Legal Compliance and Risk Management

7.1 Legal Compliance Framework

PhyChain is committed to advancing the compliant application of blockchain technology and crypto assets worldwide, providing users with a legal, transparent, and secure decentralized computing ecosystem. To achieve this, the platform has established a comprehensive legal compliance framework, covering the following aspects:

Multi-Regional Regulatory Compliance: PhyChain adheres to the regulations of various countries concerning blockchain technology, crypto assets, and decentralized networks. For example:

In the United States, PhyChain complies with the SEC (Securities and Exchange Commission) requirements to ensure that token issuance and transactions meet securities regulations.

In the European Union, the platform strictly follows the MiCA (Markets in Crypto-Assets) framework to protect user rights.

Cross-Border Operations and Localization Compliance: During its global deployment, PhyChain tailors localized compliance measures according to specific policy requirements in target markets. For instance, in Turkey, Singapore, and South Korea, the platform has partnered with local legal experts to establish operational models that meet regulatory requirements, including tax compliance, data protection, and consumer rights protection.

Anti-Money Laundering (AML) and Know Your Customer (KYC): PhyChain enforces strict KYC and AML policies to ensure the authenticity of user identities and the legality of transactions. All participants must complete identity verification to prevent illicit funds from entering the network.

Legal Team Support: PhyChain has assembled a legal team of international blockchain compliance experts and lawyers who monitor global regulatory changes in real-time and adjust the platform’s operational strategies to ensure continuous compliance.

7.2 Risk Management Measures

In the rapidly evolving blockchain and crypto asset sector, risk management is a critical foundation for PhyChain's long-term sustainable development. The platform employs multi-dimensional risk management mechanisms across technology, market, and policy domains to safeguard users and the ecosystem’s stability.

Technical Security and User Privacy Protection: PhyChain adopts a multi-layered security framework, including quantum-resistant encryption, smart contract vulnerability audits, and distributed network protection mechanisms to ensure the network’s resilience against risks and the security of user data.

Smart Contract Audits: All smart contracts undergo comprehensive audits by third-party institutions to ensure the safety and transparency of task allocation and reward distribution.

User Privacy Protection: The platform implements decentralized privacy protection measures, storing and transmitting user data in anonymized formats while protecting privacy through end-to-end encryption (E2EE).

Market Volatility and Policy Risk Response: Recognizing the high volatility of the crypto asset market, PhyChain mitigates market shocks to token value through a flexible token economy model, including limited supply, deflationary mechanisms, and ecosystem incentives. The platform has also established a market risk fund to protect user interests during extreme market conditions. For policy risks, PhyChain monitors changes in global regulations in real-time and adjusts its operational strategies accordingly.

Disaster Recovery and Fault Tolerance: To enhance network resilience, PhyChain has deployed a global disaster recovery system to maintain network availability under extreme conditions (e.g., cyberattacks, hardware failures). Multi-path communication between nodes and redundant computing power distribution further strengthen the network’s robustness.