China Launches Stringent Blockchain Regulations

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The Cyberspace Administration of China (CAC), the country’s technology and internet regulator, has released on Thursday the final draft of regulations overseeing the use of Blockchain tech in the country. The Office of the State Council’s Department of Internet Information has reviewed and approved the draft legislation, which is expected to become law on February 15, 2019.

Blockchain service providers, which are defined as any company that offers “information services to the public through internet sites and applications based on blockchain technology or systems,” have to follow stringent rules to be able to operate in China. This also includes the adoption of identity verification for users.

According to the regulations, Blockchain service providers are also prohibited to utilize their platform for activities that pose threat to “national security, disrupt social order, and infringe on the legitimate rights and interests of others.”

The regulations also forbid them to circulate any content and information prohibited by law. Users who will violate the law will be subject to “warning, restriction, and account closure.”

Furthermore, Blockchain service providers are mandated to maintain a six-month record of everything introduced on the platform. This will be regularly checked by the internet information office assigned in a particular region where the Blockchain company is based. The Chinese central government directly controls the governing bodies. Fines and prosecution await companies that are found to violate the new regulations.

According to a report by the South China Morning Post (SCMP) in October 2018, the first draft of regulations was released in reply to an open letter posted on the Ethereum Blockchain in April 2018. Authored by a Chinese activist, the letter delineates an “alleged cover-up of sexual harassment” at a university during the 1990s. The letter was first posted on Chinese social media platforms like WeChat and Weibo but was eventually censored. Subsequently, the unidentified activist attached the letter to a publicly available transaction on the Ethereum Blockchain, which triggered the Chinese government to reply.

The CAC further says that the new regulations aim to “safeguard national security and social public interests, protect the legitimate rights and interests of citizens, legal persons, and other organizations, and promote the healthy development of blockchain technology and related services.”

The Chinese government has maintained a negative stance against digital currency and has barred companies and investors from taking part in initial coin offerings. However, the country has welcomed Blockchain technology but on its own terms. Just last week, the China Banking Association rolled out a new Blockchain platform for finance.