Web3 Compliance Practices in the Wave of Payment Finance

The Web3 payment sector is ushering in new development opportunities. With the widespread adoption of blockchain technology, how to reconstruct the boundaries of payment and finance in a decentralized environment has become a focal point of industry attention. In this challenging race, how to balance compliance and innovation is also a key issue.

Recently, Diana, the legal counsel of a Web3 payment startup, shared her professional experience. Diana has an educational background from Peking University Law School and the University of Pennsylvania, and has worked at a law firm in the United States. In 2022, she joined a Web3 payment company named Infini as the legal counsel and Compliance Officer.

Diana stated that transitioning from a traditional law firm to the Web3 space is an important career shift. The Web3 industry is vibrant and innovative, not bound by credentials, but rather focused on the ability to solve problems practically. This open and creative atmosphere has given her a sense of professional belonging.

When it comes to the essence of PayFi( payment finance), Diana believes it reconstructs payment and traditional financial tools with blockchain technology, integrating them into everyday scenarios. The core value of PayFi lies in enhancing the efficiency of fund flow and reducing transaction costs, while also possessing strong inclusivity. Compared to centralized finance( CeFi), PayFi places greater emphasis on user-friendliness and scenario-based applications.

The vision of Infini, where Diana works, is to create "the Alipay of the Web3 industry" by establishing a user-friendly payment platform. They aim for the product to be simple and easy to use, achieving widespread adoption. The business mainly includes two major sectors: payment issuance and asset management. In terms of Compliance, Infini is communicating with regulatory authorities in Hong Kong and Singapore and plans to obtain the relevant licenses in the near future.

In balancing convenience and security, Infini has chosen a centralized custody model, entrusting compliant third-party institutions to manage user assets. At the same time, it strives to find a balance between convenience and security through a simplified user interface and strict compliance audits.

Diana admitted that Infini encountered setbacks during its development, such as a major theft incident. This incident made the team realize the importance of security awareness and prompted the company to thoroughly upgrade its system security and compliance measures.

In terms of global Compliance, Infini primarily serves users with overseas identities, strictly implementing KYC and anti-money laundering reviews. For Visa/MasterCard payment channels, in addition to adhering to universally accepted Compliance requirements, risk control measures have also been established for different regions.

When talking about the impact of regulation on PayFi innovation, Diana believes that regulation is a double-edged sword. Strict regulation increases compliance costs but can also provide clearer rules and a better development environment for the industry. Infini's strategy is to adopt a phased compliance approach based on the business development stage, choosing a suitable regulatory environment at different times.

Regarding how to balance compliance costs with business growth, Diana emphasized the need to make choices based on the company's positioning. Infini chose to take the compliance route, controlling costs through applying for lightweight licenses and phased compliance. She believes compliance is a company's "moat"; although the costs are high, it is indispensable.

When choosing a landing area, Diana suggests examining the local regulatory attitude. She recommends places like Dubai/UAE, the European VASP region, and Singapore, as these areas are relatively friendly to Web3 companies. At the same time, she reminds to be cautious when communicating with regulatory agencies and it is best to understand the policies through informal channels first.

Finally, Diana offered advice to legal practitioners looking to enter the Web3 field: maintain professionalism, gain a deep understanding of the business, and be allies rather than opponents to the business team. She encourages young people to be bold in innovation on the stage of Web3, which is full of opportunities, and to follow their inner desires.