Traditional financial practitioners transition to the crypto space.
Recently, lawyer Liu Honglin from Mankun Law Firm found that there are many friends in his social circle who have transitioned from traditional private equity and public equity sectors to engage in cryptocurrency education and fee-based community businesses. The reason is not hard to understand; for those who have been competing in traditional financial services, they find that providing investment advice and financial consulting on virtual currencies is essentially no different from traditional financial market investment training. After all, the candlestick charts, sentiment analysis, and information tracking in virtual currency investment are quite similar to those in traditional stock markets, making the transfer of investment skills quite natural.
However, these traditional financial practitioners find it challenging to do business with 'old players' in the crypto space—after all, the resource and information accumulation of veteran players is hard to surpass. Therefore, more people are beginning to shift their focus to the Web2 user base, leveraging their information and skill advantages in the Web3 industry to offer virtual currency financial training courses to these Web2 clients, with course fees starting from several thousand yuan. After completing the courses, clients can also choose higher-priced services, such as joining private communities to receive investment advice on secondary market buying and selling points and potential projects in the primary market. Consultants often share their 'successful performances' in social circles to attract more clients, but if investments fail, some may simply issue refunds. Such a business model is becoming increasingly common in the crypto space.
Behind this phenomenon, while it seems like a service innovation, there are also hidden legal risks. Below, we will analyze the legal risks behind such services from the perspective of legal compliance and how to prevent them.
Don't turn your training business into a cryptocurrency trading coaching business.
For well-known reasons, in mainland China, the legal challenges faced by virtual currency investment consulting far exceed those of the general financial industry. China has repeatedly made it clear that virtual currencies do not have legal compensation and has progressively introduced strict regulations on virtual currency trading. The notice issued in 2021 (on further preventing and dealing with the risks of virtual currency trading speculation) comprehensively prohibits domestic financial institutions and payment institutions from providing services for virtual currency transactions. This policy effectively restricts the legality of engaging in virtual currency investment consulting and training domestically.
For consultants providing virtual currency investment consulting to clients, these policies mean they may always face risks at the compliance level. If a consultant advises a client to 'buy or sell' virtual currencies or even recommends speculative projects in the primary market without obtaining financial business permission, they will cross China's red line on financial activity management. Such activities are likely to be seen as illegal investment or fraud, and if clients incur losses and file complaints, the consultant may face administrative penalties or even criminal liability.
Another situation is that many consultants in this field operate directly as individuals without establishing a company. Operating and promoting under an individual name is indeed convenient, but it also lacks risk isolation. If a client has a dispute regarding investment services or results, the consultant must face recovery and litigation directly as an individual, without even a company to act as a 'shield'. More importantly, operating as an individual may also involve illegal business issues. Once identified as illegal operation, the consequences can be far from ordinary troubles.
In addition, many consultants, to reduce taxes or evade fund tracking, will directly accept clients' virtual currencies, such as USDT. However, from the consumer's perspective, paying with virtual currencies like USDT also carries significant risks: once a dispute arises, domestic legal support is relatively limited because, under existing regulatory policies in mainland China, USDT is not considered 'money'. Therefore, virtual currency payments are subjective matters for both parties, and consumers should pay particular attention to whether they can bear such risks.
A few pragmatic legal risk control suggestions.
If you want to provide virtual currency investment consulting, it is advisable not to use phrases like 'guaranteed profit' or 'certain profit' too freely. Such public investment 'performance' sharing is best to be 'one statement for one statement'. Posting screenshots of returns in social circles should not be too 'hard', and it is advisable to label them with 'investment carries risks', which can clarify things and avoid future disputes. If the training fee or coaching fee is relatively high, it is suggested that both parties sign a formal contract, especially with one key clause that must be included: investment advice is for reference only, and the corresponding returns and risks are borne by the client. Be careful not to fall into the trap of direct agency investment.
If friends are indeed planning to treat this as a long-term business, it may be worth considering establishing a company. The most common option is to set up a company in Hong Kong, which allows for conducting educational training businesses under a corporate identity, providing better compliance assurance. However, although Hong Kong's policy towards virtual currency businesses is currently friendly, it is essential that friends ensure they are genuinely engaged in education and training, rather than using training as a guise to offer investment advice. Otherwise, they may still encounter Hong Kong's financial regulations, which can be much stricter than those in mainland China.
As for the usual private community interactions and course delivery, it is best to avoid directly 'calling out' trades whenever possible. Let the community serve its purpose of sharing and communication, providing information and market dynamics. The same goes for courses; try not to directly say 'this coin can rise by how much' or 'when to enter', but instead discuss tool usage and market analysis, ensuring you won't be caught on a 'soft spot'. Make clients understand that you are providing knowledge, not direct 'financial advice', which will significantly reduce compliance risks. By adopting these pragmatic risk control strategies, not only can you protect yourself and avoid legal risks, but you can also gain clients' trust and peace of mind regarding your services. While making money is gratifying in the short term, ensuring you can consistently make money is the real satisfaction.
This article represents the views of the column author who has joined PANews and does not represent PANews's position or bear legal responsibility. The article and views do not constitute investment advice.