China Considers New Regulation For Blockchain Service Providers

Cyberspace Administration of China (CAC), China's top-level internet censorship agency, has announced that it has released a draft of “The Regulation for Managing Blockchain Information Services” for public review and feedback.

Under the new rules, the CAC considers blockchain information service providers as “entities or nodes” that offer information services to the public – “both institutions and individuals” – using blockchain technology via desktop sites or mobile apps.

In what is poised to become one of the country's first regulatory frameworks drawn up specifically for the blockchain industry, the CAC wants blockchain startups to compulsorily register their names, service types, industry fields, and server addresses with it. This information would become publicly available and the CAC would conduct reviews on a yearly basis.

It also stipulates that blockchain service providers in certain highly regulated fields in the country, such as news reporting, publishing, education, and the pharmaceutical industry, must also obtain licenses from relevant authorities prior to registration with the CAC.

Further, the draft rules insists service providers would not be allowed to use blockchain technology to “produce, duplicate, publish, and disseminate” information or content that is prohibited by Chinese laws.

The proposed draft has 23 articles which have already sparked reactions from industry experts who say the proposed rules could have an impact on the “supernodes” of certain blockchain networks.

Jiang Zhuo'er, founder of the BTC.TOP mining pool, posted his views on the draft over the weekend, saying:

“For example, each of the 21 supernodes of the EOS network is operated by a company or an individual. As such, they must be fully compliant [with this regulation].”

Previously, blockchain technology had been utilized to bypass China's heavy-handed internet censorship – often dubbed “The Great Firewall”. For example, as part of the #Metoo movement and a recent pharmaceutical scandal in the country, individuals have posted information on the ethereum blockchain where it cannot be censored.

Another proposed article in the draft also requires blockchain information service providers to enforce know your customer (KYC) measures by gathering users' national identification numbers or mobile phone numbers.

“Service providers must store the logs and content published by users of their blockchain services for six months and provide this information to law enforcement when required,” the draft policy states.

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