China requires blockchain-based information service providers to register users using real names, censor postings and store user data

Chinese users will have to register their real names before they can use online information services based on blockchain, in the first set of rules specifically targeting the technology behind digital currencies like bitcoin that is known for providing anonymity for users.

Under proposed new rules, companies and entities operating in China that provide blockchain-based information services will have to ask users to register their real names and national identification card numbers, censor content deemed to pose a threat to national security and store user data to allow inspection by authorities.

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

The latest rules come after an activist in China published an open letter in April about an alleged cover-up of sexual harassment at a top university more than two decades ago on the ethereum blockchain, after the post attracted censors on social media platforms such as WeChat and Weibo. The anonymous poster attached the letter to an ether transaction to himself, in a move similar to leaving a note in a bank transfer. But since all transaction records are public on ethereum, the letter can be read by anyone.

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One of the key issues that the new rules did not address is that blockchain is a technology in which data is not changeable or erasable, which runs contrary to Chinese laws governing user data, Beijing-based lawyer Xu Kai wrote in an online column. The new rules also lack enforcement procedures to protect the rights of blockchain platforms, Xu noted.

Social media platforms powered by blockchain typically allow users to post in anonymity, without a centralised entity controlling their data. One popular example is US-based start-up Steemit, where users can obtain tradeable tokens for posting, discovering and commenting on content.

There is not yet a similar service taking off in China. Matters, a Chinese-language, blockchain-based version of Reddit based in Hong Kong, is currently invitation-only and under testing.

China has already put in place regulations that require real-name registration for online services from social networking apps to online discussion forums. The latest rules targeting blockchain media platforms are in line with existing regulations, which came into force after Beijing implemented a sweeping cybersecurity law in 2017 that has raised privacy concerns.

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A new set of regulations released earlier this month gives public security authorities the power to enter premises of all companies that provide internet services and inspect and copy data relevant to cybersecurity.

Last September, China’s central bank published a document banning cryptocurrency trading and crowd fundraising activities involving digital tokens. In August this year, the top internet watchdog shut down numerous blockchain and cryptocurrency-focused news accounts on the WeChat social app, citing regulations on online content providers.