Chinese police are not only interested in serving and protecting, but also in gaining access to the wallets of Web3 co-founders. This alarming revelation comes from Wuwei Liang, the brother of imprisoned CoinXP co-founder Liang Liang. In a recent blog post, Wuwei Liang warned that executives should never hand over their private keys when detained by Chinese police. He explained that the police would seize the money, charge them with crimes, and confiscate their assets. Losing the secret key means losing everything, including one’s life and wealth, and potentially facing wrongful imprisonment.
The arrest of Jun Zhao, the co-founder of Multichain, further highlights the precarious situation faced by Web3 co-founders in China. Multichain, a cross-chain protocol used by popular projects like Fantom and Binance, closed down after it was revealed that Zhao had been arrested by Chinese police. With Zhao in custody, the protocol’s CEO and custodian of private keys, the fate of the protocol and users’ assets became uncertain. While owning cryptocurrencies is not illegal in China, cryptocurrency exchanges, mining, and initial coin offerings are banned. However, there remains a gray area when it comes to crypto projects that do not fall into the prohibited categories. Liang emphasizes that law enforcement projects driven by the pursuit of profit are ultimately after money, citing the ongoing case of CoinXP.
Liang Liang, the co-founder of CoinXP, experienced the harsh consequences of being targeted by Chinese police. CoinXP was a blockchain and DApp ecosystem that raised $30 million through an initial coin offering. However, in 2018, Liang and other developers were arrested on charges of “illegal use of information networks.” The authorities shut down the platform, and Liang’s charges were later upgraded to “illegal solicitation of public funds” and “multi-level marketing.” These charges carry the possibility of asset confiscation if proven guilty. Liang’s brother reveals that some of the virtual currency involved in the case went missing during the transfer process and has not been recovered. The trial has faced several obstacles, including biased comments from the presiding judge and questionable actions by the police.
The Ongoing Multichain Saga
The situation for Jun Zhao in the Multichain saga looks grim. The arrest of Web3 co-founders has turned into a supply chain, with third-party tracking companies supplying information to the police in exchange for monetary rewards. This system allows the police to take co-founders into custody if they are in China and have access to funds. It is worth noting that despite the crackdown on cryptocurrency-related activities, the Chinese government still sees potential in blockchain technology, especially when it falls under their control. Shanghai has laid out a plan for the municipal advancement of blockchain infrastructure, envisioning the launch of a digital chain for public services and government affairs by 2025. President Xi Jinping has also emphasized the development of central bank digital currencies for local currency trade settlements with friendly countries.
South Korea, another country grappling with digital asset issues, has introduced regulatory measures to protect users. The Korean Federation of Banks announced that crypto exchanges must have a reserve of 3 billion won ($2.35 million) to fulfill liabilities to users in the event of hacking or computer failure. Failure to comply with these regulations can result in reprimands or penalties. Halogen Capital has made history by becoming the first digital assets fund regulated by Malaysia’s Securities Commission. The firm has been granted a full Capital Markets Services license to manage cryptocurrencies, nonfungible tokens, and tokenized assets. This development highlights the growing acknowledgment and acceptance of blockchain technology in various countries.
The targeting of Web3 co-founders by Chinese police for their wallets is a serious concern. The case of Jun Zhao and the experiences of Liang Liang shed light on the risks faced by those involved in the crypto industry in China. The ongoing Multichain saga demonstrates the level of surveillance and control employed by law enforcement authorities. However, despite the crackdown on certain crypto activities, there are indications that governments recognize the potential of blockchain technology. The regulation of cryptocurrency exchanges and the establishment of digital asset funds show a shift toward acceptance and integration. As the crypto industry evolves, it is crucial for founders and participants to navigate the regulatory landscape carefully to protect themselves and their assets.
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