China was and still remains one of the key hubs of blockchain and cryptocurrency use and development. In 2015, it was among the key actors that led to the revitalization of the bitcoin price and its upward momentum that culminated two years later in the boom of 2017. The countries huge local potential is capable of moving and shaking the crypto market on its own.
The same is true for any clampdowns and regulatory moves that are equally felt throughout the crypto community. The ban on ICOs is famous for its wide-reaching effect on the markets on the global level. Today, the repercussions of the same band are still very much felt across the world when it comes to both users of cryptocurrencies and those who develop platforms in the same ecosystem.
Thanks to this, it is no wonder that the crypto world is talking about the recent development coming from the country’s almighty regulatory agencies. But now, after many months of negative news, it appears that something beneficial for the traders, investors, and developers working with cryptocurrencies and blockchain tech might be coming from Beijing.
The CAC Regulatory Draft
China’s internet censorship agency working on the country’s top level has revealed its plan on how blockchain-related service providers should operate in the country. The CAC (Cyberspace Administration of China) published its draft policy with the name of “The Regulation for Managing Blockchain Information Services”. Now, the agency is looking for feedback from the public and industry leaders before it becomes law and takes effect.
The rules will be applied to any business entity registered in China that is regarded as a provider of blockchain based information. The draft represents the first such bill in the country that is focused on the blockchain industry. In the document, CAC calls blockchain-based information service providers all nodes or entities that provide these services to the public. The same goes for both individuals and institutions that use blockchain tech through both mobile and desktop apps.
This is interesting because the wording aims to try to define the blockchain tech in its entirety as a technology that deals exclusively in information. The draft contains 23 articles that have been proposed and among them is the one that asks from the producers of blockchain services to register their venture within 10 days of beginning to offer services directly to the public.
The draft also orders any blockchain startups to register their business names, the type of service they offer, industry field in which they are active and finally the server addresses. The same base of ventures would be publicly visible and CAC could review the applicants on a yearly basis. All of this sounds very reasonable, but there are other elements of the draft that are not clear in equal measure.
The draft does not clearly state which types of startups working in the blockchain domain fall under its venture definition. Some experts in the same industry field in China state that the rules could have a big impact on the so-called supernodes that some blockchain networks utilize.
The EOS network has been used as an example, being that each of its supernodes, meaning all of 21 of them, are operated by an individual or a company. All of them have to be compliant with the CAC regulation. Similarly, the draft states that some domains of the industry, which are already highly regulated, like publishing, the pharmaceutical industry, news reporting, and education must attain regular licenses from the designated authorities before they apply to the CAC.
This means that, for example, a blockchain-based news portal has to first get the license as a media company and only then will it be allowed to register as a tech venture in this field. Naturally, having in mind the country in which takes place, where even in-game chat rooms of esports are potentially spied upon, the draft states that the blockchain tech cannot be allowed to aggregate information or any type of content that the Chinese laws prohibit. This includes the process of producing, publishing, duplicating or disseminating.
The Great Firewall and the Blockchain
Previously, some aspects of blockchain tech have been used to bypass the heavy censorship of the internet in China. This system is often referred to as the Great Firewall of China and this decentralized tech allowed for it to be overcome.
For example, recent scandals from the MeToo movement and pharmaceutical domain have reached Chinese citizens because individuals used the ethereum blockchain to carry the news. The firewall has no way to stop the same flow in this digital form. In line with this is the draft’s articles that require from blockchain service providers to use KYC measures for gathering user information. The same info will include mobile phone numbers and national ID numbers.
However, to be fair, China is not the only nation that is planning or actively introducing already the process of cryptocurrency user identification. The article states the providers have to store the content users published and their logs of the blockchain transactions for up to six months and provide the same info to law enforcement when required.
A Step Towards Crypto Recovery
There are plenty of things that many people might find problematic with this draft. It includes all the heavy-handedness of the Chinese police state and does so unapologetically. Yet, like it often occurs with China, the economic potential not just for the country but for the rest of the crypto community is huge.
Essentially, the draft, which will enter its second phase of becoming the official policy on November 2, offers a way for ICOs to come back to mainland China. This alone could kickstart the end to the bear market and return the crypto prices to a potentially huge breakthrough.
Because of this, there is plenty of reason to expect little to no resistance from the rest of the community. Instead, many will see this as a clear signal that the crypto community can get back to business on a larger scale than ever before. No amount of restrictive policy in the draft will stop it from becoming the law.