Written by: Liu Honglin
In a recent case published by the Hong Kong Securities and Futures Commission, Huang was sentenced for sharing securities investment information and advice in a tg group without a license. In this regard, attorney Mankiw also published a quick comment, believing that the crypto community also needs to be vigilant about this compliance issue.
Prior to this, the latest data from TGStat showed that among the top ten Telegram channels in the world, six were Web3.0 communities, including Hamster Kombat Announcement, tapswap, Notcoin, etc.
In my country, although in theory mainland users cannot participate in overseas crypto communities, there are many types of Web3.0 communities in the country, including social media platforms such as WeChat, Xiaohongshu, Zhihu, and Weibo, where Web3.0 related content can often be seen shared and discussed.
Image source: Screenshots of some domestic encrypted communities
However, for community managers, operating a community is both easy and difficult. The easy part is that you only need to spend money or share money-making information to easily gather a wave of users; the difficult part is that, whether in terms of operating model or community norms, you often need to pay attention to compliance issues and avoid legal disputes.
Therefore, Attorney Mankiw hopes to use this article to discuss the key points of compliance operations in the Web3.0 community and help community operators create a more compliant community operation model.
Web3.0 Community Operation
When operating a Web3.0 community, operators often need to consider the operation methods based on multiple complex links, and ultimately build a private domain and achieve profitability. There are several core links that often involve compliance considerations. For example:
1. Community Platform
Web3.0 communities are usually built on Telegram or Discord. The former is easy to operate because of its low threshold, many tools, etc. However, the community is mixed with good and bad people, and there are often scams/advertisements. The latter has a higher threshold and is more suitable for niche enthusiasts, such as blockchain games and NFTs. At the same time, the crypto circle also has community dApps, such as DeBox and friend.tech. However, this type of community has a relatively smaller user base and a higher threshold.
In China, Web3.0 communities are usually built and operated through common social platforms such as WeChat, QQ, Zhihu, Xiaohongshu, and Weibo. WeChat groups and QQ groups usually have invitation and review mechanisms. Other platforms are based on the attributes of social media, focusing on similar topics and participating, and automatically forming communities under the topics.
Image source: Screenshot of encrypted community traffic diversion
It is worth noting that Web3.0 communities that provide general investment advice or order-based services often choose platforms with entry restrictions or audit mechanisms, and charge a certain fee for entry. The entry fee for some communities is paid in RMB, but there are also cases where the entry fee is paid in cryptocurrencies such as USDT.
(II) Profit model
The long-term operation of the community is inseparable from costs or profits. After all, generating electricity with love is limited to a small number of pioneers. Therefore, the continuation of the Web3.0 community is inseparable from the choice of profit model. The more common ones are:
Cooperation with project parties
As natural private traffic, some Web3.0 communities will choose to cooperate with crypto project parties and charge certain fees or other exchange resources by helping the project parties with popular science, publicity, or joint activities.
Image source: Screenshots of some community content
Paid courses available
Some Web3.0 communities also provide users with paid crypto-related guidance and courses, which commonly include paid porting, crypto investment advice, currency/project analysis and other course content.
3. Community Interaction
As users continue to join the community, the operators of the Web3.0 community need to consider how to manage interactions within the community. On the one hand, in the daily interaction process, operators need to consider what content to use to attract user participation, increase community activity, and guide the direction of the community.
Image source: Safety tips from a project on X
On the other hand, operators need to pay attention to fraud/advertising information in the community. For example, in many communities that have not issued coins, phishing links are prone to appear, which use the gimmick of project airdrops to induce users to click. Once the link appears, if it is not managed in time, it will cause user financial losses, and finally the community management will need to bear and compensate.
How to operate a Web3.0 community in compliance?
Based on multiple aspects of Web3.0 community operations, Mankiw believes that operators/managers need to pay special attention to the following compliance points:
1. Platform construction
When building a Web3 community, the first thing to consider is the choice of platform. The policies and regulations of some countries have strict restrictions on the crypto industry. Operators need to consider multiple aspects such as comprehensive regulatory policies, user portraits, platform rules, etc., pay attention to compliance issues such as user access and regional screening, and then determine which audience to face and what platform to build on.
Secondly, community operators may have to consider the payment model, should they accept RMB or cryptocurrency? As far as relevant Chinese regulations are concerned, it is generally believed that the model of paid communities is a service contract between operators and users: users pay, and operators provide valuable information and guidance. If a dispute occurs, the court will often hear the dispute between the two parties based on the relevant provisions of the service contract and the basic situation. However, if settlement is made in cryptocurrency, there may be certain difficulties in judicial practice. The main reason is that according to my country's supervision, cryptocurrency does not have the same legal status as legal currency and is not legally compensable.
In addition, when charging fees, operators must also do KYC. At present, domestic anti-money laundering supervision is becoming more and more stringent. Whether it is RMB or cryptocurrency, if the operator receives black money or black USDT, the bank account or exchange account may be frozen, and there may even be criminal risks of suspected concealment and aiding and abetting.
(II) Profit model
In terms of profit model, if the community generates revenue through cooperation with projects, it needs to consider the issues of project review and promotion methods.
Especially in terms of promotion methods, some communities have a multi-layered model for attracting new users. That is, the community operator publishes project promotion information and receives certain rewards from user A’s participation in the project; when user A attracts new users, the community operator can also receive rewards from A’s invitation, and the promotion continues in this way.
According to the provisions of my country's criminal law, if the level of the recommended project rebate model reaches three levels or more, it may involve the crime of organizing and leading pyramid selling activities. There are also relevant cases in judicial practice. For example, in the case of (2023) Shaanxi 01 Criminal Final No. 368, the parties promoted cryptocurrency projects through WeChat groups and other means, induced others to buy cryptocurrency, and formed 14 levels in a certain order, using the number of developed personnel as the basis for rebates, and induced participants to continue to develop others to participate, and were found to have constituted the crime of organizing and leading pyramid selling activities.
Therefore, in the process of cooperating with the project party, the community operator should pay attention to the setting of the project recommendation rebate level. A cooperation model with more than three rebate levels may be identified as a pyramid scheme, bringing criminal risks to the community operator.
3. Community Content
Community operators need to clearly define certain review obligations for comments posted in the community. However, there are many users in the community with diverse identities and backgrounds, and it is obviously difficult to review the true information of community users one by one. Therefore, in daily community management, community operators should do the following:
Timely review, set up shifts, review text content in the group, and delete abnormal content immediately;
Set thresholds. Overseas community platforms usually have tools to set up mechanisms for reviewing and deleting abnormal keywords or links.
Multiple rounds of reminders: For possible content risks, multiple rounds of continuous reminders will be given through group announcements, etc.
For example, U-merchants often appear in Web3.0 communities. If the review obligations are not fulfilled or topics such as U-merchants and the sale of virtual currencies are not avoided, once disputes arise between community users and U-merchants over the sale of cryptocurrencies, or if criminal offenses are suspected, community operators may also be implicated.
Conclusion
Whether overseas or in China, Web3.0 communities have blossomed everywhere, but not every Web3.0 community is able to do a good job of compliance control. As the regulatory policies of various countries and regions for Web3.0 become clearer, who knows when the Web.0 community will become the next target? At least, the Hong Kong Securities and Futures Commission has begun to sharpen its knife against unlicensed securities investment opinion communities.
