Don't wait for the road to wake up: the key points of blockchain project compliance review

Source: Weiyang Network

Author: Zhang Hao (deputy director of the Beijing Heng Law Firm Internet Legal Department)

In recent years, blockchain technology has developed rapidly, and companies or projects related to blockchain have blossomed everywhere. Although the National Internet Information Office issued the "Regulations on the Management of Blockchain Information Services" and the list of multiple batches of record companies has been announced, due to the special nature of blockchain projects, the record does not constitute an endorsement of compliance, and the Blockchain projects have undergone pre-compliance review and continuous risk monitoring has become a problem. In particular, some blockchain projects have prepared or completed tokens, involving the nature of the relevant tokens and the way they are issued, their application in specific scenarios, whether they are listed on an exchange (centralized exchange or decentralized exchange), and overseas operations. Situations, domestic and overseas regulatory coordination, data cross-border, and user access to KYC, etc., all present legal risks of violation of laws and regulations.

Regarding the compliance review work of lawyers engaged in blockchain projects, they are mainly focused on due diligence for professional investment institutions, back-office of state-owned enterprise cooperation, administrative verification by local governments, and third-party project ratings. For blockchain projects, especially completed Token projects, the main purpose of compliance review is to: (1) check the authenticity of the project (2) verify the domestic compliance of the project (3) identify potential financial risks ( 4) Prevent possible criminal risks. In terms of compliance review methods, including but not limited to on-site visits, executive interviews, online retrieval, system live demonstrations, cross-checking of background data retrieval, etc.).

In view of the lack of corresponding specific legal and regulatory basis and industry-specific work guidelines for the compliance review of blockchain projects in China, the focus of our verification will be mainly on the following points:

  • Whether it is suspected of illegal fundraising
  • Whether it is suspected of carrying out MLM activities
  • Is it suspected of opening a casino or gambling industry?
  • Whether it is suspected of issuing securities illegally
  • Whether it is suspected of money laundering or terrorist financing
  • Are you suspected of violating a citizen's personal information or data?
  • Are you suspected of infringing intellectual property rights or unfair competition?

1. Whether it is suspected of raising funds illegally. In the blockchain field, the most typical illegal fundraising is the fund disk model. With the fund disk, problems such as fraud and pyramid schemes will also arise. For example, whether the "trading is mining" model is suspected of being funded, can be seen from the profit mode of the exchange and the sustainability of development. We do not judge or comment on specific projects, but this is a legal issue that deserves special attention. There are also super node election models that many projects are playing, of course, some are for marketing, and some are for the ecological community. . Also, for example, some project parties issue "air coins" and run away immediately after collecting money, which is a typical fundraising fraud.

2. Whether it is suspected of carrying out MLM activities. From a certain perspective, the term "MLM" is usually a joke expression in the industry. For example, I recommend that you buy a digital token today, or that I introduce you to a digital token. Rose, dubbed this recommendation behavior "MLM." However, there are indeed some project parties that sink to second-, third-, and fourth-tier cities to do hotel conference marketing, and induce some uncles or inappropriate investors to invest or develop offline investments to achieve illegal profits. purpose. Projects suspected of carrying out MLM activities generally spend 500,000 to 1 million to buy a set of codes to be a digital token exchange, and then the digital tokens issued under the name of "blockchain" will be listed on the exchange, and " "Market value management" to do price manipulation. After the digital tokens are listed on the exchange, the project party will hire a large number of people to go to the second, third, and fourth-tier cities to push the investment. Under the guise of how many times the returns and how much stable dividends are being used to pull investment and develop offline investment. At present, similar MLM coins have been criminally regulated, such as Pu'er Coin in Guangdong. From the perspective of judicial practice, it is easier to include criminalization with "MLM" than "illegal fundraising."

3. Whether it is suspected of opening a casino or gambling industry. Guessing gambling projects have been a hit during the previous World Cup. Many gangs or organizations that opened online casinos have made a gimmick by combining blockchain. Even individual listed companies, especially those in the gaming industry, have entered into "game + blockchain" projects, and transformed some similar "horse racing", "slot machines", "black pool transactions", etc. through the concept of the blockchain. Games, inducing a large number of domestic users to participate.

4. Whether it is suspected of issuing securities illegally. For illegal acts involving the unauthorized issuance of stocks, companies, and corporate bonds, we need to specifically review whether the subject matter of the project token is suspected of being of a securities nature, review how the Token is issued, used, consumed, and recovered, and whether there are agreed premium repurchases and dividends. , Investment rebates, anchoring the price of an object, and so on.

5. Whether it is suspected of money laundering or terrorist financing. As far as most exchanges on the market are concerned, their KYC can only reach a very basic level. For example, the rules of some exchanges require users to register under a real-name system. If the user performs real-name registration, it will be allowed to make large transfers and withdrawals. If the user does not perform real-name registration, the daily transfer and withdrawal limit will be limited. In the real-name registration process, facing users from all over the world, most exchanges can only require registered users to upload photos by holding their ID cards or passports to achieve primary real-name authentication. Exchanges cannot do face-to-face user sign-ups, nor can they use the "four elements: name, citizenship number, mobile phone number, and bank card" binding verification commonly used in the financial industry. In view of the temporary lack of corresponding KYC standards in the industry, we usually draw on the KYC standards of the banking industry or traditional financial institutions to measure.

6. Whether you are suspected of violating the personal information or data of citizens leaving the country in violation of regulations. Many blockchain projects are operated globally, and some specific data, such as real-name authenticated user information, is not suspected to be encrypted during the upstream and downstream diversion of the project. Or illegally provided to overseas institutions. At present, we only have a trial method and a draft on the issue of data exit. It is difficult to have industry-standard operating guidelines, but we can at least do some compliance and self-regulation based on the trial method and draft.

7. Whether it is suspected of infringing intellectual property rights or unfair competition. At present, in the blockchain industry, the competition for domain names, trademarks and patents by various project parties is very fierce. Although some insiders believe that the blockchain industry, the code should be open source and open, promote social collaboration, and patents should not be used to restrict other industry participants, but for listed companies or large enterprises, the protection and operation of trademarks and patents is very Important compliance content is also a powerful way to prevent other project parties from engaging in unfair competition.