What should I pay attention to when joining a Web3 token-issuing company?
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What should I pay attention to when joining a Web3 token-issuing company?
Everything has two sides.
Navigating Web3 tides with focused insightsAuthor: Lawyer Liu Honglin
Over the weekend, a friend searched for blockchain-related legal issues on Zhihu, read several articles previously shared by Lawyer Liu Honglin, found them reasonably professional, and decided to book my paid consultation. During our half-hour session, I answered his most pressing questions. Afterward, I reviewed the discussion and realized these were common concerns frequently encountered by friends working in the crypto industry. Here's a brief summary for reference.
1. Is there legal risk if a company plans to issue tokens?
China encourages blockchain technology but does not welcome virtual currencies. As individual citizens, investing in and trading virtual currencies is generally considered a matter of personal gain and risk—while the state doesn't encourage it, it doesn't outright prohibit it either. The only real concern is whether gray or black-market activities during trading could lead to frozen bank accounts or exchange accounts. Over the past few years, the crime of aiding information network criminal activity (commonly known as "Bangxin crime") has become the second most frequent offense nationwide, with cryptocurrency users making up a significant proportion.
Based on our understanding of China’s regulatory policies toward virtual currencies, three activities are clearly prohibited: First is issuing and fundraising via virtual currencies—what we commonly refer to as “token issuance.” If your company plans to launch a token, list it on exchanges, and your products and services primarily target the Chinese market, promoting your project to Chinese citizens constitutes an obvious violation of the law.
Second, mining virtual currencies within China is banned, especially energy-intensive operations such as Bitcoin mining. As for the recently trending DePIN sector, whether it will be broadly classified as virtual currency mining remains debatable; personally, Lawyer Honglin holds a reserved view on this matter.
Third is operating a virtual currency exchange business. Any promotion or marketing of virtual currency exchanges targeting Chinese citizens is illegal within China. This point is often overlooked by individuals who work remotely from inside China to promote overseas exchanges. Be aware: just because you don’t have a centralized office or communicate through Telegram doesn’t mean you’re safe. Many underestimate the investigative capabilities of Chinese law enforcement.
2. Can a company issue NFTs instead of tokens?
NFTs, as neutral technology, are not inherently illegal. Whether NFT issuance is permissible depends on the underlying rights they represent. If you're issuing NFTs representing in-game items, membership cards, or profile pictures, there generally isn't an issue—whether overseas or within mainland China. For example, the digital asset membership card recently issued by the Shanghai Data Exchange can be viewed as a form of membership-based NFT.
However, note that NFTs issued and sold within mainland China must only allow purchases using RMB—not USDT or ETH.
3. Currently, I have no written agreement with my employer, receive salary in USDT, and pay social insurance myself—what legal risks exist?
Many Web3 companies adopt decentralized working models. Joining such organizations may seem appealing at first: flexible hours without clocking in, salaries paid without tax withholding or social insurance contributions—resulting in significantly higher take-home pay compared to traditional domestic jobs.
But every coin has two sides. From a cost perspective, employers benefit greatly when they avoid paying social insurance and taxes—saving substantial amounts. For instance, if a company pays you 10,000 RMB in salary, its actual outlay is around 14,000 RMB. Where does that extra 4,000 go? It covers your social insurance and housing fund contributions—the very benefits that constitute hidden income for employees.
Taxes and social insurance also affect eligibility for local public services like residency registration, home ownership, car purchases, marriage, childbirth, and children’s education. While the impact might not be noticeable now, those in the crypto space will eventually realize the disadvantages of lacking proper social security when life milestones arise.
Some may attempt to use third-party agents to make self-payments, but under such arrangements, you lose protection under China's Labor Law if terminated. Recently, a female worker in the Web3 space was dismissed without cause while pregnant and received no compensation whatsoever. Such labor rights vulnerabilities should be carefully considered by anyone accepting payment solely in tokens.
4. I'm in a technical development role at my company—what legal risks do I face if the company runs into trouble?
Typically, founders or controllers of crypto projects mitigate their own criminal liability by residing long-term overseas or obtaining foreign residency status, specifically to avoid exposure to China’s criminal laws.
Yet, due to operational and labor cost considerations, many rank-and-file employees remain based in mainland China.
Assuming the worst-case scenario—that the company’s project is involved in criminal activity—employees within China will naturally be implicated. This pattern is particularly evident among Web3 startups in Shanghai and Shenzhen. Frequently, core staff and managers are summoned for investigation, sometimes detained. Following the principle that greater responsibility comes with greater authority, department heads and above usually face higher criminal liability or pressure, while frontline workers typically face lower risks. However, this division isn't absolute—it ultimately hinges on your level of involvement and awareness within the specific project.
A friend who has worked in crypto for years once visited me offline because one of his recent projects was investigated by Chinese police. He spent a few days in detention before being released on bail. Afterward, he still planned to continue seeking Web3 roles—the reason being simple: high salaries. He even remarked calmly: “If I can earn millions here, spending a few years in prison wouldn’t be too bad.” That shocked me deeply.
Final Thoughts
For professionals in many industries, criminal liability seems highly unlikely during one’s lifetime. But in the Web3 space, managing criminal legal risks has become essential knowledge. Why? Because this industry sits so close to money and carries high financial risk. Therefore, for those considering joining a Web3 company—or whose current employer plans to issue tokens—gaining a solid understanding of China’s virtual currency regulations is invaluable. When uncertain, consulting a knowledgeable lawyer to assess potential risks is strongly recommended.
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