China's Internet Censor Releases Draft Rules to Regulate Blockchain Startups

The Cyberspace Administration of China, the central government's internet censor, published a draft policy on Friday called "The Regulation for Managing Blockchain Information Services" and is looking for public feedback before it can take effect.

The regulation , if enacted, would apply to any entity that is regarded as a blockchain information service provider operating in China, and would be one of the first rules specifically for governing the blockchain industry in the country.

The CAC defines in the draft that blockchain information service providers are "Entities or nodes" that offer information services to the public - meaning "Both institutions and individuals" - using blockchain technology, and via desktop sites or mobile apps.

The proposed draft orders that blockchain startups must register their names, service types, industry fields, and server addresses with the CAC. This information shall become publicly available and the CAC will conduct reviews on a yearly basis, the draft policy added.

While the CAC does not draw a clear line as to what types of blockchain startups should fall under its definition, some industry experts in China said this regulation could have an impact on supernodes of certain blockchain networks.

Further, blockchain service providers in certain highly regulated fields in the country such as news reporting, publishing, education, and pharmaceutical must also obtain licenses from relevant authorities prior to their registrations with the CAC. Also notably, service providers under the proposed rules are not allowed to use blockchain technology to "Produce, duplicate, publish, and disseminate" information or content that is prohibited by Chinese laws.

CoinDesk reported before that blockchain technology had been utilized to bypass China's internet censorship during the #Metoo movement and a recent pharmaceutical scandal in the country.

The proposed draft requires blockchain information service providers to enforce know-your-customer measures by gathering users' national identification numbers or their mobile phone numbers.

"Service providers must store the logs and content published by users of their blockchain services for six months and provide this information to law enforcement when required," the draft policy proposed.

CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.