Is Southeast Asia a lawless frontier for Web3 projects going overseas?
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Is Southeast Asia a lawless frontier for Web3 projects going overseas?
Expanding into Southeast Asia does not exempt companies from domestic regulatory and criminal legal risks.
Navigating Web3 tides with focused insightsAuthor: Zhang Chengjun
Starting from 2018, more and more Web3 entrepreneurs in China have begun to "go overseas," making some refer to 2018 as the inaugural year for Chinese Web3 entrepreneurs expanding abroad. Since issuing tokens and operating cryptocurrency exchanges are clearly defined as criminal activities within China, a natural question arises: Is going overseas truly a reliable solution?
Current State of the Web3 Industry in Southeast Asia
Let’s first examine the current industry landscape in several popular overseas destinations favored by domestic Web3 entrepreneurs.
The top choices are Southeast Asian countries such as Thailand, Singapore, and Vietnam. From May 4 to May 5, 2024, the world's first Web3 Music Festival opened in Bangkok, Thailand. Fansland participated in this event alongside Fantopia, IME, Neo, Neuroblocks, Hape, BAC Games, LingoAI, NOTHING RESEARCH, Transi, Titan Network, Trip.com, Trekki NFT, OneKey, HPOS10I, IOST, NFTGo, Gonesis, and NFT supporter BNB Chain. The festival highlighted just how vibrant and appealing the Web3 ecosystem in Southeast Asia appears to Chinese Web3 entrepreneurs.
Beyond the thriving Web3 ecosystem, the most significant factor is undoubtedly government policy. As previously mentioned, Chinese entrepreneurs choose to go overseas precisely because China does not offer supportive policies—instead, such activities face strict regulation and may even lead to criminal liability.
Second is geography. As fellow Asian nations close to China, these countries offer short travel times, minimal or no time difference, and ease of coordination with operations back home.
Third is the social environment. There is a large ethnic Chinese population across Southeast Asia, and local communities generally hold favorable attitudes toward Chinese nationals, making cultural adaptation—especially in terms of diet—relatively easy.
Fourth is market dynamics. When launching overseas, product-market fit is critical. Southeast Asia has a large population with relatively low income levels compared to China and other developed economies, which makes it ideal for early-stage project growth and development. Additionally, mobile device penetration and internet access are high, and the population is young, enabling faster adoption and learning of Web3 technologies.
There are many other reasons why Southeast Asia is attractive, including the region’s growing Web3 capital inflows. We’ve discussed plenty of advantages—and precisely because of these benefits, an increasing number of Chinese Web3 entrepreneurs are choosing to expand into Southeast Asia.
However, the purpose of this article is to make one thing clear: No situation is entirely positive. Everything has its downsides. And now, we get to the main point.
Can You Escape Domestic Legal Regulation by Running a Web3 Project in Southeast Asia?
Unfortunately, the answer is no. This is due to China’s application of territorial and personal jurisdiction principles. Article 7, Paragraph 1 of the "Criminal Law of the People’s Republic of China" states: “If a citizen of the People’s Republic of China commits a crime stipulated in this law outside the territory of the People’s Republic of China, this law shall apply; however, if the maximum punishment prescribed by this law is imprisonment for no more than three years, prosecution may be waived.” According to this provision, Chinese citizens who commit crimes abroad are subject to Chinese criminal law regardless of whether the act is considered illegal under local laws, the severity of the offense, the nature of the crime, or whose interests were harmed. Only when the statutory maximum penalty under Chinese law is less than three years’ imprisonment may prosecution be waived. However, “may be waived” does not mean immunity—it means that prosecution remains a possibility. Moreover, Southeast Asian countries were among the first to sign extradition treaties with China, including Thailand, Laos, Cambodia, the Philippines, and Vietnam.
What Does “Extradition” Mean, and Under What Circumstances Can It Happen?
Extradition refers to the transfer of an individual located in one country to another country that has requested their handover, either for trial or punishment, based on allegations or convictions of criminal conduct. Extradition is a key mechanism in international judicial cooperation and serves as an essential tool for states to exercise jurisdiction and combat crime effectively. Under international law, this is grounded in the principle of nationality-based jurisdiction (also known as the “active personality principle”), whereby a state holds the right to exercise legal authority over all individuals holding its nationality, regardless of where they reside. In other words, even if a person physically leaves China, their Chinese nationality still subjects them to Chinese jurisdiction. If accused of a crime in China, Chinese public security authorities may request extradition through diplomatic channels under the “Extradition Law of the People’s Republic of China.” For example, China has already extensively used extradition treaties to repatriate suspects involved in telecom fraud cases originating from Vietnam.
Beyond Web3 Project Risks: Potential Charges of “Illegal Border Crossing”
When project teams relocate overseas, they often bring their entire technical staff—and sometimes even family members—from China. To expedite and simplify the process, many opt for tourist visas. However, according to the “Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases That Impede Border Management,”
Article 6 identifies the following circumstances as constituting “illegal border crossing” under Section 3, Chapter 6 of the Criminal Law:
(1) Entering or exiting the country without valid entry-exit documents or evading border inspection;
(2) Using forged, altered, or invalid entry-exit documents;
(3) Using someone else’s entry-exit documents;
(4) Using entry-exit documents obtained through false pretenses, concealing one’s true identity, or impersonating another person;
(5) Other methods of illegally entering or exiting the country.
While Southeast Asia may appear to be a Web3 utopia, constraints imposed by China’s regulatory stance toward Web3 entrepreneurship, combined with the risks inherent in specific projects, mean that many of these overseas ventures violate Chinese regulations. Furthermore, due to the principle of nationality-based jurisdiction and the existence of extradition agreements between China and most Southeast Asian nations, expanding into Southeast Asia is far less advantageous than it might seem. It does not exempt entrepreneurs from domestic oversight or eliminate exposure to criminal liability. Therefore, whether expanding into Southeast Asia is truly viable—or reliable—must be met with a resounding question mark.
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