According to Wuwei Liang, the brother of imprisoned CoinXP co-founder Liang Liang, Chinese police are not interested in serving and protecting, but rather in seizing the assets of Web3 co-founders. In a recent blog post, Wuwei Liang cautioned executives not to hand over their private keys when detained by Chinese police. He claimed that the police prioritize money and will fabricate charges to confiscate assets. This statement was made in response to the arrest of Multichain co-founder Jun Zhao, who held control of all protocol MPC nodes, access to private keys, and investors’ funds.
In May 2023, Zhao was taken away by Chinese police and was soon out of contact with the global Multichain team. The closure of the largest cross-chain protocol in China followed this arrest, leaving users’ assets in jeopardy. Although cryptocurrency exchanges, mining, and initial coin offerings are illegal in China, owning cryptocurrencies is not explicitly illegal. However, Liang argues that profit-driven law enforcement projects are primarily motivated by money, as evident in CoinXP’s case.
CoinXP, founded by Liang Liang in 2018, raised 13,000 Ether (approximately $30 million) through an initial coin offering. However, Liang and other developers were later arrested on charges of “illegal use of information networks.” Authorities shut down the Hubdex ecosystem, linked to CoinXP, and upgraded Liang’s charges to “illegal solicitation of public funds” and “multi-level marketing.” The trial started in July, but reports suggest that the defendants are facing an uphill battle. The presiding judge reportedly dismissed the principle of presumption of innocence, which is concerning for the defense. Additionally, Liang’s defense attorney was abducted by police without cause and detained for several hours. The situation in the courtroom seems to be contentious, with even bystanders facing detention for simply observing the proceedings.
Given these events, it is expected that Jun Zhao’s case will have a similar outcome. According to an anonymous Multichain Telegram user, anyone in China with money can be easily taken into custody if third-party tracking companies assist the police. This underscores the profit-driven nature of law enforcement projects in China.
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Ironically, despite its crackdown on certain aspects of the cryptocurrency industry, China remains bullish on blockchain technology, as long as it is under government control. Shanghai, for example, has laid out a plan to launch its municipal blockchain infrastructure, the “Pujiang Digital Chain,” by 2025. The development will include computation layers, public service layers, and government affairs layers. Shanghai aims to explore services such as one-stop customs declaration, electronic bills of lading, and on-chain storage of related data for container shipping. Additionally, Chinese President Xi Jinping supports the development of central bank digital currencies for local currency trade settlements between friendly nations.
In South Korea, where issues surrounding digital asset operators have plagued the country this year, the Korean Federation of Banks announced new regulations for crypto exchanges. Exchanges must sign contracts with banks for withdrawals and deposits using real-name customer IDs and maintain a reserve of 3 billion won ($2.35 million) to cover liabilities in case of hacking or computer failure. This move aims to protect users and prevent future scandals and collapses within the crypto industry.
In Malaysia, Halogen Capital has become the first digital assets fund regulated by the Securities Commission Malaysia (SCM). The firm has been granted a full Capital Markets Services license and offers Shariah-compliant Bitcoin and Ethereum funds. This development highlights the growing recognition and regulation of digital assets in various countries.
In conclusion, the situation for Web3 co-founders in China is alarming, with reports suggesting that Chinese police are primarily motivated by seizing assets rather than upholding the law. Executives are warned against handing over private keys when detained, as it could lead to a loss of assets and personal freedom. Despite China’s strict stance on cryptocurrency activities, the government is actively promoting the development of blockchain technology under its control. Similar efforts to regulate and protect users are being seen in other countries, including South Korea and Malaysia.
