Four Viable Models for Web3 Startups Operating in Mainland China

Web3 startups in mainland China face a paradox: the technology is clearly transformative globally, yet the regulatory environment seems to permit almost nothing. But this apparent contradiction dissolves when founders abandon the assumption that Web3 must equal finance. In reality, there are four concrete models where web3 startups can build sustainable, compliant businesses without crossing legal red lines.

Technology Infrastructure: Building Real B2B Solutions

The most straightforward path for web3 startups is treating blockchain as what it truly is—a distributed database and collaboration system—rather than a financial instrument. When positioned this way, blockchain services have never been rejected by mainland regulators.

Enterprise blockchain platforms, government digital infrastructure, and industry middleware for supply chain coordination all fall under legitimate information technology services. The specific applications are well-established: data ownership verification, cross-organization collaboration, evidence preservation for judicial or administrative purposes, and transparent audit trails for compliance.

What matters here is not whether you use blockchain, but rather the business fundamentals: Who are your customers? How do you charge? Are you selling a B2B service or pushing investment narratives to the public?

When your revenue model is project-based, subscription-based, or monthly retainer fees from enterprise clients—and when your technology genuinely solves operational problems rather than speculative ones—this path remains relatively secure. The key is building the business around what customers actually need, not around blockchain branding.

De-Financialized Digital Products: The NFT Lesson

China’s evolution in digital collectibles has already mapped this territory. De-financialized digital products remain viable as long as they avoid secondary market trading and abandon investment return narratives.

Digital collectibles, membership certificates, event passes, copyright labels, and identity credentials—these are all applications of “using blockchain to issue an immutable, verifiable record.” The business model succeeds when it solves genuine problems around brand engagement, user relationships, or content ownership.

The challenge here isn’t legal; it’s commercial. Many founders get stuck asking whether blockchain actually improves their product compared to conventional databases. If the honest answer is “it sounds more Web3,” the business model won’t sustain itself. Success requires the blockchain to solve a real coordination or verification problem that genuinely matters to your customers.

This approach demands genuine product-market fit, not just technology enthusiasm. Digital products work when they address specific business needs—membership programs that improve customer loyalty, copyright systems that protect creator rights, or event systems that prevent counterfeiting.

Compliance Services: The Growing ‘Slow Business’ Niche

As regulations crystallize, an enormous service market emerges. Exchanges, development teams, content platforms, compliance officers, and international expansion teams all need support in legal analysis, risk assessment, compliance architecture, on-chain monitoring, and anti-money laundering protocols.

This category of web3 startups operates outside the spotlight but provides essential infrastructure. It’s characteristically a “slow business”—unglamorous, steady, and increasingly indispensable. Tasks like compliance research, risk frameworks, regulatory analysis, and audit support don’t generate headlines, but they’re fundamental to the ecosystem.

For founders with deep regulatory knowledge and technical understanding, this niche offers sustainable revenue. Legal consultation, compliance architecture design, entity establishment, fund flow analysis, and risk assessment models are tangible services that blockchain businesses genuinely require. The strength of this model lies in its resilience—as regulations evolve, demand only increases.

Going Global with Mainland Support: A Structural Approach

The most sophisticated path available to web3 startups involves a clear division of labor: overseas entities handle all financial activities (token issuance, trading, stablecoin design, user fund custody), while mainland teams focus on technical and support functions.

This model succeeds when founders genuinely understand what “going global” means—not simply registering a foreign company and launching a website. Real questions must be answered: Where is your actual market? Who are your real users? Who bears compliance responsibility at each stage? How does the funding loop actually close?

In practice, mainland teams can legally undertake research and development, protocol auditing, product design, system maintenance, risk control modeling, data analysis, and compliance research. These are technical services that don’t directly involve token operations or financial transaction facilitation.

What must be outsourced are the financial functions: token issuance, stablecoin mechanisms, on-chain transactions, settlement processes, user custody, and profit distribution. If these occur in mainland China, the legal risks become virtually unmanageable. If they’re managed by overseas entities with genuine international operations, the structure gains legal viability.

Organizationally, this creates a hierarchical model: the overseas location houses the main business entity, compliance infrastructure, and financial operations; the mainland location functions as an “engineering department, research institute, and backend support center.” It’s not particularly exciting packaging, but it’s been repeatedly validated by actual web3 startups operating under this structure.

The Non-Negotiable Red Lines Every Founder Must Know

Regardless of which model you pursue, certain activities remain virtually certain to trigger severe legal consequences:

Issuing or disguisedly issuing tokens in any form; raising funds through “node whitelist” or “partner” narratives; promising returns or implying investment appreciation; providing token trading matching services, price-setting, or promotional activity; and promoting cryptocurrency investment through WeChat groups, online communities, or livestreams. These activities represent the core of what mainland regulators target, and they’re non-negotiable restrictions.

The distinction is clear: you can build technology, provide services, and create digital products. You cannot engineer financial products centered on token appreciation or trading activity.

Sustainability Over Hype: A Long-Term Perspective

Web3 startups operating in mainland China shouldn’t seek the most exciting narrative; they should seek the most durable business model. Treating Web3 as a technology and operational tool—rather than as a financial asset vehicle—actually extends the entrepreneurial runway.

This isn’t the most glamorous route to venture funding or media attention. But for founders committed to building something lasting within the actual legal framework, it remains the path least likely to fail. The founders who succeed aren’t those who found loopholes; they’re those who built genuine businesses that technology happens to improve.

The future of web3 startups in mainland China won’t be determined by finding creative workarounds. It will be determined by builders who recognize that compliance isn’t a constraint to escape—it’s the foundation for sustainable growth. In this regulatory environment, long-term thinking and structural clarity aren’t limitations; they’re competitive advantages.