Compliance Traps and Risk Avoidance in Web3 Project Operations

In the Web3 space, many projects adopt seemingly clever but actually dangerous operating models to evade regulatory risks. Although these models appear to be in compliance on the surface, they may actually bring greater legal risks. This article will delve into three common but potentially dangerous operating strategies and illustrate the risks involved through real-world cases.

Risks of the "Outsourcing" Model

Some Web3 projects tend to outsource core business functions to third parties, attempting to downplay their own operational attributes. However, regulatory agencies are focused on the actual decision-makers and beneficiaries rather than the superficial contractual relationships. If it is found that the so-called third-party service providers have a vested interest or control relationship with the project team, regulatory agencies may view them as an extension of the project party, thus holding the project party accountable.

For example, in the case where the SEC sued Dragonchain, despite the project establishing multiple legal entities and outsourcing part of its business, the SEC still determined through investigation that all key decisions were controlled by the parent company of Dragonchain, and the outsourcing structure did not achieve liability isolation.

The Hong Kong Securities and Futures Commission also stated that if the core operational and technical decisions are still controlled by the same actual controller, even if the business is executed by a "service provider", it will not be considered an independent operation. This kind of "formal splitting" may instead be seen as evidence of deliberately evading regulation.

The Pitfalls of "Multiple Registrations + Distributed Nodes"

Some projects choose to register companies in countries with loose regulations while claiming global node deployment, attempting to create the impression of "decentralization." However, in reality, most of these structures still exhibit highly centralized control, with decision-making power, funding flow, and key code update permissions often concentrated in the hands of a few individuals.

Regulators are increasingly inclined to trace the "location of the actual controller" and "location of key activities" to establish jurisdiction. The ruling in the 2024 Williams v. Binance case indicates that U.S. law may apply as long as there are U.S. users and infrastructure, even if the company claims there is no U.S. entity.

The Monetary Authority of Singapore ( MAS ) and the Hong Kong Securities and Futures Commission are also strengthening their review of the actual management locations and the residences of key management personnel for virtual asset service providers. This indicates that mere multi-location registration and distributed node deployment cannot effectively avoid regulatory risks.

The Misconception that "On-chain Publishing ≠ No Operations"

Some technical teams mistakenly believe that deploying a smart contract on-chain is equivalent to "decentralized delivery," which can sever legal responsibilities. However, regulators are more concerned with off-chain activities such as marketing, distribution, and circulation control. Just because the code has no administrator or can be called arbitrarily does not mean that the project has achieved decentralization.

In 2024, the collective lawsuit by American investors against the Pump.Fun platform emphasized that despite the platform's claim of "on-chain contract transparency", marketing activities and KOL promotion are the core drivers of transactions. The SEC also clearly stated that even if it is an "entertainment type" token, as long as there is an expectation of wealth appreciation or marketing intervention, it still needs to be judged according to the Howey Test.

Global regulatory trends indicate that off-chain promotion and distribution channels have become key areas of scrutiny, especially "incentivized issuance" conducted through methods such as KOLs, airdrops, and exchange listings, which are almost universally regarded as typical operational activities.

Conclusion

Regulators' focus has shifted from superficial structures to substantive control relationships. Web3 projects should establish clear responsibilities and control boundaries, rather than attempting to obscure risks through complex structural designs. The key to true compliance lies in creating resilient and interpretable architectures, rather than playing structural games.