Don't turn the training business into a crypto trading coach.
Written by: Lawyer Liu Honglin, Mankun Law Firm
Traditional financial practitioners transitioning to the crypto space
Recently, Lawyer Liu Honglin from Mankun Law Firm has noticed an influx of friends from traditional private equity and public equity sectors entering the crypto education training and paid community business. The reason is also easy to understand; for those who have been involved in traditional financial services, they find that providing clients with investment advice and financial consulting on virtual currencies is essentially no different from investment training in traditional financial markets. After all, K-line charts, sentiment analysis, and information tracking in virtual currency investments are quite similar to those in traditional stock markets, making the transfer of investment skills seem natural.
However, these traditional financial practitioners found it not easy to do business with "old investors" after entering the crypto space—after all, the resources and information accumulated by old players in the crypto space are hard for them to surpass. Therefore, more people began to turn their attention to the user base of Web2, leveraging their information and skill advantages in the Web3 industry to offer virtual currency investment training courses to these Web2 customers, with course fees starting at several thousand yuan. After completing the course, clients can choose higher-priced services, such as joining private communities to receive investment advice on secondary market buying and selling points, and primary market potential projects. Consultants often share their "successful achievements" in their social circles to attract more clients, but if investments fail, some may simply refund the fees as a resolution. Such a business model has become increasingly common in the crypto space.
Behind this phenomenon, although it seems like a service innovation, there are also potential legal risks hidden. Next, we will analyze the legal risks behind this type of service from the perspective of legal compliance and how to prevent them.
Don't turn the training business into a crypto trading coach.
For well-known reasons, in mainland China, the legal challenges faced by virtual currency investment consulting far exceed those in the general financial industry. China has repeatedly clarified that virtual currencies do not possess legal tender status and has successively introduced strict regulations on virtual currency trading. The notice issued in 2021 (on further preventing and addressing the risks of virtual currency trading speculation) comprehensively prohibits domestic financial institutions and payment organizations from providing services for virtual currency trading. This policy essentially limits the legality of engaging in virtual currency investment consulting and training domestically.
For consultants providing virtual currency investment advice to clients, these policies mean they may always face risks on the compliance level. If a consultant advises a client to "buy or sell" virtual currency without obtaining financial business permission, or even recommends speculative projects in the primary market, they will touch upon China's red line for financial activities management. Such activities are likely to be regarded as illegal investments or fraud. Once a client suffers losses and complains, the consultant may face administrative penalties or even criminal liability.
Another situation is that many consultants in this field operate directly as individuals for convenience, without establishing a company. Operating and promoting under a personal name indeed makes it easier, but it also lacks risk isolation. If a client has disputes regarding investment services or outcomes, the consultant will have to 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. If identified as illegal operations, the consequences can be more than just ordinary trouble.
Furthermore, many consultants, to pay less tax or evade fund tracking, directly accept clients' virtual currencies, like USDT. However, from a consumer perspective, using virtual currencies like USDT for payment also poses significant risks: once disputes arise, domestic legal support is relatively limited since, under existing regulatory policies in mainland China, USDT is not considered "money." Therefore, virtual currency payments are subjective matters for both parties, and consumers must be particularly cautious about whether they can bear such risks.
Several pragmatic legal risk control suggestions
If you intend to provide virtual currency investment consulting, it’s advisable to avoid casually using terms like "guaranteed profits" or "sure profits." Such public investment "performance" sharing is best kept "to the point." Posting some profit screenshots in your social circle should be done lightly, labeling them with "investment risks exist" to make things clear and avoid later disputes. If training or coaching fees are relatively high, it is recommended that both parties sign a formal contract, especially including this key clause: investment advice is for reference only, and corresponding profits and risks are to be borne by the client. Be sure not to fall into the trap of direct investment agency.
If any friends are indeed planning to treat this as a long-term business, it might be worth considering establishing a company. The most common option is to set up a company in Hong Kong, allowing you to conduct education and training business under a corporate identity, which can provide more compliance assurance. However, while Hong Kong currently has a friendly policy towards virtual currency businesses, it is essential for everyone to ensure they are genuinely engaged in education and training, rather than masquerading as training to give investment advice; otherwise, they may still violate Hong Kong's financial regulations, which can be much stricter than those in mainland China.
As for regular private community and course delivery, it’s best to avoid directly "calling out" trades if possible. Let the community serve its purpose for 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 buy in," but instead discuss tool usage and market analysis, ensuring that you won't be caught on a "soft spot." Make it clear to clients that you are providing knowledge, not direct "investment advice," so that everyone is aware, and compliance risks will be much lower. By employing these pragmatic risk control strategies, you can not only protect yourself and avoid legal risks but also enhance clients' trust and peace of mind regarding your services. While making money is gratifying, ensuring consistent profits is what truly matters.
