Discussion on Cross-Border Legal Risks for Web3 Practitioners

With the rapid development of blockchain technology, public chain networks like Ethereum are demonstrating tremendous potential as a decentralized global public infrastructure. However, this decentralization also brings regulatory challenges, leading to increasingly concealed and complex criminal activities such as fraud, theft, and money laundering on an international scale. Traditional cross-border criminal jurisdiction and law enforcement systems are struggling to cope with these new types of crimes, and countries are being forced to undertake significant reforms to their existing systems.

This article will explore the legal risks for Web3 practitioners working abroad based on relevant legal provisions in China.

Basic Concepts of Cross-Border Criminal Jurisdiction and Law Enforcement

In the international legal system, sovereignty is a core concept. Each country enjoys supreme power within its territorial boundaries, but at the same time has the obligation to respect the sovereignty of other countries. This divides the exercise of jurisdiction into two levels: "internal" and "external". The exercise of rights internally is a direct reflection of national sovereignty, while the exercise of rights externally is strictly limited to avoid infringing upon the sovereignty of other countries.

Cross-border criminal jurisdiction and law enforcement, as a form of "enforcement jurisdiction," are inevitably subject to strict limitations. However, in recent years, some developed countries have exploited their economic advantages to abuse long-arm jurisdiction for criminal jurisdiction and law enforcement against overseas enterprises and individuals, which is, in fact, an abuse of cross-border criminal jurisdiction and law enforcement.

Cross-Border Criminal Jurisdiction and Law Enforcement Practices in China

When Chinese judicial authorities conduct cross-border criminal jurisdiction and law enforcement, they must first establish jurisdiction over the relevant criminal suspects and their actions, and then request assistance from foreign countries through criminal justice assistance procedures.

Determination of Jurisdiction ###

China mainly determines cross-border criminal jurisdiction through three methods:

1. Personal jurisdiction: Refers to criminal acts committed by Chinese citizens abroad.
2. Protective jurisdiction: Regarding criminal acts by foreign citizens abroad that endanger China or Chinese citizens.
3. Universal Jurisdiction: Based on international treaties or other international legal obligations.

In addition, the "double criminality principle" must also be considered, meaning that the criminal act is recognized as a crime under the laws of both the requesting country and the requested country.

Request and Promotion of Criminal Justice Assistance ###

Criminal judicial assistance is the foundation of cross-border criminal jurisdiction and law enforcement. China's "International Criminal Judicial Assistance Law" stipulates the scope of criminal judicial assistance, including the delivery of legal documents, investigation and evidence collection, arranging for witnesses to testify, and the sealing, seizure, and freezing of relevant property.

The subject of criminal judicial assistance depends on whether there is a relevant treaty between China and the requested country. In the case of a treaty, it is proposed by the Ministry of Justice, the National Supervisory Commission, the Supreme Court, the Supreme People's Procuratorate, and other agencies within their authority; in the absence of a treaty, it is resolved through diplomatic means.

Recent Analysis of Cross-Border Cryptocurrency Asset Fraud Cases

At the end of 2022, the Jing'an District Procuratorate in Shanghai announced a cross-border fraud case involving crypto assets. The criminal gang lured victims into investing in cryptocurrencies and stocks through fake investment platforms. The Shanghai police apprehended 59 suspects returning to the country within a few months through domestic operations.

This case shows that, despite China signing criminal justice mutual assistance treaties with multiple countries, the actual usage rate is not high. This may be due to reasons such as inefficient procedures, cumbersome formalities, and relevant personnel being unfamiliar with the regulations.

Conclusion

It is important to emphasize that engaging in Web3-related business does not necessarily imply illegal activity. However, due to China's cautious stance on crypto assets and the peculiarities of the law enforcement environment, there is a certain misunderstanding in society towards Web3 practitioners. However, if Chinese citizens utilize crypto assets as a guise to commit crimes against domestic citizens while abroad, they will still find it difficult to escape the sanctions of Chinese law, even if they are outside the country.

Web3 practitioners should fully understand the relevant legal risks and comply with laws and regulations when conducting business to avoid crossing legal red lines. At the same time, we also hope that relevant laws can keep pace with the times and provide clearer and more reasonable legal guidance for the development of emerging technologies.