By The Cyberspace Administration of China (CAC), which is the Chinese internet regulator recently released a detailed whitepaper which outlines their final draft of regulations which pertain to cryptocurrency and blockchain firms.
These rules will come into effect as early as February 19th and will be the set of guidelines which blockchain firms will be required to adhere to.
As per the director of the CAC:
“The Regulations on the Management of Blockchain Information Services has been reviewed and approved by the Office of the Internet Information Office of the State Council and is hereby promulgated and will be implemented as of February 15, 2019.”
As per the final draft, the State Internet Information Office is responsible for all blockchain regulation at a national level. State or provincial authorities will oversee any regulations in respective states. As we all know, China has previously banned all ICO’s as well as cryptocurrency exchanges which dealt a massive blow to Chinese exchanges such as BTCC.
Surveillance:
One of the more notable changes made to the regulations includes the requirement of companies to record and log user activity. They also need to maintain backups of these records for up to six months.
Any data recorded will need to be handed over at any time when the authorities request them.
Furthermore, the rules also stipulate that companies need to verify all users through their national ID and phone number.
Registration With Authorities:
In addition to this, any blockchain service provider will be under the requirement to register with authorities within ten days of launching a service. The process will need to be carried out via a ‘Blockchain Information Service Management System’. Any change or business pivot made by any service provider will be required to go through the same process within a five-day window.
When the filing process has been completed, authorities assess and enter the company into their records within twenty days and after that will revert with a filing number. Following this, any companies who have successfully filed will be required to display their record number on their site or app.
Any company that develops any new products or services will also be required to report to the authorities to enter into a “safety assessment in accordance with relevant regulations”.
The document, which has extensive twenty-four articles comprising it also states that users are not to utilise blockchain services to engage in illicit activities:
“Blockchain information service providers and users shall not use blockchain information services to engage in activities prohibited by laws and administrative regulations that endanger national security, disrupt social order, and infringe on the legitimate rights and interests of others.”
Furthermore, blockchain companies will also be required to set up a robust system for complaints management and will need to address any in a timeous fashion.
Robust Security & Regular Inspections:
The authorities operating under the central government are set to carry out regular, periodic inspections. Any blockchain company will be under the requirement to maintain open correspondence with the authorities via the blockchain service portal and provide any information to them when asked to do so.
In addition to this, the CAC also dictates a requirement of robust security standards. This, of course, could in light of large amounts of funds being lost due to exchanges being hacked in the past.
Lastly, any company found to be in breach of any of the rules laid out will be under the requirement to make amends to their services with all operations being suspended until such a time where any issue is resolved. The CAC also outlies fines which will range from as little as 5000 yuan up to 30 000 yuan with criminal prosecution as a possibility should it come to that.
Censorship In The Blockchain World:
This is no surprise. We all know the Chinese government has a massive stance on censorship so why should it not apply to the blockchain arena?
Blockchain companies will be required to equip themselves with the necessary processes in order to combat any content or information which is unintended for the general populace. In addition to this, providers will need to come up with their own set of rules and regulations and be sure to convey them to their users and ensure that they are followed.
“For information content prohibited by laws and administrative regulations, they shall have immediate and emergency response capabilities for their release, recording, storage and dissemination. It should conform to the relevant national standards.”
In a nutshell, all these rules seem extremely stringent. How will the affect companies in China? We’ll have to wait and see. Let us know what your thoughts are by commenting below.
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