Due to the clear regulatory red lines in our country, many core areas, especially those involving crypto financial services, such as cryptocurrency trading, lending, etc., still find it difficult to participate in compliance domestically. This has led many investors to consider overseas investment in search of a freer market environment.
But with this comes another critical issue that Web3 investors need to consider: Is participating in Web3 overseas really compliant?
Here, Portal Labs also provides an answer: compliance.
What exactly is the compliance law? In this article, Portal Labs will analyze it one by one.
Compliance Analysis for Investing in Web3 Overseas
To address this issue, one only needs to clarify two core questions:
Does our country prohibit citizens from participating in Web3 investments overseas?
Are foreigners allowed to invest locally, establish projects, or even set up companies?
Regarding the first question, from the current regulatory attitude in China, the focus of regulation represented by the Notice on Further Preventing and Handling Risks of Virtual Currency Trading and Speculation mainly concentrates on domestic enterprises and financial institutions, as well as crypto financial services conducted within the country, such as ICOs, cryptocurrency exchanges, mining, and token financialization.
In other words, as long as individual investors from China do not involve illegal fund flows (such as money laundering or illegal currency exchange) or provide financial services within the country in violation of regulations, it is feasible to participate in overseas Web3 investments through legal and compliant channels without crossing the above regulatory red lines.
However, although Chinese investors can participate in Web3 overseas, there is significant variation in regulatory policies regarding crypto assets in different countries, and compliance in various regions also differs. Therefore, when choosing to invest in Web3 projects, investors need to understand local regulatory policies to avoid crossing the red lines of other countries.
From the current global regulatory trend of Web3, most popular regions, including Hong Kong, Singapore, Dubai, the UAE, the United States, and Europe, are gradually improving their compliant regulatory systems to attract global investors and entrepreneurs with clear rules and frameworks. Portal Labs believes that most investors looking to venture overseas into Web3 will choose these countries and regions as their preferred destinations.
Therefore, let us take a look at whether these countries and regions can accept Chinese investors:
Hong Kong
The Hong Kong Securities and Futures Commission has clarified the regulatory path for trading platforms since June 2023 by implementing the Virtual Asset Service Provider (VATP) licensing system. It is noteworthy that the Hong Kong license explicitly prohibits providing financial services such as cryptocurrency trading to users from mainland China.
However, for investors from mainland China, there are currently no explicit restrictions on establishing corporate entities or investing in legal and compliant virtual asset companies or funds in Hong Kong. Therefore, it is compliant for investors from mainland China to invest in Web3 enterprises or projects in Hong Kong, but related companies should avoid providing trading-related services to mainland China and ensure their compliance and safety.
Singapore
Singapore has maintained a cautious but open regulatory attitude towards crypto assets. Since 2022, the Monetary Authority of Singapore (MAS) has explicitly included virtual assets within the regulatory scope of the Payment Services Act (PS Act), requiring all virtual asset trading platforms to obtain Digital Payment Token (DPT) licenses. As long as a company obtains the compliance license, investors from any country can legally invest in or participate in the construction and operation of local Web3 projects.
Additionally, Singapore has not imposed restrictions on investors from specific countries, and investors from mainland China can comply with local requirements when investing or establishing Web3 enterprises in Singapore.
Dubai
In recent years, Dubai has actively promoted the development of the Web3 and virtual asset industry and established a dedicated regulatory authority for virtual assets—the Dubai Virtual Asset Regulatory Authority (VARA) in 2022, allowing international investors to invest, register companies, or apply for virtual asset operating licenses in Dubai, including exchanges, asset management, wallet services, metaverse platforms, and other business directions.
Currently, Dubai does not have special restrictions on investors from mainland China, so Chinese investors can legally invest or establish Web3 companies in Dubai, fully compliant and supported by the local government.
United States
The regulatory environment in the U.S. is relatively complex, with differences between federal and state policies.
From a federal perspective, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have strict regulations on virtual assets. The SEC primarily regulates virtual assets with securities attributes, while the CFTC oversees commodity assets (such as Bitcoin). In recent years, the SEC has repeatedly sued crypto project parties, focusing particularly on financing activities such as ICOs and security token offerings (STOs), resulting in stricter overall regulation. However, under Trump's administration, there is hope for a move towards a more relaxed environment.
But at the state level, there are significant differences. States like Wyoming, Texas, and Florida show a more open and encouraging attitude towards cryptocurrency companies, providing clearer and more relaxed regulatory frameworks to support the implementation of blockchain projects.
Overall, the U.S. market does not explicitly restrict investments by individual or corporate investors from mainland China, but if one wishes to invest in Web3 in the U.S., it is advisable to do so through compliant paths such as setting up offshore companies or investment funds.
European Union
In 2024, the EU passed the Markets in Crypto-Assets (MiCA) Act, the world's first regional-level law that clearly regulates crypto assets, providing a unified and clear regulatory framework. MiCA outlines compliance requirements for the issuance, trading, and operation of crypto assets and applies to all Web3 enterprises operating within the EU, regardless of the country of origin of the founding team or investors, all must adhere to its unified standards.
Although MiCA has clarified the licensing system for stablecoin issuance and exchanges, it still lacks comprehensive regulation in areas such as DeFi and NFTs. However, from the bill documents, the EU does not restrict investors from mainland China from participating in investments or establishing enterprises in Web3 projects, as long as they comply with MiCA's regulatory requirements. This makes the EU one of the more stable and clearly compliant regions for investors from mainland China when expanding into Web3.
Southeast Asia (Thailand, Vietnam, Philippines, etc.)
The regulatory situation for virtual assets in Southeast Asia is relatively fragmented but generally maintains an encouraging and relaxed attitude.
For example, Thailand has clarified the compliance path for virtual asset trading platforms and asset custody businesses since 2022 through its Digital Assets Act; likewise, the Philippines welcomes Web3 projects, particularly allowing cryptocurrency exchanges and blockchain gaming companies to apply for operating licenses; additionally, Vietnam currently has relatively vague regulatory policies but has not explicitly prohibited or strictly restricted investors and Web3 startups.
Overall, most Southeast Asian countries do not have specific restrictions on Chinese investors. As long as investors or enterprises comply with local policies and apply for compliant licenses, they can legally engage in relevant Web3 businesses.
Summary
Overall, although there are certain policy restrictions for investors from mainland China to participate in Web3, there are still feasible paths for compliant overseas expansion. Whether in Hong Kong, Singapore, Dubai, or Southeast Asia and Europe and the United States, there are clear regulatory frameworks supporting investors' compliant participation in local Web3 projects or enterprises.
However, it should be noted that going overseas does not mean evading all regulations; instead, it imposes higher compliance requirements on investors.
For investors from mainland China, when participating in Web3 investments overseas, it is essential to ensure that the flow of funds is legal and compliant, that the established corporate entities meet local legal requirements, and must also avoid providing any form of crypto financial services to mainland China to prevent crossing regulatory red lines.
Remember, compliance is not only the foundation for making money but also a key element in protecting asset safety.
