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

As 2024 comes to a close, it is time to look back on the development of the Web3.0 industry this year.

In 2024, compliance has become the main theme of the development of Web3.0 in China. From the licensing of virtual asset service providers (VASP) in Hong Kong and the advancement of stablecoin regulatory systems, to the exploration of RWA financing by mainland enterprises and the cross-border application testing of the digital renminbi, the interaction between policy and market continues to drive the standardization process of the industry.

Let's review the annual hot events and trend dynamics around the compliance keywords for 2024.

Hong Kong: The Rise of Asia's Web3.0 Hub

In 2024, the compliance opening of Hong Kong's Web3.0 becomes the biggest boon for the industry. The policy centered around the VASP license not only brings clear regulation to the Chinese market but also comprehensively promotes compliance opening, attracting global capital and enterprises to flood in, gradually establishing Hong Kong's position as the cryptocurrency hub of Asia.

Multiple virtual asset trading platforms have been approved to open trading to retail investors in Hong Kong, marking a maturation of the compliance system in the Hong Kong virtual asset market. The regulatory authorities have further clarified compliance boundaries, and regulatory details for stablecoin issuers, custodial service providers, OTC, and other segmented areas have been successively introduced to ensure market safety and transparency.

These measures have enhanced the credibility of Hong Kong's digital asset market, attracting capital and businesses in both directions. By November, Hong Kong's Cyberport has gathered over 270 Web3.0 concept companies, with total financing exceeding 400 million HKD. The BTC spot ETF launched in the first half of the year has seen nearly 500 million USD in net inflows. Hong Kong is also actively hosting Web3.0 events, such as October's FinTech Week, which attracted over 500 exhibitors and tens of thousands of participants.

Hong Kong's ongoing Web3.0 projects also include the Ensemble Sandbox Program, e-HKD+ Program, and others. More virtual asset trading platforms are applying for or awaiting approval. As Asia's Web3 foothold, Hong Kong is gradually opening up a compliant virtual asset market through a policy-led and market-driven approach. In the future, with the coordinated advancement of regulation and technology, Hong Kong is expected to continue leading in Web3 compliance innovation, providing a model for other regions.

Mainland: Virtual Currency Regulation and Property Protection in Parallel

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

In judicial practice, courts across various regions have generally emphasized that virtual currencies must 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 reinforce the positioning of virtual currency as "prohibited from circulation" within the mainland legal framework.

At the same time, some case law also shows the flexible handling of property rights protection by the judicial system. The Shanghai High People's Court explicitly recognized the property attribute of virtual currency in a financing contract dispute case, stating that it can be protected as property rights under the law. Furthermore, in multiple theft cases involving cryptocurrencies, judges have classified the offense as property theft rather than illegal acquisition of computer data, further reflecting the recognition of the property attribute of virtual currency in judicial practice.

These cases not only provide a clearer basis for the legal application of virtual currencies but also emphasize their circulation restrictions and investment risks.

Blockchain Technology: Accelerating Implementation and Policy Support

In stark contrast to the regulation of virtual currencies, mainland China 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 in March 2024 will focus on the widespread application of blockchain technology as a key topic for technological innovation, proposing to strengthen basic research, enhance independent innovation capabilities, and support its widespread application in key areas such as finance, logistics, and energy.

Local governments have introduced support policies, such as the "Three-Year Action Plan for Promoting Digital Trade in Hangzhou" formulated by the Hangzhou Municipal Bureau of Commerce, to guide the development of new business formats like the metaverse, digital twins, and digital collectibles; Shandong Province has released the "Action Plan for Blockchain Technology Innovation and Industrial Development," integrating blockchain, big data, metaverse, and other technologies to assist in the development of new cultural and creative products such as digital intangible cultural heritage, digital collectibles, and digital trendy toys.

The promotion of digital renminbi (e-CNY) is accelerating, especially making breakthroughs in the fields of cross-border payments and wholesale settlements. Shanghai is advancing the digital renminbi pilot program, expanding application scenarios; the pilot scope in Hong Kong and Macau is expanding, with the scale of cross-border transactions steadily increasing, becoming an important part of China's Web3.0 infrastructure.

Overall, in 2024, the policy support for blockchain technology and its applications in the mainland has not only promoted the construction of digital financial infrastructure but also provided new compliance development paths for the Web3.0 ecosystem. In the future, these innovative applications will continue to deepen, laying the foundation for the digital upgrade of the domestic market and enhancing international competitiveness.

RWA: 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. Chinese companies are beginning to explore compliant cross-border financing models, providing new solutions for the integration of traditional assets and the digital economy.

In August, a domestic technology company launched a new energy charging pile RWA project in collaboration with an energy enterprise, successfully completing a financing of 100 million RMB, opening up new compliance paths for the integration of traditional assets and the digital economy. In October, at the Hong Kong FinTech Week, the technology company officially launched the RWA infrastructure "two chains and one bridge" cross-border platform, focusing on the tokenization of traditional assets such as real estate, bills, and supply chain finance, 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 such as the e-HKD pilot project and the Ensemble sandbox plan are gradually improving the compliance standards for the RWA industry, providing security for cross-border transactions. In contrast, while the mainland has yet to introduce specific policies targeting RWA, it has laid the groundwork in blockchain technology and digital financial infrastructure development. Coupled with Hong Kong's pioneering exploration in the RWA field, this creates conditions for mainland enterprises to participate in this trend through offshore markets.

With the continuous improvement of the regulatory framework and the expansion of cross-border application scenarios, RWA may become an important tool for Chinese enterprises in digital financing and global asset allocation in the future.

Crypto Going Global: Finding New Paths for Compliance Participation

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 in the face of a stringent domestic regulatory environment, exploring new paths for compliance participation. Hong Kong's open policies, mature regulatory system, and shared cultural system have become the most attractive choices. Regions such as Malta in Europe, Thailand in Asia, and the UAE in the Middle East have also become important choices for Chinese enterprises to layout Web3.0 due to their flexible financial policies and open digital economy environment.

Going global 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 ensure that global operations are conducted within a legal framework. Companies should flexibly utilize tools such as offshore funds and digital asset custody platforms within the scope allowed by policy, gradually exploring feasible paths to participate in the digital economy.

Summary

In 2024, the Chinese Web3.0 industry is gradually showing a trend of compliance amidst policy adjustments and market innovations. From the leadership of the Hong Kong VASP licensing system to the trial of RWA cross-border asset management platforms, and further to the expansion of borders for crypto overseas, these keywords not only outline the contours 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 key breakthroughs. Against the backdrop of accelerating global competition, how to flexibly layout within the compliance framework and seize market opportunities will become the core issue that Chinese enterprises must address.