Blockchain Regulations in China Raise Censorship Concerns Among Industry Leaders

China's new regulations require users to register for blockchain services using their real names and government IDs in an effort to discourage anonymity.
Susan Fourtané

China's central government has recently announced that users who want to register for blockchain services must do it using their official names and IDs. The measure aims to discourage blockchain anonymity. 


The Cyberspace Administration of China, which is the country's Internet regulator, has recently released a draft of a policy requiring blockchain users to remove illegal information quickly before it spreads among users. Blockchain services will also be required to retain backups of user data for a period of six months. 

"Due to the broad language used in this draft policy, anything remotely blockchain is essentially subject to compliance considerations, not just cryptocurrencies and tokens," says to Interesting Engineering Fran Strajnar, CEO and co-founder of Brave New Coin, a leading data and research company focused on the Blockchain and Cryptographic Assets industry commenting on the recent blockchain regulation in China.

"It's interesting that this came from Cyberspace Administration of China (CAC)," Fran Strajnar says. "It may be portentous of things to come, as the CAC is in-charge of the social-credit scoring system. The PBOC will undoubtedly release its own centralized cryptocurrency --a Digital Yuan-- and combine it with their social scoring system. The future is going to be decentralized unstoppable technology versus ever increasingly censored solutions." 

Regulation of cryptocurrency around the world

However, when news like China's new regulations for Blockchain users come into light, it's a good idea to have a look at what's happening in the rest of the world within the regulatory framework for cryptocurrencies to get a broader idea of where we are standing. 

The Regulation of Cryptocurrency Around the World full report published by the U.S. Law Library of Congress in June 2018, details the current position of each country. Some countries' position tend to warn consumers that using virtual currencies have risks as they operate in a legally unregulated virtual system and there are no proper rules on liability, guarantee, and compensation that would protect the interests of consumers in the event of abuse. 

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The Regulatory Framework for Cryptocurrencies map created by the Law Library of Congress as part of the report shows the application of tax laws, anti-money laundering, and anti-terrorism financing laws.

According to the report, China's central bank, the People's Bank of China (PBOC), has been conducting a study of digital currency for over three years, and has set up an Institute of Digital Money within the PBOC.

The China part of the report says that Zhou Xiaochuan, the then governor of the PBOC, addressed the regulatory status of virtual currencies in a press conference held during the annual National People's Congress session in March 2018.  

Blockchain regulations in China raise censorship concerns among industry leaders 

Requiring blockchain users to register with real names and government IDs remove anonymity, which has been a key long promise of blockchain technology. 

"Privacy is and always has been one of the greatest values of cryptocurrencies," says Jake Choi, CMO at Fantom, the world's first DAG based smart contract platform commenting on the news on China's regulations for Blockchain users.

"Bitcoin, and the vast array of cryptocurrencies in the market today, were created to provide users with a decentralized monetary framework that enables users to make transactions while maintaining their privacy and shifting the power away from central authorities. China's new regulation strips people of their right to anonymity and as industry professionals, it's our duty to help users reclaim their privacy while still rising standards around security and user-friendliness. To do so, we can start by creating better methods of KYC," Jake Choi says. 

According to Beijing-based lawyer Xu Kai, one of the key issues that the new rules don't seem to address is that Blockchain is a technology in which data is not changeable or erasable. This contradicts the Chinese laws governing user data. The new regulations also lack enforcement procedures to protect the rights of Blockchain platforms, Xu Kai noted. 

"It is unfortunate to learn of China's increasing grip on distributed ledger technology," said Rafael Delfin, Head of Research of Brave New Coin. Technically, a country cannot strip privacy technology from a blockchain protocol but they can control the access points, such as exchanges, to crypto assets, which is what this latest Chinese regulation is proposing. Hopefully, the community will keep finding ways to circumvent such measures. While we applaud the Chinese government's efforts to prevent consumer abuse, this type of privacy restricting regulations pose a threat to any Chinese activist and citizen that is critical to their government."

Meanwhile in China, what do people think about crypto and blockchain? 


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