Review of Compliance Development in China's Web3.0 Industry in 2024

As 2024 comes to a close, it is necessary for us to review the development of China's Web3.0 industry over the past year. Compliance has been the main theme of the industry's development this year, from the advancement of regulatory systems to enterprises' exploration of compliance, and to the testing of new technologies. The interaction between policies and the market continues to drive the normalization process of the industry.

Let us review the events and trends worth noting around several keywords for 2024.

Hong Kong: The Rise of Asia's Web3.0 Hub

In 2024, Hong Kong's compliance openness in the Web3.0 field is undoubtedly the most remarkable development. The regulatory policy centered around the Virtual Asset Service Provider (VASP) license not only provides clear guidance for the Chinese market but also attracts global capital and enterprises' attention, gradually establishing Hong Kong's position as the Asian cryptocurrency hub.

This year, several virtual asset trading platforms have been approved to open trading to retail investors in Hong Kong, marking the maturation of Hong Kong's virtual asset market's Compliance system. Regulators have further clarified the rules in segmented areas such as stablecoin issuance, custody services, and over-the-counter trading, comprehensively enhancing the market's safety and transparency.

These measures have greatly enhanced the credibility of Hong Kong's digital asset market, attracting a large amount of capital and enterprises. According to statistics, as of November, Hong Kong's Cyberport has gathered over 270 Web3-related companies, with a cumulative financing scale exceeding 400 million Hong Kong dollars. The Bitcoin spot ETF launched in the first half of this year has already completed nearly 500 million dollars in net inflow.

Hong Kong is also actively hosting various Web3.0 events, such as the Hong Kong FinTech Week held in October, which attracted over 500 exhibitors and tens of thousands of participants, highlighting its status as a hub for industry communication.

Currently, Hong Kong is still conducting multiple Web3.0 projects, such as the sandbox program and the digital Hong Kong dollar program. More virtual asset trading platforms are also applying for or waiting for approval. As Asia's frontier in Web3, Hong Kong is gradually opening up a compliant virtual asset market through a combination of policy guidance and market-driven approaches. In the future, with the collaborative advancement of regulation and technology, Hong Kong is expected to continue leading the trend in Web3 compliance innovation, providing valuable experience for other regions.

Mainland: Virtual Currency Regulation and Property Protection Go Hand in Hand

In 2024, the judicial system in mainland China further clarified its position on the regulation and legal application of virtual currencies. Courts across various regions have defined legal boundaries for the circulation and use of virtual currencies in accordance with relevant policy spirit, while gradually recognizing their economic value in property-related disputes.

In judicial practice, courts across the country generally emphasize that virtual currencies must not be used as financing, payment tools, or trading media. For example, a certain court in Shenzhen ruled that paying wages with virtual currencies is an invalid act; a court in Xiangyin determined that using virtual currencies to settle debts is invalid. These cases further solidify the positioning of virtual currency as "prohibited from circulation" within the mainland legal framework.

However, some case law also shows that the judicial system has adopted a more flexible approach in the protection of property rights. The Shanghai High People's Court explicitly recognized the property attributes of virtual currency in a financing contract dispute case, stating that it can be legally protected as property rights. Furthermore, in multiple cases of coin theft, judges classified them as property theft rather than the crime of illegally obtaining computer data, further reflecting the recognition of the property attributes of virtual currency in judicial practice.

These cases not only provide clearer judicial bases for the legal application of virtual currencies but also emphasize their circulation restrictions and investment risks.

Blockchain Technology: Policy Support Accelerates Implementation

In sharp contrast to the regulation of virtual currencies, mainland China maintains a positive attitude towards the support and promotion of blockchain technology and its related applications. At the National Committee of the Chinese People's Political Consultative Conference held in March this year, the widespread application of blockchain technology was listed as an important topic in technological innovation. The meeting proposed to strengthen basic research on blockchain, enhance independent innovation capabilities, and support its extensive application in key areas such as finance, logistics, and energy.

Local governments have successively introduced support policies. For example, the Hangzhou Municipal Bureau of Commerce has formulated an action plan to promote the development of a strong digital trade city, guiding the development of new business formats such as the metaverse, digital twins, and digital collectibles. The Shandong Provincial Department of Industry and Information Technology has released an action plan for blockchain technology innovation and industrial development, encouraging the integration of technologies such as blockchain, big data, and the metaverse to develop new cultural and creative products like digital intangible cultural heritage, digital collectibles, and digital trendy toys.

The promotion of digital renminbi continues to accelerate, especially achieving breakthroughs in the fields of cross-border payments and wholesale settlements. The Shanghai municipal government has introduced an implementation plan for high-level institutional openness, proposing to orderly advance the digital renminbi pilot and expand application scenarios. In addition, the pilot scope of digital renminbi in Hong Kong and Macau has further expanded, with the scale of cross-border transactions steadily increasing, becoming an important component of China's Web3.0 infrastructure.

Overall, the policy support for blockchain technology and its applications in mainland China in 2024 has not only promoted the construction of digital financial infrastructure but also provided a new compliance development path for the Web3.0 ecosystem. In the future, these innovative applications will continue to deepen, laying the foundation for the digital upgrade of the domestic market and its international competitiveness.

RWA: New Paradigm of Cross-Border Financing

In 2024, the tokenization of real-world assets (RWA) gradually moves from concept to implementation, becoming one of the core trends in the Web3.0 industry. Amid this wave, Chinese enterprises are also beginning to explore compliant cross-border financing models, providing new solutions for the integration of traditional assets and the digital economy.

In August of this year, a certain blockchain platform collaborated with a certain group to launch a new energy charging pile RWA project, successfully completing a financing of 100 million RMB, opening up new compliance pathways for the integration of traditional assets and the digital economy. Subsequently, at the Hong Kong FinTech Week in October, the platform officially launched the RWA infrastructure "Two Chains and One Bridge" cross-border platform, focusing on the tokenization of traditional assets such as real estate, bills, and supply chain finance, promoting the standardization and compliance construction of asset cross-border circulation.

At the policy level, Hong Kong is taking the lead to explore the compliance path for RWA. Multiple initiatives, including the digital Hong Kong dollar pilot project and the sandbox program, are gradually improving the compliance standards for the RWA industry, providing security for cross-border transactions. In contrast, while mainland China has not yet introduced specific policies targeting RWA, it has laid the foundation in blockchain technology and digital financial infrastructure construction. Coupled with Hong Kong's pioneering exploration in the RWA field, this creates conditions for mainland enterprises to participate in this trend through offshore markets.

With the continuous improvement of the regulatory framework and the expansion of cross-border application scenarios, RWA may become an important tool for digital financing and global asset allocation for Chinese enterprises in the future.

Crypto Going Abroad: Finding New Paths for Compliance Participation

In 2024, against the backdrop of the rapid development of the global Web3.0 industry, Chinese enterprises, faced with a strict regulatory environment domestically, are gradually turning their attention to Hong Kong and even overseas markets, exploring new paths for compliance participation. Hong Kong's open policies, mature regulatory system, and similar cultural background undoubtedly make it the most attractive choice. At the same time, Europe, such as Malta, Asia, such as Thailand, and the Middle East, such as the UAE, have also become important choices for Chinese enterprises to layout Web3.0 due to their flexible financial policies and open digital economy environment.

It is worth noting that going overseas does not mean evading regulation; on the contrary, it requires companies to pay more attention to compliance requirements. From building legal structures to cross-border capital flow, companies need to ensure that they operate globally within a legal framework. For example, they can flexibly use offshore funds, digital asset custody platforms, and other tools within the scope allowed by policies to gradually explore feasible paths to participate in the digital economy.

Summary

In 2024, China's Web3.0 industry is gradually showing a trend towards compliance amidst policy adjustments and market innovations. From the leading role of the Hong Kong VASP licensing system, to the trial of RWA cross-border asset management platforms, and the expansion of the boundaries for crypto going abroad, these keywords not only outline the profile of compliance development in China's Web3.0 but also provide a reference for the further evolution of future policies.

For enterprises, compliance is the fundamental prerequisite for embracing the Web3.0 market, while cross-border layout, technological innovation, and policy communication are the key breakthroughs. In the context of accelerating global competition, how to flexibly layout within the compliance framework and seize market opportunities will become the core issue that Chinese enterprises must address.