Written by Zhang Chengjun, senior lawyer at Shanghai Mankiw LLP
It is difficult to start a Web3 business in China. Since 2018, more and more Web3 entrepreneurs have started to "go overseas". Some people say that 2018 is the first year for Chinese Web3 entrepreneurs to go overseas. Since the issuance of coins and exchanges have been clearly defined as illegal and criminal acts in China, the question is, is it reliable to go overseas?
01 Current status of web3 industry in Southeast Asia
Let’s first talk about the current industry status of several overseas destinations that domestic Web3 entrepreneurs are more interested in.
The first destination is Southeast Asian countries, Thailand, Singapore, Vietnam, etc. The world's first Web3 Music Festival will be held in Bangkok, Thailand from May 4 to May 5, 2024. Fansland will join hands with Fantopia, IME, Neo, Neuroblocks, Hape, BAC Games, LingoAI, NOTHING RESEARCH, Transi, Titan Network, Trip.com, Trekki NFT, OneKey, HPOS10I, IOST, NFTGo, Gonesis, and NFT special support partner BNB Chain to participate in this carnival. With the opening of the music festival, domestic web3 entrepreneurs have a deeper understanding of how desirable the web3 ecosystem in Southeast Asian countries is.
In addition to the biggest reason for the web3 ecosystem, which is definitely policy, we also mentioned why domestic entrepreneurs choose to go overseas. It is because the country cannot provide corresponding policy support, but instead has to be subject to supervision and may even involve criminal offenses.
The second is the geographical location. As an Asian country, we are very close to the motherland, with short travel time and almost no time difference, so we can synchronize with the domestic situation.
The third is the social environment. There are many Chinese people in Southeast Asian countries, and the attitude towards Chinese people is very friendly. Eating habits can also be adapted quickly.
The fourth point is the market factor. If you want to go overseas, you need to consider the landing of overseas markets. Southeast Asia has a large population, and its income is lower than that of China and other developed countries, which is more conducive to the growth and development of the project in the early stage. In addition, the penetration of mobile devices and the Internet in Southeast Asian countries is relatively high, and the population is relatively young, so they can accept and learn web3 faster.
There are many reasons to choose Southeast Asia for going overseas, such as the current web3 capital situation in Southeast Asian countries. We have already mentioned too many advantages. It is precisely because of these advantages that more and more domestic web3 entrepreneurs are attracted to go overseas to Southeast Asia.
However, the purpose of this article is to make you clearly realize that things do not only have a good side but also a bad side. Therefore, the following content is the main text.
02 Can you escape domestic legal supervision by doing web3 projects in Southeast Asia?
Unfortunately, the answer is no. This is because my country adopts personal jurisdiction over crimes. Article 7, Paragraph 1 of the Criminal Law of the People's Republic of China stipulates: "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 penalty stipulated in this Law is a fixed-term imprisonment of not more than three years, he may not be prosecuted." According to the above provisions, if a Chinese citizen commits a crime outside the territory of my country, regardless of whether it is considered a crime according to local laws, whether the crime is light or heavy, what kind of crime it is, and whether the crime violates the interests of which country or citizens of which country, in principle, the criminal law of my country shall apply. It is only according to the provisions of the Criminal Law of my country that the maximum statutory penalty for the crime committed by the Chinese citizen is a fixed-term imprisonment of not more than 3 years, then he may not be prosecuted. The so-called "may not be prosecuted" does not mean that it will not be prosecuted absolutely, but that the possibility of prosecution is reserved. In addition, Southeast Asian countries are the first countries to conclude extradition agreements with my country, such as Thailand, Laos, Cambodia, the Philippines, and Vietnam.
03What does "extradition" mean? Under what circumstances will one be extradited?
Extradition means that a country will transfer a person who is accused of a crime or has been sentenced by another country to the requesting country for trial or punishment at the request of the relevant country. The extradition system is an important system of international judicial assistance and an important guarantee for the country to effectively exercise jurisdiction and punish crimes. Jurisdiction based on the "principle of nationality jurisdiction" or "principle of nationality" in international law (that is, the country has the right to exercise jurisdiction over all people with its nationality, regardless of whether they live in the country or abroad). That is to say, if the criminal is a citizen of the country's nationality, the country can exercise jurisdiction. In other words, although the body has gone to sea, it is subject to nationality. Once the situation of being accused of a crime by our country occurs, our public security organs will make an extradition request to a foreign country through the Ministry of Foreign Affairs in accordance with the relevant provisions of the "Extradition Law of the People's Republic of China". At present, our country has used extradition treaties on a large scale to extradite suspects for telecom fraud crimes in Vietnam.
04 In addition to the problems of the web3 project itself, it may also constitute the crime of "illegally crossing the national (border) border"
When project owners go overseas, they often bring their entire technical team and even their families with them. When it comes to visa applications, these people often use tourist visas for faster and more convenient processing. However, the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Laws in Handling Criminal Cases of Obstructing National (Border) Management
Article 6 Any of the following circumstances shall be deemed as an act of "illegally crossing the national (border) border" as provided for in Chapter 6, Section 3 of the Criminal Law:
(1) Entering or leaving the country (border) without entry and exit documents or evading border inspection;
(2) Using forged, altered or invalid entry and exit documents to enter or leave the country (border);
(3) Using another person's entry and exit documents to enter or exit the country (border);
(iv) Entering or leaving the country (border) using entry and exit documents obtained by fraudulent means such as false entry and exit reasons, concealing one's true identity, or using another person's identity document;
(5) Illegal entry or exit of the national border by other means.
It seems that Southeast Asian countries are the utopia of web3. However, due to my country's supervision of web3 entrepreneurship and the project's own reasons, these overseas projects violate my country's regulatory provisions. In addition, due to the "principle of nationality" and the fact that most Southeast Asian countries have extradition agreements, going overseas to Southeast Asia is not as good as it seems. It cannot escape domestic supervision and criminal legal risks. Therefore, whether going overseas to Southeast Asia is reliable or not is a big question mark.
