New Regulations that Chinese Blockchain Businesses Have to Follow
Legal Nodes Team
On January 10, 2019, the Chinese Office of the Central Cyberspace Affairs Commission has issued an official statement, saying that new “Regulations on the Management of Blockchain Information Services” have been developed by the National Internet Information Office of the People's Republic of China and will come into effect on February 15, 2019.
In its report, the Commission acknowledges opportunities that blockchain technology opens for economic development, yet also security risks that come with it.
From now on, all blockchain service providers, operating within the territory of the People's Republic of China, will be obliged to comply with these Regulations, or have legal actions taken against them (warnings, fines up to 30,000 yuan, or penal sanctions as set forth in Chinese criminal legislation).
Among other, the Regulations impose the following duties on every blockchain service provider (defined as “an entity or node that provides blockchain information services to the public, and the organization that provides technical support for the blockchain information services”):
1. Implementation of reasonable measures of cybersecurity, improvement of registration, approval procedures, emergency systems, and information processing (articles 5 and 6), as well as warnings, restrictions and account suspensions for users (article 16);
2. User verification, based on organization code, personal ID number and mobile phone (article 8);
3. Filing requirements: service providers have to file a form to the NIIO within 10 days from the date of providing the services, and within 5 days should they make changes to the services. Moreover, should the service provider terminate the provision of services, the form has to be filed 30 days in advance (article 11). Upon receiving a record number, it has to be placed on the service provider`s website (article 13).
In addition, Regulations also compel already existing service providers to complete the relevant formalities in accordance with these Provisions within 20 working days from the date of their entry to the legal force.
And even though Chinese Regulations for blockchain businesses seem somewhat harsh and mostly aimed at safeguarding national security (interestingly enough, national security and social public interests protection come before rights and interests protection of the citizens and legal entities in article 1 of the Regulations), they are not completely grim. Article 4 encourages blockchain businesses to strengthen industry self-discipline and industry standards, urging blockchain information service providers to provide services according to the law, which may ultimately lead to the emergence of a favourable business microclimate in the industry.
After all, China remains one of the very few countries to issue blockchain-specific regulations, but we should definitely expect more to come in the upcoming year.
In our earlier article, you can read about the taxation of cryptocurrency-related activities in the United Kingdom.
Disclaimer: the information in this article is provided for informational purposes only. You should not construe any such information as legal, tax, investment, financial, or other advice.
Nik Kliapets, Legal Counsel at Legal Nodes