The Chinese regulator of the Internet, the Administration of cyberspace in China(CAC) in a detailed document describes a final regulatory project regarding cryptocurrency and blockchain companies. The rules will come into effect on February 19 and will provide a set of guidelines that blockchain companies must follow.
According to the director of ACC:
The Blockchain Information Services Management Regulation has been reviewed and approved by the State Council's Bureau of Internet Information.
promulgated and will be implemented as of February 15, 2019.
According to the final draft, the National Bureau of Information on the Internet is responsible for the regulation of block chains at the national level, with the exception of the state or provincial specific authorities that oversee the regulations in the respective states.
China had already severely repressed the ICOs by banning them in 2017, as well as domestic exchanges on crypto-currencies, inflicting a blow to local exchanges such as BTCC.
Among the fugitive changes brought about by regulation, companies record and record user activity, as well as saving backups for at least six months. The recorded data must be sent to the authorities upon request.
In addition, the rules require companies to verify users based on their national identity and phone number.
Registration of companies with the authorities
Apart from this, blockchain service providers are required to register with the authorities within ten days of providing the service. This process is done through a Blockchain Information Service Management System. A pivot or a change made by the service provider requires resuming the procedure within five days.
Once the filing process is complete, the authorities will evaluate and register the company in registers within twenty days, with a filing number. Companies are required to publicly display their registration number (for example: website, mobile app application)
Companies that develop new products must inform the authorities so that they "undergo a" safety assessment in accordance with the regulations in force ".
Companies are also required to implement the necessary changes to issue warnings to users, restrict and close accounts. Users who violate administrative laws and regulations should be reported to the relevant authorities.
The comprehensive document, which includes twenty-four articles, explicitly states that users are not expected to use blockchain central services to engage in illegal activities.
Blockchain information service providers and users must 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.
Companies are also required to put in place a robust complaint handling system and process them quickly.
Periodic inspections and enhanced security
Central government authorities will carry out periodic inspections. Channel companies are required to maintain correspondence with the authorities via the service portal of the television channel and to provide relevant information upon request.
The rules also dictate the requirement of strict safety standards. This is perhaps because of the large amount of money lost because of pirated exchanges.
Any company that violates the stipulated rules will be obliged to modify its offer and its service will be suspended until the problem is corrected. The rules also provide for fines ranging from 5,000 to 30,000 yuan. Apart from this, criminal prosecution is also declared as a possibility whenever necessary.
Given China's position on censorship, it is not surprising that the same applies in the blockchain niche. Blockchain service providers must have the necessary procedures to process content and other information that is not intended for the public. Apart from this, suppliers are required to formulate a set of rules and conventions, pass them on to users and ensure that they are followed.
For the content of the information prohibited by the laws and administrative regulations, they must have immediate and urgent intervention capabilities for their dissemination, recording, storage and dissemination. It should comply with applicable national standards.
Overall, the regulation seems pretty strict. It remains to be seen how they affect companies in China. Given the crackdown in 2017, these regulations are not a surprise. However, they could have an impact on neighboring India, which is about to announce a regulation on cryptocurrency soon.
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