Chinese Authorities Propose the First Set of Blockchain-Specific Regulations

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Chinese Authorities Propose the First Set of Blockchain-Specific Regulations

The Cyberspace Administration of China (CAC) published a draft policy framework on Oct 19, 2018, to regulate blockchain-powered services in the country. The leading internet censorship agency said it is open for public feedback till November 2, 2018, before finalizing the implementation of the new policy.

First Step Toward Blockchain Regulation?

If implemented, the new policy dubbed “The Regulation for Managing Blockchain Information Services,” will be the first set of regulations explicitly targeted at China’s homegrown blockchain industry.

Under proposed new rules, Chinese users will be mandatorily required to submit their real names before being able to access blockchain-based services. This is in stark contrast with one of the critical ethos that adds to the charm of the technology: anonymity.

Social media platforms using blockchain technology usually enable users to posts without revealing their true identity. Additionally, it is incredibly tough, if not downright impossible, for the government to track users as any centralized entity does not control the data on the network.

The CAC announcement reads:

“In order to standardize blockchain information service activities, promote the healthy and orderly development of blockchain information services, protect the legitimate rights and interests of citizens, legal persons, and other organizations, and safeguard national security and public interests, we have formulated the Regulations on the Management of Blockchain Information Services.”

According to the local media in China, the CAC’s latest move was prompted by an April 2018 open letter written by an activist to bring a more than 20-year-old sexual harassment case into the limelight. The activist alleged a coverup of the alleged crime that took place at a top Chinese university.

As the open letter drew public attention, the SAC stepped in to prevent its circulation on social networking platforms such as Weibo and WeChat.

The anonymous activist defied the gag order by attaching the letter to an ether transaction to themselves. Since all blockchain-based transactions are always in the public domain, the letter was open for everyone to access while the CAC could do nothing to stop it.

Of course, that didn’t go down well with the Chinese authorities who don’t seem particularly keen on forfeiting their firm grip on the spread of information within the country’s cyberspace.   

The Proposed Policies Still Carry Loopholes

The initial draft of the new policy framework left one crucial detail unaddressed. Understandably so, considering that this particular detail is ingrained in the fundamentals of blockchain technology.

The experienced reader has probably already guessed that this is about the fact that blockchain is a technology that doesn’t allow data to be changed or erased. Bluntly put, this fundamental property of the technology has no room within China’s legal and regulatory framework targeted at governing user data.

Worse still, some analysts claim that the proposed rules make it practically impossible for the state to protect the rights and interest of blockchain firms.

Notably, the CAC has refrained from clarifying what kind of blockchain startups are expected to come under the purview of the proposed policy. However, according to some experts, the regulations could target supernodes of specific blockchain networks.

Priyeshu Garg

Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He holds an engineering degree in Computer Science Engineering and is a passionate economist. He built his first digital marketing startup when he was a teenager, and worked with multiple Fortune 500 companies along with smaller firms. When he is not solving the transportation problems at his company, he can be found writing about the blockchain or hacking at a Hackathon.

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