Editor's note: The original title was "Blockchain's Legalization Supervision Needs Great Wisdom", this article first appeared in "People's Forum"
[Abstract] The trend of "gaseous" blockchain has challenged the government's ability to supervise. This disruptive innovation has impacted existing rules and market order, and has aggravated international competition and challenges. In this regard, we should abandon the highly volatile policies and sports enforcement, and consider introducing a regulatory sandbox mechanism to help regulators play a constructive role in innovative supervision; focus on the leading and promoting role of scientific legislation in blockchain supervision and governance ; Focus on top-level design and industry self-discipline; strictly enforce the spirit of the rule of law, and make supervision and risk treatment legal.
On the afternoon of October 24, 2019, the Political Bureau of the Central Committee of the Communist Party of China conducted the eighteenth collective study on the current status and trends of blockchain technology development. General Secretary Xi Jinping emphasized when conducting the study, "The integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation. Blockchain should be used as an important breakthrough in independent innovation of core technology …". This collective study pointed out an important development direction for the development of China's blockchain industry. Blockchain technology has important strategic significance for China, and there are also some risks. It is necessary to vigorously regulate development and build a solid foundation for the improvement of China's blockchain technology competitiveness.
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Blockchain is a great innovation that has appeared in the field of Internet and information technology in recent years, and has great application value.
Blockchain is a combination of all transaction information within a certain time to form an information block, this information block is called a block. At the same time, each block is time-stamped, and the blocks are linked in chronological order to form a chain that can be verified with each other, forming a block chain. Blockchain information can be traced back, and the cost of tampering is extremely high, so it has high credibility. It has great application value in areas where credit is highly absent, such as the creation and transfer of digital assets, data confirmation, bills, securities, deposit certificates, or anti-counterfeiting traceability of some famous products.
Specifically, the applications based on blockchain technology generally include: First, the creation, transfer, cross-border payments and transactions of digital assets (non-monetary assets that exist in the form of electronic data and have market prices, such as Bitcoin) . Among them, Bitcoin is the first mature and large-scale application of the blockchain. The second is the deposit and confirmation of off-chain assets, such as the recording of real estate information on the blockchain, and then the confirmation of copyright. At present, some countries have tried to register land property rights on the blockchain. Third, smart contracts based on blockchain platforms (such as Ethereum) control data access, reach certain transactions, and automatically execute contracts without the need for third party intervention. For example, buyer A purchases goods online and wants to pay after seller B ships, then A can create a smart contract, and set the contract to automatically query B's logistics data in SF through the program, and confirm that the purchased goods are sent to A's address After that, the contract automatically transfers the pre-frozen payment to B. At this time, third-party secured transaction institutions such as Alipay were replaced by smart contracts. In addition, with the rapid development of blockchain technology and the continuous upgrade of social application requirements, there will be multiple types of integration scenarios. Blockchain is currently divided into public and alliance chains. The former is that any institution or individual can freely join or withdraw from the blockchain network node (such as the Bitcoin blockchain), and the block information is made public on the entire network; the latter is an authorized institution or individual who can join. Blocks Information is only available internally.
Blockchain, as a great innovation in the field of Internet and information technology, has received the attention of many countries, institutions and individuals in recent years. In addition to the developed countries with large economies such as the United States and Japan, countries and regions such as Singapore and Gibraltar have also emphasized the importance of blockchain technology at the national level. However, when the technology promotes the transformation of the information Internet to the value Internet, it may affect or even challenge the current regulatory model and system in many industrial fields, especially the concentration of blockchain risk in financial-related fields, which has attracted the attention of financial regulatory agencies in various countries.
Blockchain's challenges to regulation are reflected in: regulatory capabilities, the regulatory thinking and methods inherent in traditional regulators, and existing rules and market order.
First of all, the format characteristics of the blockchain challenge the regulatory capabilities. Drawing on the image classification of scholars, traditional financial institutions have a "solid form", for example, they can show customers their strong strength and credit by seeing and touching bank buildings. The financial industry supported by innovative technology mostly has "liquidity" characteristics, such as payment mobility, currency digitization, and electronicization. The data or information in it is as "liquid" and flows in various financial accounts. Financial products or digital assets based on blockchain technology can break through national borders and send peer-to-peer via arbitrary infinitely generated public key addresses. They do not have the controllable boundaries of financial accounts and break through inherent regulatory barriers. This kind of asset diffuses around the world, and flows like air. Therefore, assets with blockchain as the underlying technology tend to have "gaseous" characteristics, which brings challenges to traditional financial supervision methods.
In traditional financial services, accounts under a centralized mechanism have clear national boundaries. Supervisors have built "dams" based on the bank account model to monitor the financial industry within their control. Digital assets supported by blockchain technology can be directly paid or sent point-to-point, and clearing and settlement can be completed simultaneously. This kind of asset circulation and transfer no longer requires traditional accounts, breaking through national borders and inherent financial supervision methods.
Secondly, the "gaseous" financial business format poses a huge challenge to traditional supervisors' inherent thinking and methods of supervision. For example, the sponsor of an overseas blockchain project uses ICO (Chinese meaning initial coin offering, which is similar in form to IPO, that is, an initial public offering) to finance Chinese citizens, or provides transactions to Chinese citizens on overseas virtual currency platforms. Services without providing any user identification (KYC) and anti-money laundering measures, the Chinese government has obstacles to the regulation and regulation of such overseas businesses. Overseas law enforcement involves issues such as diplomatic coordination and judicial extradition, which are costly. There is a trend of cross-border transmission of financial risks in the "gaseous" blockchain industry. There is currently no unified answer on how to overcome these difficulties.
Third, this disruptive innovation has impacted existing rules and market order. Through innovation, some emerging blockchain companies have broken the leading position of some leading companies in certain fields and the existing competitive landscape. In the past four or five years, a number of new technology upstarts and the accumulation of strong capital have been rapidly emerging in the field of blockchain, which is changing people's inherent understanding of currency, asset forms, or investment and financing methods. In the course of industry development, the old order is being broken, but new rules have not yet been established. Therefore, competition within the industry is often very confusing, without rules, or even without a bottom line.
For example, in the rivers and lakes of virtual currency transactions, there is an undercurrent, all kinds of suspected violations of laws and regulations are emerging, and even pyramid schemes that fake the name of the blockchain appear. The formal opening of an exchange in China requires rigorous approval by regulatory authorities. But in the field of virtual currency trading, as long as the relevant institutions and individuals have strong capabilities, they can basically open exchanges in many countries or regions and provide trading services to the people of most countries in the world, including China. For the criminal behavior of the securities market, the law usually has a clear definition, such as insider trading or market manipulation and other related securities criminal behaviors. In the past few decades, the existing rule of law and supervision methods have basically coped with freely. However, in the virtual currency trading market, there are basically no rules and no formal laws. Some institutions or individuals take the opportunity to chase regulatory arbitrage in a chaotic order.
At present, the further mature application of blockchain technology has intensified international competition and challenges in this field. In June 2019, Calibra, an affiliate of the US Internet giant Facebook, released a white paper on the Libra (Libra Coin) project, officially announcing the stable coin Libra plan based on blockchain technology. Libra plans to start with “Building a simple, borderless currency and financial infrastructure for billions of people around the world ’s 1.7 billion people who have no access to the financial system and cannot enjoy traditional banking financial services” In 2020, a low-volatility cryptocurrency and smart contract platform will be launched with assets such as a basket of currency deposits and short-term government bonds as collateral. As a super-sovereign currency in the future, Libra may directly replace the fiat currencies of some countries. In the future, it may even affect the monetary policies and financial stability of large countries. Therefore, it has alerted the financial regulators of many countries, including the central bank of China.
Finally, there is an eternal contradiction between the rapid differentiation and combination of the blockchain industry and the particularity of regulations. The development and change of the blockchain industry is very fast. Due to its solidification, regulations often lag behind the development of the times. For example, with the development of blockchain technology and the needs of the times, the People's Bank of China plans to issue digital currency in recent years. This digital currency is a new type of RMB carrier. However, according to Article 2 of the Regulations of the People's Republic of China on the Administration of the Renminbi, the Renminbi "refers to the currency issued by the People's Bank of China, including banknotes and coins." The current regulations do not yet include the renminbi in the form of digital currency, which requires legislative bodies to amend the law in a timely manner or issue judicial interpretations to cope with the changing times.
It takes a long time for a legislature to formulate a law or regulation, from proposal, to drafting, to formal adoption and entry into force. If the legislature now formulates a legislative plan for a certain area of the blockchain, after the corresponding laws and regulations are passed, it is likely that the target of the predetermined specifications no longer exists. In short, the contradiction between the block chain's unsteadiness and the solidification of regulations will exist for a long time. Therefore, how legislators and regulators can cope freely in the era of blockchain really needs great wisdom.
To cope with the risks in the blockchain field and its challenges to supervision, we should abandon the highly volatile policies and sports-type law enforcement, and pay attention to scientific legislation
Aiming at the risks in the blockchain field and its challenges to supervision, regulation and governance should be given from the perspective of the rule of law, so that the rule of law becomes the basis for improving the technological competitiveness of the blockchain. As the "Decision of the Central Committee of the Communist Party of China on Several Important Issues Concerning the Comprehensive Advancement of Governing the Country According to Law" (hereinafter referred to as the "Decision") adopted by the Fourth Plenary Session of the Eighteenth Central Committee of the Party states, An important guarantee is the inevitable requirement for the modernization of the national governance system and governance capacity. " The rule of law is an important support for the modernization of national governance systems and capabilities. Bringing the innovation and development of blockchain into the track of governing by law, and improving the innovation and competitiveness of the blockchain industry through the rule of law, is one of the concrete manifestations of the party's leadership in realizing the modernization of governance capabilities.
For this reason, we should abandon the highly volatile policies and exercise law enforcement. Supervisors create a good business environment for the development of the blockchain industry through the rule of law path. On February 25, 2019, General Secretary Xi Jinping hosted the second meeting of the Central Committee for the Comprehensive Management of the State by Law, stressing that the rule of law is the best business environment. On March 5, 2019, Premier Li Keqiang emphasized in the "Government Work Report" that we must properly handle the relationship between the government and the market, vigorously promote reform and opening up, speed up the establishment of a unified, open, competitive and orderly modern market system, and relax market access. , Strengthen fair supervision, and create a business environment of rule of law, internationalization and convenience. Guided by General Secretary Xi Jinping's speech on the 18th collective study of the Political Bureau of the CPC, regulators and law enforcement agencies should focus on regulating and governing the blockchain industry from the perspective of the rule of law.
Therefore, the legalization of regulatory legislation should be promoted. The "law" referred to here includes laws and regulations, as well as broadly defined "laws" such as administrative normative documents. In recent years, certain legislative processes or policies have been prone to the impact or impact of some extreme risk events. Specifically, some extreme risk events in the financial market have caused shocks and pressures on financial regulators and rule makers, which directly increased the volatility of some administrative regulatory documents, national policies, and departmental regulations, making some regulations Or the content of the policy is inconsistent or even inconsistent, resulting in some practitioners, consumers, or investors being at a loss, increasing operating costs and affecting the improvement of technological competitiveness.
Promoting the normal development of the blockchain industry should rely on good legislative mechanisms. To this end, regulators need to make a pre-judgment of the blockchain industry and its future development. Based on this, a basic regulatory framework and industry development guidelines should be established to avoid the introduction of clean-up and rectification policies in the event of extreme risk events and direct shutdown Or restrict the brutal practices of an industry.
As an emerging industry, some of the segmented areas of the blockchain have no rules to follow. Regulators should strictly set negative lists within the scope prescribed by the law in order to maintain regulatory consistency, so that market participants have certain expectations of the industry. . Blockchain technology innovation is a future-oriented exploration, often without too many precedents to follow. In this highly competitive global technology field, regulators should not go beyond the inherent legal rules and set up vague negative lists to bring unnecessary policy and regulatory risks to market participants, leaving market entities like glass bottles at their tentacles. Every blame. Setting a negative list beyond the law will affect the technological competitiveness of Chinese blockchain companies. Faced with the challenges of global blockchain innovation and the lack of competitive market players, the country will bear huge risks. In the name of maintaining the security of the financial market, treating market entities simply and rudely is likely to result in a risky ending of “cutting and chaos”, which is a major issue that requires careful treatment by regulators and market entities.
For any emerging industry, in order to avoid the traditional dilemma of "dead in one pipe, chaos in one pipe", innovative regulatory thinking and regulatory mechanisms are needed. The UK's first regulatory sandbox mechanism is similar to China's inherent "pilot" mechanism. It is recommended that Chinese regulators consider the introduction of a regulatory sandbox for the blockchain sector. The regulatory sandbox mechanism refers to providing a secure environment that allows fintech companies entering it to test their innovative products, services, and business models, allowing new products or models to be faked in a near-real market environment; allowing consumers to access new products or The new model is not harmed by risks (a prior agreement on compensation mechanisms for consumer rights damages). The regulatory sandbox mechanism aims to promote effective competition in fintech, encourage corporate innovation, stimulate market vitality, and protect consumer rights. This is a new market and regulatory experiment and an important regulatory innovation in the field of fintech. By establishing a regulatory sandbox mechanism, it can provide a testing environment close to the real market for some innovative but potentially disruptive fintech companies.
Attention should be paid to scientific legislation. To make the rule of law the basis for improving the competitiveness of the blockchain, we must focus on the role of scientific legislation in the supervision and governance of the blockchain. The laws and regulations that have been formulated should reflect the reasonable demands of market entities and the trend of steady development of the industry, which is the prerequisite for good governance. Scientific legislation, perfecting the legislative process, and ensuring the full and orderly participation of market participants in the broad blockchain field, so that legislation accurately reflects the interests of all parties in the market, and can only meet the future trend of the blockchain in accordance with public opinion. Article 62 of the "Regulations on Optimizing the Business Environment" that came into effect on January 1, 2020 stipulates that "the formulation of administrative regulations, rules and administrative normative documents closely related to the production and operation activities of market entities shall be in accordance with the provisions of the State Council, Fully listen to the opinions of market players and industry associations and chambers of commerce. " According to this, legislative bodies should formulate laws and policies related to the blockchain industry. They should listen to the opinions of market entities, improve statutory procedures, and take public participation, expert argumentation, risk assessment, legality review, and collective discussion decisions as statutory procedures for major administrative decisions. Set a policy adjustment period for market entities, and safeguard the interests of market entities.
The formulation process and content of regulations or administrative normative documents related to blockchain supervision and governance should be consistent with the rule of law. Especially for emerging matters, department regulations and even some administrative normative documents may "land" before the specific provisions of the higher law have been promulgated, playing a leading role. At this time, the supervisor should ensure the legalization of the legislation, especially the legitimacy of the formulation of administrative normative documents and the supervision review. As stated in the "Decision" of the Fourth Plenary Session of the Eighteenth Central Committee of the Communist Party of China, "incorporate all normative documents into the scope of archival review, and revoke and correct normative documents that are unconstitutional and illegal according to law." Higher requirements.
To cope with the risks in the blockchain field and its challenges to supervision, we should pay attention to top-level design and industry self-discipline, strictly enforce the spirit of the rule of law, and make supervision and risk treatment legal.
Attention should be paid to top-level design and industry self-discipline. Regulators should promote flexible law enforcement, and fully encourage industry organizations to self-discipline and reduce excessive rigid intervention by regulators, which is conducive to blockchain innovation to drive economic development. At present, administrative forces and artificially created rules of regulatory agencies occupy a dominant position in the regulation of the blockchain industry. Innovation is related to the improvement of a country's core competitiveness. As General Secretary Xi Jinping pointed out during the "two sessions" in 2015, "innovation is the primary driving force for development. Grasping innovation is development, and innovation is the future." The logic for the necessary supervision of the blockchain industry should be based on improving the competitiveness of China's blockchain technology and protecting consumer rights, and the scope of supervision should be limited to an appropriate range, otherwise the innovation capacity of the blockchain will be reduced.
The blockchain industry requires regulators to combine careful top-level design and public participation in legislation based on long-term judgments on future technology development. Before regulators formulate various regulatory documents and policies, they can first guide and promote industry self-regulatory organizations to formulate internal governance rules on their own, and through the market's repeated testing and trial and error, mature the rules of emerging industries. When promoting regulatory documents, departmental regulations or policies, regulators fully absorb market participants to participate in the formulation of formal rules and overcome the will of the chief executive to become the sole leader of regulations and policies to reduce future obstacles to law enforcement.
The spirit of the rule of law should be strictly implemented in order to legalize supervision and risk management. Supervisors or law enforcers strictly implement the spirit of the rule of law, achieve supervision and rule of law, and enhance the certainty of the industry development of practitioners and the predictability of the market. The essence of this certainty and predictability is that in the spirit of the rule of law, the property security, transaction security, personal security, and various rights related to each blockchain-related enterprise and practitioners are strictly guaranteed. Only when the market entities are in a "determinable and predictable state" can they steadily plan investment, promote research and development, arrange production and expand the market. The legalization of supervision means that the laws and regulations that have been formulated must be implemented universally, steadily, and strictly, reducing the speculative mentality and fluke of the practitioners. Supervisors should adopt a legislative thinking and fully recognize that good regulations and their healthy operation are a country's core competitiveness.
We must promote the rule of law in risk management. Once risks occur in the blockchain industry, they should be handled in strict accordance with the universality and consistency requirements of the rule of law. At present, risks in certain segments of the blockchain have emerged one after another. For example, the pyramid scheme “capital disk” under the banner of the blockchain has crashed, and the contracts of some overseas virtual currency exchanges have “storied out”, which has affected hundreds of thousands of domestic Investors, the negative impact is great. In this regard, in terms of risk management in the industry, we should strictly follow the procedures prescribed by law to avoid taking the extreme route.
In reality, after the above-mentioned risks occur, there are such situations: individual law enforcement agencies either do not respond to investors' reasonable claims for rights protection, or impose a small number of blockchain practitioners who are still in normal operations but have some negative rumors Compulsory measures make this market entity unable to operate and breed greater risks. Some risk incidents arise from selective disposal or selective enforcement by individual law enforcement agencies. This situation easily leads to speculative and fluke mentality in individual market entities, and even rent-seeking power, which makes investors who have infringed their legitimate rights and interests have no way to defend their rights, and then seeks some more extreme means of rights protection, affecting social stability.
The "Decision" of the Fourth Plenary Session of the Eighteenth Central Committee of the Party states that "the vitality of the law lies in its implementation, and the authority of the law lies in its implementation." If the law is not implemented, it will certainly weaken the authority of the law and then affect the normal development of the blockchain industry. General Secretary Xi Jinping pointed out: "If the law is not implemented, it is put on the shelf, or if it is not implemented effectively, and it is a superficial article, it will not help to formulate more laws." Promoting the rule of law in the field of blockchain, and curbing the lack of strict law enforcement and illegal violations Research and other issues. The "Decision" of the Fourth Plenary Session of the Eighteenth Central Committee of the Party stated that "the full implementation of the administrative law enforcement responsibility system, strict determination of law enforcement responsibilities and accountability mechanisms for law enforcement personnel in different departments and agencies, positions …". Use existing laws and regulations to set boundaries for supervisory and law enforcement agencies, and promote the legalization of the functions and responsibilities of relevant agencies. Specifically, first of all, the development of rule of law procedures for risk disposal should be promoted in a timely manner; secondly, during the entire process of risk disposal, the disposal agency should promptly disclose various key information to the society and the public, especially investors, in order to make the disposal process transparent, Stabilize investor sentiment; Finally, individual institutions or public officials who violate the universality and consistency requirements of risk disposal shall be promptly investigated for legal responsibilities. Under the framework of the rule of law, handle risks and disputes in the blockchain field, maintain a good business environment, establish and improve a legal governance system that matches the competitiveness of the blockchain, and enhance the global competitiveness of China's blockchain technology. In order to enhance the economic vitality and competitiveness of the entire country.
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② Deng Jianpeng and Deng Jiyan: "The Risk and Regulation Path of the Stablecoin Libra", "Journal of Chongqing University (Social Science Edition)", No. 2 of 2020.
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