Web3 Lawyer: The explosive game Hamster Rush in the TON ecosystem sparks controversy, what insights does GameFi compliance provide?

Author: Mankun Blockchain

Recently, a mini-game called Hamster Kombat has sparked widespread attention and controversy in Iran. This click-based game on the Telegram platform attracts a large number of users through a "click to earn" mechanism. Since its launch in March this year, the user base of Hamster Kombat has rapidly grown, reaching 200 million, with 9.8 million subscribers on the project's X platform and 28.7 million on YouTube. In just a few months, Hamster Kombat has quickly become a phenomenon.

However, with the popularity of Hamster Kombat in Iran, the game has also triggered significant controversy.

In recent years, Iran has implemented a series of strict regulatory measures regarding virtual currencies. Particularly concerning cryptocurrency mining, the Iranian government has adopted a dual strategy: in short, you can mine, but you cannot trade what you mine abroad, and what you mine domestically must be sold to the central bank. Against this policy backdrop, the rapid rise of Hamster Kombat has also attracted criticism from the Iranian government and experts.

Criticism 1: Information Security Threats

Hamster Kombat fully utilizes the principle of viral growth, leveraging users' initiative with the mechanism of "invite friends, earn XX." While this mechanism promotes rapid user base expansion, it also brings serious information security risks. If hackers infiltrate the servers where project data is stored, they can easily access users' personal data and their social connections (who they invited to play the game). In response, Hossein Delirian, spokesperson for the Iranian National Cyber Space Center, warned that many Iranian users are discussing using this game for cryptocurrency mining in Telegram supergroups, which has become a breeding ground for hacker crimes, putting users' personal information and account security at great risk.

Criticism 2: Value Investment Risks

Unlike Bitcoin (BTC) or Ethereum (ETH), whose prices and values have stood the test of time, various trending projects and virtual currencies represented by Hamster Kombat this year have not demonstrated stability or scarcity. Their market performance is often linked to FOMO, speculation, etc., resulting in significant price/market cap fluctuations with market heat changes. Therefore, Esmail Qamari from the Justice Department of Ilam Province pointed out that the value of Hamster Kombat is largely driven by community and external investor speculation. Investors participating in such projects are at high risk of their funds flowing into a void of investment bubbles. Additionally, renowned scholar Ayatollah Nasser Makarem Shirazi also believes that cryptocurrencies have many drawbacks, and from a value investment perspective, users may face the risk of financial loss.

Criticism 3: Socio-Cultural Risks

Whether it's the early Web3 Play2Earn or the current Tap2Earn and invitation rewards, the essence is to make users believe they can easily make money or "win by lying down." This is also why Dr. Alireza Chabkeru from Tehran University and Deputy Chief of Staff Habibollah Sayyari of the Iranian Army believe that such games may have far-reaching negative impacts on society - they not only distract the public from significant events (like elections) but may also lead to cultural degradation and encourage a culture of laziness, potentially affecting social stability and the sustainable development of culture.

These criticisms reflect the Iranian government's concerns about a series of social, cultural, and economic issues that may arise in the future, while also highlighting the complexity of regulatory policies and attitudes that project developers must consider when developing and promoting Web3 projects, as well as the legal and social responsibilities they must undertake as project parties. So the question arises: as Chinese Web3 entrepreneurs, what legal compliance points should we pay special attention to in the domestic Web3 entrepreneurial environment if we want to share in this "click to earn" wave?

Lawyer Liu Honglin from Mankun Law Firm specifically reminds: remember the following compliance points and follow the corresponding solutions.

Personal Information Protection

In fact, with the awakening of personal privacy awareness, personal information protection has become a global principle and consensus. In China, according to the Cybersecurity Law of the People's Republic of China and the Personal Information Protection Law, Chinese Web3 entrepreneurs need to ensure the security of users' personal information and data. Therefore, if Hamster Kombat were to launch in China, to avoid information security issues, entrepreneurs should take the following measures:

• Data Encryption. Ensure that user data is encrypted during storage and transmission to prevent data leakage.
• Multi-Factor Authentication. Introduce multi-factor authentication mechanisms to enhance account security.
• Regular Security Audits. Conduct regular security audits to identify and patch potential security vulnerabilities.
• User Education. Strengthen user education on security awareness, reminding users to protect their personal information and account security.

Compliant Token Issuance

A topic that Web3 projects cannot escape is token issuance. However, the Securities Law of the People's Republic of China and the Announcement on Preventing Risks of Token Issuance Financing clearly state that token issuance financing activities are illegal financial activities. Therefore, if Web3 entrepreneurs want to launch a game similar to Hamster Kombat in China, they must avoid any form of token issuance financing to prevent being classified as illegal fundraising. The following "life-saving" suggestions should not be overlooked:

• Avoid Token Financing. Avoid financing through token issuance (ICO) and consider other legal financing methods, such as equity financing or debt financing.
• Legal Consultation. Consult professional lawyers before launching the project to ensure all operations comply with Chinese laws and regulations.
• Compliant Operations. Ensure that all activities and transactions of the project are conducted within the legal framework to avoid any form of illegal fundraising.

Anti-Money Laundering and Counter-Terrorism Financing

Once Web3 projects issue virtual tokens, they will also begin the "offensive and defensive battle" of money laundering and anti-money laundering. According to the Anti-Money Laundering Law and the People's Bank of China’s Notice on Strengthening Anti-Money Laundering and Counter-Terrorism Financing Related Work for Virtual Currencies, Web3 projects must strictly adhere to anti-money laundering and counter-terrorism financing regulations. To minimize money laundering risks, Web3 entrepreneurs need to:

• Establish KYC Processes. Know your customer, ensuring that each user provides real identity information when registering on the platform to prevent anonymous transactions.
• Monitor and Report Suspicious Activities. Set up monitoring systems to detect and report suspicious transaction activities to prevent money laundering and terrorist financing.
• Train Employees. Provide training for employees on anti-money laundering and counter-terrorism financing to enable them to identify and respond to potential risks.

Cultural and Ideological Regulation

Whether it's memecoins or Web3 games, it's easy to create subcultures and form a unified cultural ideology within the community. In the context of the Chinese government's high emphasis on cultural and ideological security, the content of Web3 games and their communities should avoid involving politically sensitive topics, spreading negative social values, or content that does not align with the core socialist values, to avoid crossing regulatory red lines. General operations include:

• Content Review. Conduct strict content reviews before the game goes live to ensure that the game content meets national cultural and ideological requirements.
• Compliant Promotion. During the promotion and marketing process, avoid using content that does not align with socialist core values to ensure compliance.
• Establish Feedback Mechanisms. Create user feedback mechanisms to promptly adjust and correct content that does not meet cultural and ideological requirements.

The legal and socio-cultural controversies triggered by Hamster Kombat in Iran provide an important warning for Chinese Web3 game entrepreneurs - entrepreneurs need to consider not only investment risks, anti-money laundering, and token issuance but also the security of user data and cultural ideology, strictly adhere to Chinese laws and regulations, and ensure compliant operation of Web3 game projects.