Recently, a small game called Hamster Kombat has sparked widespread attention and controversy in Iran. This click-based game on the Telegram platform has attracted a large number of users through the 'click to earn money' mechanism. Since its launch in March this year, the number of Hamster Kombat users has grown rapidly, reaching 200 million. The subscription numbers for the project's X platform and YouTube account are 9.8 million and 28.7 million, respectively. In just a few months, Hamster Kombat has rapidly become a phenomenon.

However, with the popularity of Hamster Kombat in Iran, this game has also sparked considerable controversy.

In recent years, Iran has implemented a series of strict regulations in the field of virtual money. In particular, regarding cryptocurrency mining, the Iranian government has adopted a dual strategy, in short: you can mine, but you cannot trade the ones mined overseas, and the ones mined domestically must be sold to the central bank. In the context of such policies, the rapid popularity of Hamster Kombat has also drawn criticism from the Iranian government and experts.

Criticism 1: Information Security Threats

Hamster Kombat fully utilizes the fission principle and taps into users' subjectivity, that is, "invite friends and earn XX immediately". Although this mechanism promotes rapid expansion of user base, it also brings serious information security risks. Once hackers invade the server where project data is stored, it is easy to obtain users' personal data and their social relationships (who invited you to play the game). In response, Hossein Delirian, spokesperson for Iran's National Cyberspace Center, warned that many Iranian users are discussing using this game for crypto mining in platforms like Telegram supergroups, which has become breeding ground for hacker crimes, posing great threats to users' personal information and account security.

Criticism 2: Value Investing Risks

Different from BTC or ETH, whose prices and values have stood the test of time, various skyrocketing projects and virtual currencies represented by Hamster Kombat this year have not demonstrated their stability or scarcity, and their market performance is often linked to FOMO and speculation, resulting in significant fluctuations in price/market cap with changes in market heat. Therefore, Esmail Qamari of the Judiciary Department of Irum Province pointed out that the value of Hamster Kombat is more from community and external investor speculation. Investors participating in such projects are extremely susceptible to flowing their funds into worthless investment bubbles. At the same time, the famous scholar Ayatollah Nasser Makarem Shirazi also believes that cryptocurrencies have many drawbacks, and from the perspective of value investment, users may face financial loss risks.

Criticism 3: Social and Cultural Risks

Whether it's the early Play2Earn of Web3, Tap2Earn this time, or referral rewards, the essence is to make users think they can easily make money or 'win by lying down.' This is also why Dr. Alireza Chabkeru of the University of Tehran and Deputy Chief of Staff Habibollah Sayari of the Iranian army believe that such games may have a deeper negative impact on society - not only does it distract the public from major events (such as elections), but it may also lead to the degradation of intellectual culture and encourage a culture of laziness, potentially affecting the stability of society and the continuous development of culture.

The above criticisms reflect the Iranian government's concerns about a series of social, cultural and economic issues that will arise in the future. It also highlights the complexity of considering the regulatory policies and attitudes of different countries and bearing the legal and social responsibilities as a project party when developing and promoting Web3 projects. So, as a Chinese Web3 entrepreneur, what legal compliance issues should be particularly focused on in the domestic Web3 entrepreneurial environment in order to get a share of the "click-to-earn" trend?

Man Kwan Law Firm Lawyer Liu Honglin specially reminds: Remember the following compliance points, Follow the corresponding solution.

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 provisions of 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 is launched in China, in order 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. Introducing a multi-factor authentication mechanism to enhance account security.
• Regular security audits. Regular security audits are conducted to identify and patch potential security vulnerabilities.
• User Education. Strengthen user awareness education, remind users to pay attention to protecting personal information and account security.

Token Issuance in Compliance

One topic that Web3 projects can't escape is token issuance. However, the Securities Law of the People's Republic of China and the Announcement on Preventing the Risk of Token Issuance and Financing clearly stipulate that token issuance and financing activities are illegal financial activities. Therefore, Web3 entrepreneurs who want to launch a game similar to Hamster Kombat in China must avoid any form of token issuance financing to prevent it from being identified as illegal fundraising. Don't ignore the following "life-saving" tips:

• Avoid token financing. Avoid financing through token issuance (ICO) and consider other legitimate financing methods such as equity financing or debt financing.
• Legal consultation. Consult professional lawyers before starting the project to ensure that all operations comply with Chinese laws and regulations.
• Compliance operation. 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 Countering the Financing of Terrorism

The Web3 project has issued virtual tokens, which will also start the "offensive and defensive warfare" of money laundering and anti-money laundering. According to the "Anti-Money Laundering Law" and the "Notice of the People's Bank of China on Strengthening the Anti-Money Laundering and Anti-Terrorist Financing Work of Virtual Currency", Web3 projects must strictly comply with the regulations on anti-money laundering and anti-terrorist financing. In order to avoid money laundering risks as much as possible, Web3 entrepreneurs need:

• Establish KYC process. Understand your customers and ensure 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, preventing money laundering and terrorist financing.
• Train employees. Train 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 a subculture and form a unified cultural ideology in the community. In the context of the Chinese government's high attention to cultural and ideological security, the content of Web3 games and communities should avoid political sensitive topics, disseminating negative social values, or content that does not conform to the core socialist values, in order to avoid crossing the regulatory red line. Common operations include:

• Content Review. Conduct rigorous content review before the game goes live to ensure that the game content complies with the cultural and ideological requirements of the country.
• Compliance Promotion. During the promotion and advertising process, avoid using content that does not conform to the core socialist values, and ensure compliance in promotion.
• Establish a feedback mechanism. Establish a user feedback mechanism to promptly adjust and correct content that does not meet cultural and ideological requirements.

The controversy caused by Hamster Kombat in Iran has provided an important warning for Chinese Web3 game entrepreneurs - entrepreneurs need to consider not only investment risks, anti-money laundering, token issuance, etc., but also maintain user data security and cultural ideology, strictly abide by Chinese laws and regulations, and ensure the compliance operation of Web3 game projects.

Reference materials

PANews, Zen, "Milk Head Music or Software War? TON Ecosystem Game Hamster Kombat Sweeps Iran and Provokes Political Condemnation"[1]

Cybersecurity Law of the People's Republic of China[2]

Personal Information Protection Law of the People's Republic of China[3]

Anti-Money Laundering Law of the People's Republic of China[4]

"Announcement on Preventing Risks of Token Issuance Financing"[5]

Shanghai Mankun Law Firm, "Web3.0 Entrepreneurship Legal Risk Prevention Manual"[6]