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China proposes law to de-anonymise blockchain users and censor content

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It's not yet clear how it will be enforced, but the law stands to impact coins in different ways.

In its first laws proposed specifically for blockchain, China is considering requiring its users to de-anonymise and for blockchain platforms to censor materials when requested, reports the South China Morning Post.

Specifically, the proposed rules would require companies and entities that operate in China and provide blockchain-based services to register users with their real names and national identification card numbers, to censor content that's judged to pose a threat to national security, to store user data and to allow inspection by authorities.

The Cyberspace Administration of China published the draft regulations on its website on Friday for public consultation until 2 November, but it is not clear when the rules will come into effect.

The implications

These laws sound like a direct response to the tendency of Chinese blockchain users to immutably and anonymously store information on public blockchains.

One example is the activist who in April posted an open letter describing the alleged cover-up of sexual harassment at one of China's top universities. A more recently example is the investigative journalists who posted a story about China's ongoing vaccine scandals.

Both stories were posted to the Ethereum blockchain, and so are, as far as anyone knows, immutably and permanently available there for the foreseeable future.

These laws cannot necessarily be enforced on decentralised networks like Ethereum, and so might need to be coupled with additional laws that ban the use of decentralised blockchains in China.

It's less/more problematic for centralised projects like EOS, whose top block producers are all in China and can be pressured into censoring offending transactions or turning over users. The ability to control the EOS blockchain where needed might be why China's top blockchain authority has been relentlessly endorsing EOS.

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Bitcoin might also be affected. The vast majority of bitcoin's hashing power is in China, and if it really wanted to do so, China could severely impact the bitcoin blockchain. It couldn't destroy it per se, or rewrite bitcoin's blockchain history, but it could seize the majority of bitcoin's hashing power and start preferentially including and excluding certain new transactions and blocks, with the functional end result of bitcoin becoming worthless.

The feasibility of the laws has been criticised, with Beijing-based lawyer Xu Kai writing in an online column that the new rules don't address the fact that existing blockchain data is largely immutable and don't give much guidance to the projects that might not be able to comply with the requests even if they wanted to.

NEO, VeChain Thor and EOS are among the most prominent China-based cryptocurrencies (or Hong Kong, technically, in the case of EOS), and so might find themselves between a rock and a hard place.

Or perhaps, like China's crypto exchanges, these projects will by necessity spread around the world and get even stronger.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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