China Sets New Mandatory Rules for Blockchain Startups

On Friday 19 October the People’s Republic of China released a document detailing the new rules of blockchain startups in China. With blockchain increasing in popularity and as the technology continues to advance, we are seeing blockchain startups popping up all over the world. China being a major world economy and the second wealthiest nation in the world, they have their fair share of blockchain startups ready to grab a share of the market.

When it comes to blockchain in a world with financial regulations designed before the technology surfaced, we are increasingly seeing governments setting out new rules, especially authoritarian ones such as China.

The release by the Chinese government is in-depth and extensive, so for the purpose of this exercise, we will only highlight the significant rules so we can get a feel of China’s priorities and concerns when it comes to blockchain. The rules below are paraphrased.

The Rules

  • The new blockchain information service provider should fill in the “blockchain information service registration form” within 10 working days of being requested. This is 20 working days for companies in autonomous regions.
  • The Internet Information Office of the State (Chinese government internet technologies arm) will conduct an annual review of the filing required. Companies are then required to log into the system and check they are compliant.
  • Registration numbers provided by the government should be displayed in a prominent manner so their credibility can be checked by officials or consumers.
  • Any news, publishing, education, medical care, medicines and medical devices based on blockchain technology are subject to review and approval by relevant authorities.
  • Blockchain services may not be provided to engage in unlawful activities or anything that endangers national security.
  • The blockchain company should not provide services to people who can’t perform real identity authentication.
  • Six months work of back-ups should be kept on relevant user information and log files, and the authorities can ask for the information. If asked the information must be volunteered.

The release also goes into several fines that companies can expect to receive for breaking any of these rules. These fines range from 10,000 yuan (1440.65 USD) to 30,000 yuan (4321.96 USD). The rules will likely evolve as blockchain technology and applications continue to evolve, and we expect to see more counties introducing rules to maintain some control and order over the emerging technology. Hopefully, these rules will continue to be sensible and drawn up with protecting the public in mind, and not be oppressive so that it stifles creativity.

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