Web3 Project Compliance Risk Identification Guide

In today's rapidly developing Web3 industry, many entrepreneurs and practitioners still hold a common misconception: that as long as a project is registered abroad and servers are deployed overseas, it can achieve "natural compliance". However, the core of whether a project is compliant lies in its business model, funding structure, and operational substance, rather than the superficial offshore structure. Registration abroad can be a part of compliance, but it cannot serve as a shield to cover high-risk business activities.

For teams that are still based in the country and provide services to Chinese users, it is even more important to pay special attention to the legal boundaries and criminal compliance risks of the project. This article will focus on analyzing four common Web3 illegal risk patterns to help developers establish basic identification capabilities from the perspectives of project structure, system functions, and token circulation.

Identification of Four Types of High-Frequency Web3 Illegal Risk Patterns

1. Gambling-related projects ( Opening a casino crime )

Typical features: Recharge entry + Random gameplay + Withdrawable path

Key identification points:

• Is there any virtual currency recharge behavior?
• Is there a design for games with randomness, such as lotteries and betting?
• Is there a withdrawal path, such as whether the project token can be exchanged for mainstream currencies and circulated?

When a blockchain gaming project meets all three points mentioned above, even if the developer is only responsible for the front-end interface, wallet integration, and other modules, they may face legal risks due to their deep involvement in the construction of a gambling closed loop.

2. Involvement in pyramid scheme projects ( organizing and leading pyramid scheme activities crime )

Typical features: User payment + Invitation commission + Multi-level rebate chain

Key Points:

• Do users need to recharge or purchase coins to qualify for participation?
• Is there a mechanism to invite others to register or invest to receive rewards?
• Is there a multi-level hierarchy, with rebates decreasing by level?
• Does the project's profitability primarily rely on headcount expansion and commission-driven incentives?

If the reward model of the project is built around the development personnel and is directly linked to the payment behavior and level structure, it is necessary to be particularly vigilant about whether it involves pyramid schemes.

3. Involvement in illegal fundraising projects ( illegal absorption of public deposits/fundraising fraud crime )

Typical characteristics: public fundraising + promised returns + no financial qualifications

Key Points:

• Is it aimed at widely attracting funds from the general public?
• Is there a commitment to fixed income or returns?
• Whether it has legitimate financial business qualifications

Common high-risk patterns include:

• Issuing tokens for financing without approval
• The platform promises "capital protection with high returns"
• Establish a fund pool that allows users to exchange tokens for withdrawable assets.

4. Involved in illegal business projects ( illegal business crime )

Typical features: cryptocurrency trading matching + over-the-counter exchange + fiat deposit and withdrawal channels

Key Points:

• Does it provide deposit and withdrawal services between virtual currencies and fiat currencies?
• Is there an off-exchange OTC trading module for matching cryptocurrencies with fiat currency?
• Whether to complete the arbitrage exchange for domestic and foreign users through virtual currency.
• Whether foreign exchange trading and settlement matching business is conducted without permission

How Developers Can Stay Away from Criminal Legal Risks

As a technical personnel, do not think that "as long as I am only responsible for developing features and do not understand the specific gameplay" can exempt you from liability. In judicial practice, as long as you are aware that the project has illegal risks and still provide technical support, you may be recognized as an accomplice.

Before participating in the project, it is recommended for technical personnel to conduct self-checks from the following three aspects:

1. Examine the project model: whether there are high-risk structures such as gambling, pyramid schemes, illegal fundraising, illegal operations, etc.

2. Sort out the funding logic: whether the source of tokens, user fund inflow and outflow paths, token redemption mechanisms, etc. are in compliance.

3. Retain communication records: Clearly state in the technical agreement that you only provide development services and do not assume operational responsibilities. Document discussions with the project party regarding compliance as self-protection evidence.

Conclusion

In the Web3 field, developers with the ability to identify legal risks have a greater survival advantage. Compliance awareness beyond technology is an indispensable hard skill for contemporary developers. We hope to promote the healthy development of the entire industry on the basis of compliance by raising the risk awareness of practitioners.