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China to Enforce Regulation for Blockchain Companies in February

Last Updated September 23, 2020 12:20 PM
Alex T
Last Updated September 23, 2020 12:20 PM
By Alex T

China’s internet regulator, the Cyberspace Administration of China (CAC) in a detailed document outlined a final draft of regulations concerning cryptocurrency and blockchain companies. The rules will come into effect starting February 19, and provide a set of guidelines that blockchain companies are required to follow.

According to the CAC’s director:

The Regulations on the Management of Blockchain Information Services has been reviewed and approved by the Office of the Internet Information Office of the State Council and is hereby
promulgated and will be implemented as of February 15, 2019.

According to the final draft, the State Internet Information Office is responsible for blockchain regulations at a national level, apart from state or province-specific authorities who oversee the regulations in respective states.

China previously cracked down on ICO’s by banning them in 2017, along with banning domestic cryptocurrency exchanges, dealing a huge blow to local exchanges such as BTCC.

User Surveillance

Some of the fleeting changes brought by the regulations include companies to record and log user activity, along with maintaining backups for at least six months. The data recorded should be handed over to the authorities when requested.

Moreover, the rules require companies to verify users based on their national ID and phone number

Registering Companies With Authorities

Apart from this, blockchain service providers are required to register with authorities within ten days of providing the service. This process is done through a ‘Blockchain Information Service Management System’. A pivot or a change made by the service provider requires going through the procedure once again within five days.

Once the filing process is complete, authorities will assess and enter the company into records within twenty days, reverting with a filing number. Companies are required to publically display their record number(eg: website, application mobile app)

Companies that develop new products are required to report the same to authorities to undergo “safety assessment in accordance with relevant regulations”.

Companies are also required to implement necessary changes in order to issue warnings to users, restrict and close accounts. Users who violate administrative laws and regulations should be reported to relevant authorities.

The extensive document, encompassing twenty-four articles explicitly states that users are not supposed to use blockchain centric services to engage in illegal activities.

Blockchain information service providers and users shall not use blockchain information services to engage in activities prohibited by laws and administrative regulations that endanger national security, disrupt social order, and infringe on the legitimate rights and interests of others

Companies are also required to set up a robust system for managing complaints and address them in a timely manner.

Periodic Inspections and Robust Security

Authorities under the central government will be conducting periodic inspections. Blockchain companies are required to maintain correspondence with authorities through the blockchain service portal and provide relevant information as requested.

The rules also dictate the requirement of strong security standards. This is perhaps because of the large amount of money lost owing to exchanges being hacked.

Any company found to be in breach of the stipulated rules will be required to amend their offering, and their service will be suspended until the issue is rectified. The rules also outline fines ranging from 5,000 yuan to 30,000 yuan. Apart from this, criminal prosecution is also stated as a possibility wherever necessary.


Given China’s stance on censorship, it is not a surprise that the same applies within the blockchain niche. Blockchain service providers are required to be equipped with necessary procedures to tackle content and other information that is unintended for the public. Apart from this, providers are required to formulate a set of rules and conventions, convey them to users and make sure they are followed.

For information content prohibited by laws and administrative regulations, they shall have immediate and emergency response capabilities for their release, recording, storage and dissemination. It should conform to the relevant national standards.

Overall, the regulations seem fairly stringent. It is yet to be seen how they affect companies within China. Given the crackdown in 2017, these regulations are not a surprise. However, they might have an impact on neighboring India, which is about to announce cryptocurrency regulations soon.

Featured image from Shutterstock.