Source: People's Post and Telegraph , original title "Blockchain: How to Fill the" Blank "of Legal Supervision? 》
Author: China Internet Information Communication Institute of Legal Research Center Li Yawen
Nowadays, taking blockchain as an important breakthrough in independent innovation of core technology, accelerating the development of blockchain technology and industrial innovation has become a hot topic for everyone's attention. There is no doubt that the blockchain will bring new opportunities for the development of next-generation information technology and trigger a new round of technological innovation and industrial change. Accompanying it is the legal gap and regulatory dilemma brought about by the development and application of new technologies and new business. How to find a balance between the regulatory gap and excessive regulation has become a difficult problem for legislators and law enforcement.
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Blockchain concept, characteristics, application development
On November 1, 2008, the author signed Satoshi Nakamoto published an article entitled "Bitcoin: A Peer-to-Peer Electronic Cash System", explaining an electronic transaction system that does not rely on third parties-by using Peer-to-peer network technology solution to solve the double spending problem. In February 2019, the Organization for Economic Cooperation and Development (OECD) released the "Blockchain Getting Started Guide", which defines "blockchain" as "the distribution of shared transaction information between parties in the network that is not controlled by a single central agency A type of ledger, which records and stores all transaction information between users in chronological order. All users (nodes) on the network have the same copy of information, not unique to a single institution (such as a bank) that controls the distributed ledger. "As a whole, the blockchain can be simply summarized as an intelligent peer-to-peer network that recognizes, disseminates, and records information through a distributed database.
This disruptive technology has special properties that distinguish it from other technologies. In June 2017, the "Blockchain Development Potential Report" released by the World Economic Forum summarized the characteristics of blockchain technology into the following points: distributed, not centralized; open, not hidden; inclusive , Not exclusive; immutable, immutable; and secure. These characteristics make the blockchain technology quickly form a reliable new computing paradigm and collaboration model, and quickly integrate and change application scenarios and operating rules in many industries.
As of August 2019, the cumulative investment and financing amount of the global blockchain industry reached 10.369 billion US dollars. From the first birth of the concept of the underlying technology of the blockchain to the vigorous development of industrial applications, the blockchain has only gone through a 10-year journey. In 2009, the first Bitcoin network, the Genesis Block, was born. With the birth of Bitcoin mining factories, Bitcoin exchanges, and other cryptocurrencies, all sectors of the community have gradually become "blockchain" and its underlying technology. Pay great attention. In 2014, Vitaric Butrin published an article entitled "Ethereum: A Next-Generation Cryptocurrency and Decentralized Application Platform", and the emergence of related decentralized applications such as Ethereum and smart contracts, will The application of block chain has been extended from the currency system to the ownership certification, bond registration, transfer and other property authentication and transfer security management, which has further enriched the application space of block chain technology. At the beginning of 2015, the proportion of strategic investment in the global blockchain market led by the United States began to increase, and the number of patent applications rose by 3000%. In 2016, due to the rapid development of blockchain technology, the rapid popularization of concepts, and the unprecedented rise in market conditions, the number of blockchain companies has exploded, increasing by more than 250% for two consecutive years; 2017-2018 was the blockchain During the most active period of industrial investment and financing, blockchain technology began to land, related commercial projects and products have emerged, and the regulatory gap and legal risks brought by the rapid development of industrial applications have gradually become prominent, which has drawn great attention from governments around the world.
Review of foreign blockchain policies and laws
From the perspective of practice, the development positioning, development direction, and development stage of blockchain in different countries are different. Therefore, around the blockchain and its related applications, governments of various countries encourage technological development and policy and legal supervision with different focuses. Most countries attach great importance to the application of blockchain technology in the real economy. At the same time, most countries hold a "tolerant and prudent" regulatory attitude towards the beginning of large-scale "high-risk" application areas such as cryptocurrencies and ICOs.
1. Issue the national strategy for the development of the blockchain industry
It has become an important battlefield for international competition in the era of digital economy. Facing the development opportunities brought by the blockchain, some countries have carried out strategic layouts and introduced policies and regulations. While clarifying the development direction of the blockchain technology, they have given appropriate policy preferences. In March 2019, Australia announced the National Blockchain Road-map, strengthening the supervision and guidance, skill training and capacity building of the blockchain industry, increasing industrial investment and strengthening international cooperation Enhance industrial competitiveness, integrate blockchain into government and financial sectors, accelerate government digital transformation, and ensure that Australia maintains a leading position in this technology field. In August 2019, Germany issued a blockchain strategy, which clarified action measures in five major areas, including ensuring stability and stimulating innovation in the financial field; supporting technological innovation projects and application experiments; formulating a clear and reliable investment framework; strengthening digital administrative services To spread and popularize the relevant information and knowledge of the blockchain, strengthen related education, training and cooperation, hoping to maintain and expand Germany's leading edge in blockchain technology, make use of the opportunities brought by blockchain technology, and tap it to promote the economy The potential of digital transformation of society. In addition, South Korea, the Netherlands, Cyprus, the United Arab Emirates, Malta and other countries have also formulated overall blockchain development strategies to actively promote industrial innovation and development.
2. Different regulatory attitudes towards virtual currencies
As the starting point and hotspot of the development of blockchain technology, virtual currencies have attracted great attention from governments of various countries. At present, the following major directions exist in the regulatory level: First, the legal status of virtual currencies is denied. If the Indian Ministry of Finance has explicitly stated that it does not recognize cryptocurrencies as fiat currencies, the Indian Government Parliament has announced that it has taken all necessary measures to prevent virtual assets used to finance criminal activities and terrorism, and does not allow virtual currencies to be part of the payment system. The Central Bank of India has banned banks in the country from servicing crypto exchanges. The second is not to recognize virtual currency as legal currency, but to treat it as other legal "objects." For example, Brazil considers virtual currency as "commodity", New Zealand regards it as "securities", Norway regards it as "assets", and the UK regards it as "foreign currency" and "private assets", and their transactions are subject to corresponding taxes Payment of fees and other requirements. The third is to recognize the legal status of virtual currencies and make regulations on trading institutions and processes. For example, the Japanese government revised the "Fund Closing Algorithm" to recognize Bitcoin as a legal payment method and set a series of standards and rules for exchanges. On the basis of recognizing the legal status of virtual currencies, South Korea requires that its transactions be authenticated by real names, and foreigners, minors, and public officials are not allowed to participate in transactions. Thailand requires all cryptocurrency market participants to register with the SEC within 90 days of the effective date of the regulation.Germany uses digital currency to purchase goods or services as a payment method, and Switzerland's Zug has become the first in the world to allow Cities using Bitcoin in public services.
3. Be prudent with regard to initial coin offering financing (ICO)
The concept of ICO is derived from the initial public offering of the stock market, which refers to the act of financing entities to raise bitcoin, ether, and other virtual currencies from investors through the illegal sale and circulation of tokens. Regarding the supervision of ICOs, there are currently the following directions at the regulatory level: Firstly, ICOs are completely prohibited through legislation and law enforcement activities. For example, in September 2017, the People's Bank of China and other seven ministries and commissions jointly issued the "Announcement on Preventing the Financing of Token Issuance Financing" and found that ICO activities were suspected of illegal criminal activities such as illegal fundraising, illegal issuance of securities, and illegal sale of token tickets. At the same time, the Korean Financial Services Commission determined that ICOs violated the Capital Market Law, and prohibited domestic companies from participating in ICOs. And severe penalties will be imposed on those involved in the ICO. The second is to adopt a case evaluation model to determine whether it is restricted by relevant legislation such as securities law. For example, in July 2017, the U.S. Securities and Exchange Commission issued the "Investor Announcement: Initial Token Issuance" to determine the actual nature of the virtual currency or token issued or sold based on the actual situation of each ICO. If it is a security, the ICO is subject to the "Federal Under the Securities Act. In February 2018, the Swiss Financial Market Supervision Authority issued the "ICO Guidelines", which divided tokens into three types: payment tokens, functional tokens, and asset tokens. Depending on the potential purpose of the token and whether it can be traded Or the specific circumstances of individual cases such as transfer or transfer, to determine whether financial market laws and regulations are applicable to ICOs. The third is to clarify the legitimacy of ICOs and establish regulatory mechanisms such as ICO registration. In April 2018, the Cabinet of Malta's Virtual Financial Assets Act, the Malta Digital Innovation Authority Act and the Technology Arrangements and Services Act provide a regulatory framework for cryptocurrencies, ICOs, and blockchain-related technologies. In June 2018, the Thailand Securities and Exchange Commission Department announced the details of ICO supervision, and made detailed regulations on ICO access conditions, annual fees and registered capital of the exchange. In April 2019, the French government passed the Financial Law to initially construct a legal framework for cryptocurrency service providers and initial token issuance, including specific screening and management requirements for local crypto projects, and taxation to adapt to the special characteristics of crypto assets And accounting framework. In addition, countries such as Japan, the United Kingdom, and Singapore have issued “high fraud risk” warnings on the basis of allowing ICOs, reminding investors to be cautious in handling cryptocurrency investment, and clarifying that ICOs must comply with anti-money laundering, prohibition of financing terrorism, and fiscal and tax laws , Banking law, securities trading, and collective investment legislation.
4. Encourage technological innovation, first try the project first
In addition to digital currency and token issuance, the first-to-first-mover fields, blockchain technology also has great application potential at the social management level, such as electronic certification and tax audits. For such development applications, innovation is currently widely adopted in various countries. The principle of inclusive supervision, reducing prior judgment and intervention, and strengthening guidance and self-discipline: First, actively carry out pilot projects and case investigations, and strengthen concept identification and risk assessment. For example, the GSA's Emerging Citizen Technology Office uses blockchain to expedite the automated contract review; the Treasury Department organizes contractors to try to use distributed ledger technology to track and manage physical assets such as computers and mobile phones, and to explore the application of blockchain technology In supply chain management, according to the subsequent "Applicability of Blockchain in Government Applications" report, public records, budget allocation, supply chain monitoring, and government approval procedures are the most suitable areas for adopting blockchain; the Ministry of Economy, Trade and Industry of Japan Organize the assessment of the legal and technical risks of blockchain technology in the three areas of healthcare, logistics supply chain and smart property; the EU has established use case and transition program working groups, focusing on the most promising transformative blockchain use cases, The focus is on public sector applications such as identity and government services, healthcare, energy and environmental reporting. The second is to strengthen communication research and guide the rational development of the industry. For example, the European Union has successively established the Blockchain Alliance, the EU Blockchain Observation Forum, and the Blockchain Policy and Framework Conditions Working Group to strengthen experience sharing and issue discussions, research cross-technology and cross-industry issues to determine the promotion of large-scale blockchain deployment Apply the required policies, regulations, and legal conditions to improve the predictability of the legal and regulatory environment; the Ministry of Economy, Trade and Industry of Japan guides the healthy development of the blockchain through surveys, release of evaluation forms, and case evaluations; US Department of Commerce national standards and technologies The research institute and the Bureau of Science and Technology of the Ministry of Homeland Security have issued reports that provide the basis for the judgment of the applicable blockchain technology and guide the healthy and rational development of the industry; the third is to balance the cost of supervision and innovate the supervision model. In 2015, the British Financial Conduct Authority took the lead in creating and launching a “regulatory sandbox” system. By providing a “reduced version” of the real market and a “relaxed” regulatory environment, fintech companies were encouraged to protect consumer rights Test its innovative products, services, and business models in a small range of simulated markets to encourage financial innovation and prevent market risks. In June 2016, the first batch of 60 companies tested their innovative products and services in a real market under controlled conditions. After more than a year of trial operation, 90% have been launched into a wider market and 40% are testing Financing was obtained during the test or after the test. Based on the above successful experience, Hong Kong, Malaysia, Singapore, Abu Dhabi, Australia, Mauritius, Netherlands, Indonesia, Brunei, Thailand, Bahrain, Switzerland, Canada, and Arizona, USA have also issued sandbox supervision plans.
5. Public safety and personal interests still need to be balanced
The openness and immutability of blockchain technology make it face greater challenges in terms of national security protection, network system stability, information content management, and personal information protection. Some governments have pre-arranged or risk early warnings. . The first is to ensure national security through security review. In December 2017, US President Trump signed the 2018 National Defense Authorization Act, requiring the Department of Defense to lead an assessment within 180 days: potential offensive and defensive network applications of blockchain technology and other distributed database technologies; foreign forces , Extremist organizations and criminal networks' use of the technology; the use or planned use of the technology by the federal government and infrastructure networks; the vulnerability of key infrastructure networks to cyber attacks; the second is balancing the development of blockchain technology with individuals Information protection. The European Commission proposed to formulate an EU-level blockchain and distributed ledger technology strategy. One of the legal issues involved is the conflict between the General Data Protection Rule (GDPR) and blockchain technology. Germany's "National Blockchain Strategy" also proposes that the establishment of a legal framework based on the principle of technology neutrality must not tend to be beneficial or disadvantageous to blockchain technology in the context of other technologies. Blockchain technology does not need to change GDPR; on the contrary, blockchain technology needs to shape the development and use of blockchain solutions in a way that compound data protection requirements. In any area of uncertainty, consumer protection and data protection needs must be fulfilled. In these cases, existing technology solutions (hash values, anonymization, zero-knowledge proofs, etc.) should be used as default design principles and privacy specifications.
Trends of Blockchain Regulation and Suggestions on China's Blockchain Legislation Supervision
It is foreseeable that the blockchain will become one of the essential technical means for the future development of the digital economy and the construction of a new type of trust system. The establishment of its regulatory framework will directly affect the overall development of related industries and even the digital economy industry.
1. Strengthen layout research and guide rational development
At present, the development and application of blockchain technology is still in the early stages. The definition of relevant concepts, application models, potential risks, and regulatory requirements are not yet clear, and the unknown concepts will directly lead to difficulties in legal supervision and policy application. Drawing on the experience of countries and regions such as the United States, the European Union, and Japan, it is recommended that regulatory authorities and research institutions actively organize and conduct blockchain-related pilot projects and concept verifications, and conduct research and judgment on issues such as technical characteristics, development space, potential risks, and legal convergence. Make policy reserves for timely and appropriate intervention in blockchain supervision, and issue relevant recommendations and guidelines for related industries and fields that are risk-controllable and suitable for the application of blockchain, and guide the benign innovation and rationality of blockchain technology in the public and private fields. Development to create a good environment for the healthy development of the blockchain industry.
2. Tolerate prudent legislation and ensure technology advancement
On the basis of clarifying the concept and judging the risks, the regulatory issues of blockchain technology and its applications can be divided into two categories, namely, social extension issues and new issues. For the former, it is recommended to start from the perspective of existing legislation, try to incorporate relevant technology application models into the scope of existing legislation, or expand the scope of legal supervision through timely amendment of relevant legislation, such as clarifying that the use of virtual currencies still requires compliance with anti-money laundering Relevant regulations; for the latter, due to information asymmetry between industrial institutions and regulators, policy recurrences occur from time to time. For example, Thailand and South Korea ’s regulatory policies on virtual currencies and ICOs have undergone subversive changes. Therefore, for areas where risks are not yet clear, it is recommended to keep the law humble and moderately guide through policy adjustments to reserve space for industrial development and technological innovation.
3. Take control first and protect the rights and interests of all parties
The special attributes of blockchain technology such as decentralization and immutability, while ensuring authenticity, may be a cross-border data flow, information content management, network security guarantee, critical infrastructure protection, personal privacy, and user rights protection bands. Here comes the security risk. It is recommended that on the basis of China's current cyberspace legal system, further advance the construction of cybersecurity and data governance mechanisms, improve cross-border data flow, personal information protection, critical information infrastructure and data lifecycle management, and strengthen the ecological content of the blockchain Governance to protect the national public interest and the rights and interests of all parties.
4. Innovate supervision methods and promote modernization of governance capabilities
The decentralization of blockchain technology will further impact the single and centralized legal supervision model, and a more flexible, rapid and efficient supervision mechanism is urgently needed to be established. Such as sandbox supervision, security risk assessment, credit system management and leak notification, etc. At the same time, multiple parties will participate more frequently in “cooperative governance”, exerting multiple supervisory effects of self-discipline and other disciplines, and promoting the modernization of the governance system and capacity.
5. Guide technological innovation and development and seize development opportunities
The risks and regulatory uncertainty caused by the blockchain are common problems faced by legislative departments and regulatory agencies in various countries. With the rapid development of the digital economy, emerging economies and developing countries have gradually strengthened their international discourse power and influence, which has a new impact on the traditional order of the digital world. In the future, the digital economy industry based on blockchain technology will play a more important role in international competition. At present, China has raised the development of blockchain technology to unprecedented heights. In the future, it is recommended to continue to increase policy support, guide technological innovation and development, improve China's right to speak in the field of cyberspace governance, contribute to the wisdom of international cyberspace governance, and build networks. Community of Destiny in Space, sharing the fruits of digital economy and technological development.