Communist China Moves to Restrict Use of Blockchain Technology

January 13, 2019 Updated: January 13, 2019

On Jan. 10, China’s Cyberspace Administration announced regulations to manage blockchain technology, requiring registration of real names and identification. After it comes into effect on Feb. 15, violation of the rules will be punishable by fines or prison.

The Chinese authorities have been increasing scrutiny of, and imposing legislation on, the country’s hundreds of millions of internet users. The Chinese Communist Party (CCP) has built up a formidable infrastructure of internet censorship, while passing increasingly draconian cybersecurity laws to ban online political dissident and try violations.

Blockchain, or Distributed Ledger Technology (DLT), was developed as an anonymous and impartial means of recording transactions via the bitcoin virtual currency. Because it stores data in such a way that it cannot be altered, the technology poses a severe challenge for the Party’s censorship.

Chinese internet users have used blockchain to expose and distribute information about prominent scandals.

Evidence of the rape of a 19-year-old college student at the prestigious Peking University by her professor in 1995, which drove her to suicide, was brought to light this April by one of her friends. The friend’s account was defended against internet censorship using blockchain technology. Following public outrage, the professor was dismissed and disciplined.

Similarly, many Chinese users used the blockchain to expose a government department scandal that involved the vaccination of infants with fake or faulty vaccines.

The new rules governing blockchain appear to be intended to discourage more people from posting information about scandals that the authorities find embarrassing, according to Taiwan’s Central News Agency.

Real Names Required

The draft version of the blockchain regulation was released last October. The document released Jan. 10 is the final version.

According to the rule, all blockchain operators have to register with their company’s organization code, the identification of their legal personal representatives, mobile phone number, the company’s name, service type, service form, application area, and server IP address.

While in use, blockchain operators have to make sure that the content meets the government’s requests, records all users’ information, and so on.

The rule stipulates that blockchain operators have to register with the local office of the Cyberspace Administration within 10 days after launching a new service; register within 5 days of changing a service; and report to the authorities within 30 days after stopping a service.

Any blockchain operator that violates the regulations is subject to fines by the Cyberspace Administration up to the amount of 30,000 yuan ($4,450), or prison time if the transgression is deemed to be serious.

The rules surrounding blockchain operation is the latest regulation that the CCP has passed in a series of attempts to clamp down on freedom of speech in recent years.

In November 2016, the Chinese authorities published the Internet Security Law, which was implemented starting June 1, 2017.

That May, the authorities announced their Provisions for the Administration of Internet News Information Services, which was implemented the same day as the Internet Security Law.

In January 2011, CCP updated its Administration of Internet Information Services Procedures, which was first published in September 2000.

To enforce these laws and regulations, the Communist Party mobilized significant resources and personnel to monitor and control internet use in China. Media can’t post any information that the regime considers unfavorable, and individuals who do so are punished.

Use of VPNs, which allows netizens to access blocked sites such as Google, Facebook, and Twitter, is now also controlled. Two netizens reportedly were punished recently for using VPNs.

Recent reports suggest that the Party authorities, including the police, have been hacking and commandeering the Twitter accounts of prominent activists to post incriminating content in their names, fabricating evidence against them that could be used in court.

Leo Timm contributed to this report.