Hangzhou police investigate encryption practitioners, causing a follow-up.

Recently, it has been reported that the Hangzhou police have started investigating encryption practitioners in the area since June 8, attracting widespread follow within the industry. As one of the more active regions for web3 startups in China, Hangzhou's move is seen as a possible indication of the beginning of more extensive regulatory actions.

According to reports, local encryption practitioners have been asked to bring their laptops to the police station to cooperate with data collection, information recovery, and other tasks. Some of the individuals being investigated stated that the police used specialized equipment to recover chat records from uninstalled software.

The current investigation seems to mainly target the following types of groups:

1. Personnel who have participated in token issuance or project financing.
2. Companies or individuals with records of overseas fundraising, capital repatriation, cross-border transfers, or over-the-counter transactions.
3. Personnel engaged in community operations, user acquisition activities, such as KOLs, DAO managers, etc.

Some analyses suggest that Hangzhou becoming the first city to conduct large-scale inspections may be related to local public security's leading position in blockchain technology, the concentration of web3 talent, and the active cross-border virtual currency trading.

From a legal perspective, there is currently insufficient evidence to suggest that mainland China will further intensify its crackdown on the encryption industry based on the "9.24 notice." If the Hangzhou incident is true, there may be several possible reasons:

1. There may be large local encryption teams involved in criminal cases, leading to an investigation of the entire industry.
2. Based on the clues provided by the financial regulatory authorities, the police conducted an investigation into the encryption practitioners in the jurisdiction.
3. For tax considerations, establish the basis for the potential taxation of encryption assets in the future.

It is worth noting that public security authorities have legal grounds to summon citizens verbally to cooperate with investigations, but if they wish to restore computer data, they must follow the corresponding legal procedures.

Since the "9.24 Notice" was issued by ten ministries and commissions of the country in September 2021, China has implemented a comprehensive ban on activities related to virtual currency. However, the notice also stipulates that losses incurred from investing in virtual currency are to be borne by the investors themselves, which has been interpreted by some legal practitioners as not prohibiting but not protecting virtual currency investments.

Nevertheless, there are still cases in practice where individuals have been convicted and sentenced for receiving illicit funds through the buying and selling of virtual currencies. Therefore, to mitigate legal risks, it is recommended that citizens in mainland China participate in virtual currency trading with caution.

Currently, regulatory attitudes towards cryptocurrency vary around the world. Singapore recently announced that it will implement stricter web3 regulations; Hong Kong, while expressing an open attitude, is cautious in its actual actions; the United States' encryption policies are also not entirely friendly.

The future development of cryptocurrency still has many uncertainties. True believers in encryption should perhaps focus more on how to make cryptocurrency reflect its intrinsic value, rather than being overly concerned about the attitudes of centralized institutions.