Blockchain Regulation in China

I’ve been interested in issues around censorship and freedom of speech & expression for a long time - since my first brush with On Liberty by John Stuart Mill. This interest grew into a concern with how governments around the world seek to control access to information and ideas that directly undermine their hold on power or challenge the version of morality they use to keep populations compliant (which led to me occasionally straying into outright activism to discourage my own government from the idiocy of ‘filtering the internet’).

Lots of countries are party to this manipulation “for our own good’’. Unsurprisingly, this has meant a large (but not exclusive) focus on the actions, laws and regulations of China . This isn’t to say other countries don’t do their share or try to at least. But watching the erasure (as @KrNel discussed not so long ago) of events regarding Tiananmen Square, Tibet, Xinjian and a whole generation’s worth of dissent from open discourse in China has had an effect on me.

More recently, my involvement in a certain Chinese blockchain-based social networking project has given me a little more inside perspective on how on the breadth of what is potentially censorable. It’s also given me an idea of how seriously social media companies take the prospect of coming to the attention of the authorities for allowing the spread of content that expresses the wrong political or social message.

Suppression of events because they are inconvenient to the ruling party’s historical narrative, and the deliberate repression of diversity of political and social opinions are not things I expect every blockchain or every blockchain-related dApp or project to be against. But I did expect to hear a little more concern from various communities at the prospect of the new Chinese Blockchain Information Service Management Regulations - 区块链信息服务管理规定.

What are these regulations? Rather than bore you with the whole lot, I’ll highlight some of what seems relevant. (I say “seems” because I’ve yet to find a good translation of these regulations and have had to reconstruct this using google translate and my extremely cursory linguistic skills).

Article 2: The operation of blockchain information services within the territory of the People's Republic of China shall comply with these Provisions. Where there are other provisions in laws and administrative regulations, the provisions shall be followed.
The blockchain information service referred to in these Provisions refers to the provision of information services to the public through Internet sites and applications based on blockchain technology or systems.
The blockchain information service provider referred to in these Provisions refers to the entity or node that provides the blockchain information service to the public and the organization or organization that provides technical support for the blockchain information service. The blockchain information service user referred to in these Provisions is an organization or individual that uses blockchain information services.

A lot of the key questions that could cause uncertainty are around who the regulations actually apply to. I’m inclined to think that a plausible reading is that the government intends them to apply to both dApp providers and block producers that wish to operate within China, but am happy to hear alternative views.

Article 8: The blockchain information service provider shall, in accordance with the provisions of the "Network Security Law of the People's Republic of China", conduct real identity information certification based on the organization code, identity card number or mobile phone number for the blockchain information service users. If the user does not perform real identity authentication, the blockchain information service provider shall not provide related services.

No anonymous accounts for users, no exceptions.

Article 10: 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, and may not use blockchain information services to publish and disseminate information content prohibited by laws and administrative regulations.

Anyone who has paid attention at all to how WeChat and Weibo operate know that there is a considerable list of content that is prohibited by various laws. Organisations and publications such as the China Digital Times, GreatFire.org and Pen America all have great resources on the nature and extent of these practices - go look them up.

Articles 11-18: Mainly innocuous and banal regulations except for...

Article 16: The blockchain information service provider shall take measures such as warning, restriction, and account closure for users of blockchain information services that violate laws, administrative regulations and service agreements, and illegal information content. Take appropriate measures in time to prevent information from spreading, keep relevant records, and report to relevant authorities.

Again, this places obligations on providers to restrict the spread of certain information.

Most of the rest describes the various fines and penalties for non-compliance:

Article 19: Blockchain information service providers that violate Articles 5, 6, 7, 9, 10, 11, 13, 15 and 18 will be given a warning by the relevant authority, and shall be ordered to make corrections within a time limit. The relevant business shall be suspended before the correction.

Refusal of correction leads to fines and possible criminal prosecution.

Article 20: If the blockchain information service provider violates the provisions of Articles 8 and 16 of these Provisions, the Internet Information Office of the State, the province, the autonomous region or the municipality directly under the Central Government shall, in accordance with the duties, follow the provisions of the "Network Security Law of the People's Republic of China" will act accordingly.

FYI, the Network Security Law of the People's Republic of China details the fines applicable for network operators who do not make users provide identity information or allow the spread of information “for which transmission and publication are prohibited”, and refuse to comply:

A fine of between RMB 50,000 and 500,000 shall be levied, and the relevant competent department may order a temporary suspension of operations, a suspension of business for corrections, closing down of websites, cancellation of relevant operations permits, or cancellation of business licenses; persons who are directly in charge and other directly responsible personnel shall be fined between RMB 10,000 and 100,000.

Article 21 details what can happen to a blockchain information service provider if they violate the provisions of Article 10 by producing, copying, publishing or disseminating information content prohibited by laws and administrative regulations. (Fines of 20,000 - 30,000 yuan and possible criminal prosecution).

Article 24 These Provisions shall come into force on February 15, 2019.

I think it unlikely that anything outwardly noteworthy will happen on the 15th, but I gues time will tell.

Good thing Steemit, and the Steem blockchain aren’t subject to these regulations, wouldn’t you agree?

In all seriousness, I think there is an important conversation to be had, that either hasn’t occurred, or has only happened in private. Can networks and dapps that refuse to toe the party line survive if Chinese users (and their money) are cut off? Is compliance with Chinese censorship itself a source of risk in that it could lead to a PR backlash or attention from legislators, as it did for Google’s Dragonflysearch engine?

It certainly seems that we are entering a new era that will test people’s commitment to free speech, as well as the ability of blockchain projects to circumvent state censorship.

Whatever the case, I doubt this is the last time we will be discussing these sort of regulations.

_{Public domain image of the National People's Congress via Wikimedia Commons}