Recently read an article from a16z titled "Markets need rules, and crypto is no different". The article itself isn't long, and its core argument isn't complex. In summary:

Although the crypto market has narratives of new technology and decentralization, as long as control and risk exist, it must accept rules similar to those in traditional markets.

Next, Portal Labs will first outline the core points of this article.

a16z's Four Core Rules
Although the utopian narrative of the crypto world has long championed "decentralization" and "anti-statism," reality has proven that this philosophy inherently clashes with the practical needs of today's market operations. Bitcoin's creator, Satoshi Nakamoto, designed a system that bypasses financial intermediaries, and early followers often exhibited a radical individualism—much like the Homebrew Computer Club, the open-source movement, or the cypherpunk community of the past.

However, for crypto to truly unlock its potential, it must achieve mass adoption and integrate into everyday commerce. The reality is that the current world order remains "rule-based" with governments at its core. Any market involving capital flows and public trading must inevitably accept regulation and constraints imposed by state will. Especially at the commercial level, if Web3 entrepreneurs and companies want to gain investor trust, consumer acceptance, and legal protection, the only path is to operate within a compliant framework.

This requirement isn't unfounded. In the discourses of economists like Adam Smith, Friedrich Hayek, Milton Friedman, and Hernando de Soto, healthy market operation relies on property rights protection, contract enforcement, and fair order. The crypto market is no exception.

It is against this backdrop that a16z distilled four core regulatory objectives that the crypto market should follow:

First, Stability and Predictability.

For markets to function, rules must be clear and enforceable. Web3 entrepreneurs need to know how their businesses will be regulated, investors need assurance that policies won't change abruptly, and users need confidence that transactions are secure. Without this stability, market participation lacks confidence.

Second, Property Rights Protection.

Secure ownership is the cornerstone of any market. Blockchain technology can indeed confirm and transfer ownership on-chain, but this doesn't mean law is unnecessary. On the contrary, legal frameworks need to complement technology to truly protect assets.

Third, Transparency and Clear Information.

Efficient markets rely on information symmetry. Whether it's tokens, DeFi products, or NFTs, buyers must understand what they are purchasing. Disclosure mechanisms and transparent rules are necessary to prevent fraud and misrepresentation.

Fourth, Fair Competition.

Any market without oversight will eventually breed manipulation and scams. The purpose of regulation is not to eliminate competition but to ensure the competitive landscape isn't distorted by information asymmetry or monopoly.

In a16z's view, these four points constitute the basic order upon which markets depend: with stability and property rights, transactions can occur; with transparency and fairness, markets can move towards efficiency and long-term value.

The Challenge of Regulation in the Chinese Context
However, market rules must also be viewed in conjunction with national/regional policies.

Currently, regulatory policies for Web3 vary significantly across different regions globally. For example, the US is gradually transitioning from enforcement-driven actions to building institutional frameworks focused on market structure and stablecoins; the EU is promoting unified regulatory standards through MiCA; Singapore initially attracted projects and capital with an open attitude, but its regulation has tightened rapidly in recent years, with the new DTSP regulations being a typical example.

Mainland China, however, consistently prioritizes risk prevention and capital outflow control, maintaining strict restrictions on crypto businesses. Meanwhile, Hong Kong, as an institutional testing ground, is gradually opening up through the VASP regime and stablecoin framework. This also means that discussing "regulation" in the Chinese context requires considering the dual structure of Mainland China's tight control and Hong Kong's relative looseness. Consequently, the challenges faced by Chinese Web3 entrepreneurs are more complex: they must understand international regulatory trends while also finding space for survival and compliance within the local regulatory logic.

If we map a16z's four market rule objectives onto the Chinese context, we should see a completely different set of challenges and focal points.

First, Stability.

In Mainland China, so-called "stability" manifests in two ways:

On one hand, since 2017, regulators have clearly drawn red lines for crypto assets, consistently treating token issuance, trading, and intermediary services as illegal financial activities—a stance that has never wavered.

On the other hand, the Mainland has consistently encouraged exploration in areas like blockchain infrastructure, consortium chains, and data element circulation—a policy direction that has also maintained continuity.

For Web3 entrepreneurs, this means that if their focus is on token-related businesses, there is almost no compliance space; but if they position themselves in underlying technology, data elements, or compliant applications, they can advance long-term within a stable policy framework.

Meanwhile, Hong Kong is gradually opening up under "One Country, Two Systems," establishing VASP and stablecoin frameworks, providing an institutionalized window for asset-class entrepreneurship. However, Mainland regulators are highly vigilant against cross-border arbitrage. Therefore, if Web3 startup teams choose the Hong Kong path, they must clearly segregate domestic and overseas markets in their business structure.

This dual-track situation requires Web3 startup teams to "choose sides upfront" strategically: they must remain sensitive to the Mainland's red lines, avoiding token issuance and trading, while also leveraging Hong Kong's institutional experiments to undertake asset-class businesses. In practice, a common approach is to base data and technology R&D in the Mainland and place financialized applications in Hong Kong, creating a natural structural firewall.

Second, Property Rights Protection.

Property rights protection is the cornerstone of any market. In Europe and the US, crypto assets are gradually gaining legal recognition, complementing the ownership confirmation enabled by blockchain technology. But in Mainland China, this logic does not apply. Crypto assets themselves are not legally recognized as a property category, and token-related rights cannot obtain judicial protection. Meanwhile, the Mainland's policy-driven "rights confirmation" direction focuses on data elements, digital collectibles (a variant of NFTs), and consortium chain asset registration, emphasizing "rights confirmation within a controllable scope" rather than boundless tokenization.

For Web3 entrepreneurs, this means:

If involving token-class assets, property rights cannot be established in the Mainland, posing extremely high compliance risks;

If focusing on data elements, NFT collectibles, or consortium chain scenarios, property rights protection actually has policy backing (such as data circulation rights confirmation pilots, judicial recognition of digital evidence), and entrepreneurship in these directions can find institutional support.

Hong Kong, through its VASP regime and stablecoin regulations, provides legal recognition and a regulatory framework for tokens and related assets. For Chinese entrepreneurs, this offers a window for "compliant rights confirmation" for asset-class businesses, but the prerequisite is that the business must genuinely operate according to Hong Kong's local rules, not using Hong Kong as a channel back to the Mainland.

This North-South difference requires Web3 startup teams to consider both sides when designing their path: In the Mainland, the focus of rights confirmation should be on "data elementization" and "compliant digital assets," forming a product logic that can align with policy; in Hong Kong, the tokenized and asset financialization parts can be separated to undergo the scrutiny and licensing of the local regulatory framework. Businesses in the two regions must achieve institutional segregation and clear information disclosure to both adhere to the Mainland's red lines and seize the new opportunities brought by Hong Kong's openness.

Third, Transparency.

In a16z's framework, transparency means information symmetry – investors and users need to know what they are buying. In Mainland China, due to vaguely defined red lines and room for discretion in enforcement – for example, while token financing is explicitly banned, "technical service fees" or "overseas structures" often operate in regulatory gray areas – this ambiguity keeps the market in a prolonged state of grayness.

For Web3 entrepreneurs, this lack of transparency presents two challenges:

Externally, projects operating in gray areas lack compliant disclosure records, making it difficult to gain the trust of international capital and partners.

Internally, ordinary investors often cannot obtain clear project information. The information gap leads to "trust building" heavily relying on personal networks, which can easily breed scams and overhyping.

Hong Kong is the opposite. Regulators have clearly established disclosure obligations. Licensed exchanges need to publicize audits and risk warnings; stablecoin issuers are required to maintain fund transparency. For Web3 startup teams, this means that although the entry barrier is higher, they can also gain long-term market trust through standardized information disclosure mechanisms.

This contrast means that Web3 startup teams need to adopt completely different information strategies in the Mainland and Hong Kong: In the Mainland, it's more about "speak less, do more," keeping disclosures within compliance limits to avoid being interpreted as crossing red lines; in Hong Kong, they must proactively enhance compliant disclosure, using transparency to gain regulatory trust and market recognition. For teams, the ability to flexibly switch between these two discourse systems determines whether they can maintain survival space in both domestic and international markets simultaneously.

Fourth, Fair Competition.

If stability and property rights determine whether a market can exist, then fair competition determines whether it can operate healthily. In the Mainland, due to the strict prohibition of token businesses, a public market doesn't really exist. But this doesn't mean there's no unfairness: gray area arbitrage and relationship-based monopolies still influence opportunity distribution. Web3 entrepreneurs often aren't competing on a level playing field based on products and capabilities, but rather contending based on resources and connections within ambiguous zones.

Hong Kong's attempt is different. As the VASP regime and stablecoin regulation gradually advance, regulators are trying to set up guardrails using licenses and reviews to prevent "bad money driving out good." Although this raises the entry barrier, it also gives truly long-term-oriented teams a chance to compete within a fairer framework.

This difference dictates completely different competitive strategies for Web3 startup teams in the Mainland versus Hong Kong: In the Mainland, it's more about finding the compliance boundaries within policy gray areas and avoiding being passively drawn into games of resource monopoly; in Hong Kong, it's about directly facing the licensed competition and winning with compliance capabilities and long-term reputation. In other words, the former is "survival by navigating red lines," while the latter is "breaking through within order." For teams aiming for long-term development, only within the latter framework can they truly build sustainable competitiveness.

Conclusion
The a16z article reminds us: markets need rules, and crypto is no exception. Placed in the Chinese context, this statement still holds true, only the form and focus of the rules are completely different. The Mainland's baseline control and Hong Kong's institutionalized pilot together constitute the reality that Web3 entrepreneurs must face.

For Chinese Web3 startup teams, the real challenge is not how to bypass the rules, but how to find space for long-term growth within them. Rules are not obstacles, but prerequisites; not shackles, but tests. Only those projects that can establish themselves firmly under a compliant order have the chance to become the "long-termists" that remain.