promotion, and user acquisition all occurring overseas, and the mainland team only existing as a technical or support party, the overall structure has practical cases and space.
This type of model often presents as a layered structure in reality: overseas is the business entity, compliance entity, and commercial closed-loop location; mainland is more like an "engineering department + research institute + backend support center." It is not glamorous and is difficult to package into a grand narrative, but it excels in sustainability. This may not be the ideal state for Web3 entrepreneurship, but it is a repeatedly validated practical path under the existing legal framework.
Of course, the premise of this path is that entrepreneurs must have a real understanding of "going overseas," rather than just registering an overseas company or setting up an overseas website. Where the market is, who the users are, who bears the compliance responsibilities, and how funds are closed-looped—if these questions are not clarified, even the most beautifully structured plan can easily go out of control at the execution level.
Finally, I want to repeatedly remind friends who want to start a business in the Web3 industry that under the legal context of mainland China, the following activities can almost certainly be classified as high-risk or even illegal: issuing or indirectly issuing tokens in any form; fundraising under the guise of "nodes, partners, or whitelists"; promising returns or implying profits; providing virtual currency transaction matching, pricing, or promotion for others; promoting investment in crypto assets in WeChat groups, communities, or live broadcasts.
In mainland China, treating Web3 as a "technology and tool" rather than "finance and assets" may actually lead to a longer entrepreneurial path. This is certainly not the most bustling route, but it may be the one least likely to crash.
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