Web3 Project Compliance Risk Identification: How Developers Can Avoid Legal Pitfalls

In today's rapidly developing Web3 industry, many entrepreneurs and developers easily overlook a key misconception: simply registering a project overseas or deploying servers abroad does not achieve "natural compliance." In reality, the core of whether a project is compliant lies in its business model, funding structure, and operational substance, 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 criminal compliance risks of the project. This article will analyze how to quickly assess whether a Web3 project touches the "criminal law red line" from the developer's perspective, and will focus on four common high-risk project models.

How to Identify High-Risk Web3 Projects

1. Gambling-related projects (crime of operating a casino)

Typical features: recharge entrance + random gameplay + withdrawable path

Key Judgment Points:

• Is there any virtual currency recharge behavior?
• Are there designs for games of chance such as lotteries, guessing games, etc.
• Is there a way to exchange the project tokens for mainstream currencies and withdraw them?

When a project possesses these three characteristics simultaneously, it is very likely to be regarded as constituting a "gambling closed loop." Even if the developers are only responsible for front-end interfaces or wallet integrations, they may still face legal risks due to their deep involvement.

2. Projects involving pyramid schemes (Organizing and leading pyramid scheme activities)

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

Key Judgement Points:

• Is it necessary to purchase coins or recharge to qualify for participation?
• Is there a mechanism for inviting others to register and receive rewards?
• Is there a multi-level hierarchy, with rebates decreasing by level?
• Does the project's profitability mainly rely on personnel expansion rather than actual product services?

If developers are responsible for building functions such as rebate calculation systems and level permission modules, they must carefully assess whether there is a risk of pyramid schemes in the overall business structure.

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

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

Key judgment points:

• Is it unauthorized to issue tokens to the public for financing?
• Do you commit to principal protection with high returns or fixed returns?
• Are there any fictitious investment platforms or dividend mechanisms?
• Is it allowed for users to redeem tokens or points for withdrawable assets

If developers participate in the design of core functions such as token issuance logic and points redemption modules, they may bear legal responsibility for providing critical technical support, even if they do not participate in operations.

4. Involvement in illegal business projects (Illegal Business Crime)

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

Key Judgment Points:

• Do you provide deposit and withdrawal services between virtual currency and fiat currency?
• Is there an over-the-counter (OTC) trading module?
• Whether to complete the exchange with domestic and foreign users through virtual currency.
• Whether to conduct foreign exchange trading or settlement matching business without permission

Even if the platform does not directly hold customer funds, as long as it has set up a matching system or trading interface, the technical party may also be regarded as an accomplice.

How Developers Can Protect Themselves

1. Understand the project model: Assess whether there are high-risk structures involving gambling, pyramid schemes, illegal fundraising, or illegal operations.

2. Gain a deeper understanding of the business logic: clarify key aspects such as the source of tokens, the flow of user funds, and the exchange paths.

3. Retain evidence: Clearly state in the technical agreement that you only provide development services and do not bear operational responsibilities; document the discussions with the project party regarding Compliance.

4. Stay vigilant: When holding a core technical role, it is harder to claim "unawareness", so extra attention must be paid to project Compliance.

5. Cultivate legal awareness: possess basic skills in identifying criminal legal risks, and become a developer who understands both technology and law.

In the Web3 industry, compliance construction is crucial, and developers are an indispensable key part of it. Only developers with both technical capabilities and legal awareness can innovate and develop safely and sustainably in this rapidly changing field.