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

As 2024 draws to a close, it's time to review the development of the Web3.0 industry in China over the past year.

Compliance has been a consistent theme throughout the year. From the advancement of the regulatory system for virtual asset service providers in Hong Kong, to mainland enterprises exploring RWA financing, and the cross-border application testing of the digital yuan, the interaction between policies and the market continues to drive the industry towards standardization.

Hong Kong Becomes Asia's Web3.0 Hub

In 2024, Hong Kong's open policies in the Web3.0 field became the most prominent highlight. The regulatory system centered around the virtual asset service provider (VASP) license provides clear guidance for the entire Chinese market, while also attracting a surge of global capital and enterprises, gradually establishing Hong Kong's position as the Asian cryptocurrency center.

Multiple virtual asset trading platforms have received approval to officially open trading to retail investors in Hong Kong, marking the increasing maturity of the compliance system in the Hong Kong virtual asset market. Regulatory agencies have also further clarified the rules in segmented areas such as stablecoin issuance, custody services, and over-the-counter trading, enhancing the security and transparency of the market.

These measures have greatly enhanced the credibility of Hong Kong's digital asset market, attracting a large amount of capital and enterprises. As of November, Hong Kong's Cyberport has gathered over 270 Web3.0 related companies, with a total financing scale exceeding 400 million HKD. The Bitcoin spot ETF launched in the first half of this year has already achieved nearly 500 million USD in net inflow.

Hong Kong is also actively hosting various Web3 events, such as the FinTech Week held in October, which attracted over 500 exhibitors and tens of thousands of participants. Currently, Hong Kong is promoting several Web3 projects, such as the sandbox program and the digital Hong Kong dollar. As a frontier in Web3 in Asia, Hong Kong is gradually opening up a compliant virtual asset market through policy guidance and market-driven approaches.

Dual-track Exploration of Judicial Practice in Mainland China

In 2024, the judicial system in mainland China further clarified its position on virtual currency regulation and legal applicability. Courts across the country defined legal boundaries for the circulation and use of virtual currencies based on relevant policies, while gradually recognizing their economic value in property disputes.

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

However, some case law also shows that the judicial system takes a flexible approach in the protection of property rights. The Shanghai High Court explicitly recognized the property attributes of virtual currencies in a financing contract dispute case, stating that they can be protected by law as property rights. Furthermore, in multiple theft cases involving cryptocurrencies, judges classified the crime as property theft rather than illegal acquisition of computer data, further reflecting the recognition of the property attributes of virtual currencies 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 accelerates implementation

In stark contrast to the regulation of virtual currencies, the mainland maintains a positive attitude towards the support and promotion of blockchain technology and its related applications. The National Committee of the Chinese People's Political Consultative Conference held in March identified the widespread application of blockchain technology as a key topic for technological innovation, proposing to strengthen fundamental research, 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 instance, the Hangzhou Municipal Bureau of Commerce has developed an action plan to promote the city as a strong digital trade hub, 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 blockchain, big data, the metaverse, and other technologies to help develop new cultural and creative products like digital intangible cultural heritage and digital collectibles.

The promotion of digital renminbi continues to accelerate, especially making breakthroughs in the fields of cross-border payments and wholesale settlements. The Shanghai Municipal Government has released an implementation plan to promote the high-level institutional opening up of the free trade zone, proposing to orderly advance the pilot program of digital renminbi; in November, Shanghai held a deployment meeting for the pilot application of digital renminbi and formulated a new round of action plan. In addition, the pilot scope of digital renminbi in Hong Kong and Macau has further expanded, and the scale of cross-border transactions is steadily rising.

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.

RWA Becomes a New Paradigm for Cross-Border Financing

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

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

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

Searching for Compliance in Crypto Going Abroad for New Paths

In 2024, under the backdrop of the rapid development of the global Web3.0 industry, Chinese enterprises are gradually shifting their focus to Hong Kong and even overseas markets, exploring new paths for compliance participation in the face of a stringent regulatory environment at home. Hong Kong's open policies, mature regulatory system, and shared cultural background have become the most attractive choice. At the same time, regions like Malta in Europe, Thailand in Asia, and the UAE in the Middle East have also become important options for Chinese enterprises to lay out their Web3.0 strategies due to their flexible financial policies and open digital economy environments.

Going abroad does not mean avoiding regulation; instead, it requires companies to pay more attention to compliance requirements. From building legal structures to cross-border capital flows, it is essential to achieve globalization operations within a legal framework. Companies need to flexibly use tools such as offshore funds and digital asset custody platforms within the policy-allowed range and gradually explore feasible paths to participate in the digital economy.

Summary

In 2024, China's Web3.0 industry is gradually showing a trend of compliance amidst policy adjustments and market innovations. From the leading role of Hong Kong's VASP licensing system, to the pilot programs for RWA cross-border asset management platforms, and the expansion of 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 a core issue that Chinese enterprises must address.