Is the web3 wallet legal in China

China's legal treatment of Web3 wallets is nuanced, with selective enforcement focusing on unlicensed platforms and emphasis on AML/CFT compliance, while their legality overall remains unclear.

Oct 20, 2024 at 07:18 pm

Is Web3 Wallets Legal in China?

1. Regulatory Landscape

China has been taking a proactive stance towards regulating the cryptocurrency industry, including digital wallets. In 2017, the Chinese government banned initial coin offerings (ICOs) and virtual currency exchanges. However, it did not explicitly prohibit the use of digital wallets.

2. Distinguishing Web3 Wallets

Web3 wallets differ from traditional cryptocurrency wallets in that they connect to decentralized applications (dApps) on blockchain networks. This decentralized nature has raised questions about their legal status in China.

3. Selective Enforcement

Chinese authorities have not pursued blanket bans on Web3 wallets. Instead, they have adopted a selective enforcement approach, targeting specific platforms or activities that they deem illegal or disruptive.

4. Crackdown on Unlicensed Platforms

In 2021, the Cyberspace Administration of China (CAC) launched a crackdown on unlicensed digital currency trading platforms. As part of this effort, several Web3 wallet providers were investigated and ordered to suspend operations.

5. Focus on AML/CFT Compliance

China has emphasized the need for digital asset service providers, including Web3 wallet providers, to comply with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. Failure to adhere to these requirements could result in legal action.

6. Future Considerations

The Chinese government continues to monitor the evolution of Web3 and may adjust its regulatory stance in the future. As decentralized technologies become more prevalent, authorities may seek to implement new regulations to mitigate potential risks.

Conclusion:

The legality of Web3 wallets in China remains a complex issue. While there is no explicit ban, selective enforcement and a focus on AML/CFT compliance indicate that Chinese authorities are actively monitoring the space. As Web3 technology develops, it is likely that China will continue to refine its regulatory approach.