A Must-Read for Web3 Entrepreneurs: The Importance of Project Compliance and High-Risk Model Identification

In today's rapidly developing Web3 industry, many entrepreneurs and developers easily overlook an important compliance misconception: believing that as long as the project is registered overseas and the servers are deployed abroad, it can achieve "natural compliance". However, the core of whether a project is compliant always lies in its business model, capital structure, and actual operations, rather than the superficial overseas structure.

For teams that are still providing services to Chinese users within the country, it is even more important to pay special attention to the legal boundaries and compliance risks of the project. This article will explore how to quickly determine whether a Web3 project crosses legal red lines, using four common types of illegal risk patterns as examples to help developers establish basic identification capabilities.

How to Identify High-Risk Web3 Projects

1. Gambling-related projects

Typical features: Recharge entry + Random gameplay + Withdrawable path

Key judgment point:

• Is there a behavior of virtual currency recharge
• Is there a design for uncertain gameplay such as lotteries or quizzes?
• Is there a way to exchange the project tokens for mainstream currencies and withdraw?

When a project meets the above three points simultaneously, even if the developer is only responsible for part of the functional modules, they may face legal risks due to their involvement in constructing a "gambling closed loop."

2. Pyramid scheme-related projects

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

Key judgment points:

• Is it necessary to purchase coins or recharge first to obtain participation eligibility?
• Is there a mechanism to invite others to register and receive rewards?
• Is there a multi-level rebate structure set up?
• Does the project's profitability mainly rely on headcount expansion and rebates?

If developers participate in building core functions such as commission algorithms and hierarchical databases, they may be held accountable for providing key technical support even if they did not directly participate in promotion.

3. Involved in illegal fundraising projects

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

Key Judgement Point:

• Is it unauthorized public token financing?
• Whether to promise capital preservation with high returns or set fixed returns
• Are there any fictitious financial products, such as wealth management or mining machine leasing?
• Does the establishment of a fund pool allow token exchanges for withdrawable assets?

Developers who are deeply involved in the design of core modules such as token issuance and point redemption, even if they do not participate in operations, may still be held accountable for providing critical technical support.

4. Involved in illegal business projects

Typical features: Coin-to-coin matching + Over-the-counter exchange + Fiat deposit and withdrawal channels

Key Judgement Points:

• Does it provide deposit and withdrawal services between virtual currencies and fiat currencies?
• Is there an establishment of over-the-counter (OTC) trading for fiat currency exchange?
• Is it possible to complete currency exchange for domestic and foreign users through virtual currency?
• Whether to engage in foreign exchange buying and selling, settlement services without permission.

Even if the platform does not directly hold customer funds, as long as a matching system is built, the technical party may also be held accountable for participating in the organization and implementation of illegal operations.

How to Avoid Getting Involved in High-Risk Projects

As a developer, before participating in any Web3 project, it is essential to possess basic legal risk identification skills:

1. Examine the project model to see if there are high-risk structures involving gambling, pyramid schemes, illegal fundraising, illegal operations, etc.

2. Gain a deeper understanding of the project logic, including token sources, user fund flows, redemption mechanisms, etc.

3. Clearly state in the technical agreement that you only provide development services and do not assume operational responsibilities, and keep relevant discussion records.

In the Web3 industry, developers with technical skills and legal awareness can truly establish themselves. Compliance is not only the responsibility of the project parties but also a basic quality that every participant should possess. Only on the foundation of safety and transparency can Web3 projects achieve long-term development.