Author: Deng Jianpeng (Central University of Finance and Law Professor / PhD supervisor)
This article will be published in the "Journal of Hengyang Teachers College" in the first issue of 2020, authored by the author Babbitt Information Network for the first time, reprinting without permission is strictly prohibited.
Summary of content: Blockchain is an important technological innovation in recent years, and it has recently attracted great attention from the Party Central Committee. At the same time, the current risk of blockchain in the financial-related fields is very concentrated, there are some loopholes in the inherent laws, and the existing regulatory policies have certain shortcomings. Therefore, the supervisory agency should reshape the supervision thinking under the guidance of the spirit of the rule of law, and promote the rule of law in the blockchain field, the rule of law, and the risk treatment process; in the specific practice path, promote the reference of international mature experience Let the rule of law become the cornerstone of improving the international competitiveness of China's blockchain technology.
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Keywords: blockchain; financial supervision; rule of law; legal risk
Abstract: Blockchain is an important technological innovation in recent years, which has attracted great attention of the Party Central Committee recently. At the same time, the risks of blockchain are very concentrated in the field of finance. There are some loopholes in the inherent laws and some deficiencies in the existing regulatory policies. Therefore, in the spirit of the rule of law, we should reshape our regulatory thinking and promote law-based regulation, legislation and risk management procedures. On the specific practice path, we should promote the reference of mature international experience, and make the rule of law become the cornerstone to enhance the international competitiveness of China's blockchain technology.
Key words: blockchain; financial regulation; the rule of law; legal risk
The Rule of Law on the Blockchain Regulation
I. Connotation and Application of Blockchain
On 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. Among them, General Secretary Xi Jinping pointed out during the study that the integrated application of blockchain technology plays an important role in new technological innovations and industrial changes. We must regard blockchain as an important breakthrough in independent innovation of core technologies.  The author believes that this collective study by the Politburo has pointed out important directions for the development of China's blockchain technology.
The so-called blockchain is a chain database that combines data blocks in a chronological order to ensure that they cannot be tampered and forged with distributed ledgers, distributed storage, and distributed encryption. . The characteristics of the blockchain are like an image. For example, every time a member of an economic cooperative takes a transaction, it broadcasts the transaction information to all members through the cooperative's broadcast. After each member verifies, this information is recorded on their own books. The chain recorded in chronological order is the blockchain. The blockchain can be traced back, is extremely difficult to tamper with, and has a high degree of credibility. Therefore, the blockchain first has application value in the areas of lack of credit, such as digital asset transfer, data confirmation , bills, securities, deposit certificates, or imitation of traceable sources.
The main scenarios where blockchain is suitable for applications include the requirements of decentralization, multi-party participation, and data writing; high data authenticity requirements; and the need for multiple participants to build distributed trust in the initial situation. Specifically, the application of blockchain technology can be roughly divided into three types of scenarios at present, one is the transfer of value, such as the creation of virtual assets and their transfer or payment between different token accounts; Rights, to record information on the blockchain, such as the right to confirm electronic contracts and digital rights; third, authorization management, such as using smart contracts to control data access. In addition, with the continuous upgrade of application requirements, there are also multiple types of fusion scenarios.  In the future, the blockchain will gradually integrate with the real economy (such as supply chain finance based on the blockchain platform) and gradually move towards the level of social governance (such as community voting decisions based on the blockchain platform).
Blockchain is a great innovation in the field of information technology in recent years. As the commentator said, its characteristic lies in the clever concatenation of well-known technical elements such as hash pointers, Merkel trees, digital signatures, etc., to construct a blockchain structure and lay the idea for the "Internet of Value" And technical foundation.  Blockchain has promoted the transformation of the information Internet to the value Internet. On the one hand, it may promote the development of the real economy, on the other hand, it may affect or even challenge the current regulatory model and legal system. Value. With the rapid development of blockchain technology, especially in the context of concentrated risk in the financial and other fields, it has caused the attention and supervision of financial regulators in various countries.
Legal issues and limits of blockchain
In the financial-related fields, the application of blockchain is currently the most concentrated, and the legal risks related to blockchain also mainly occur in this area. In the technical field represented by public blockchains such as Bitcoin and Ethereum, the blockchain has the characteristics of typical peer-to-peer and no specific legal responsibility. Judging from the eleven-year history of the development of blockchain, it has concentrated risks in areas such as finance. In other areas, blockchain is more a neutral technology to improve economic efficiency, and the legal risks involved are currently limited.
First, there are related legal risks related to Bitcoin. Bitcoin is the first mature, large-scale application of the blockchain, and its current market value is around $ 160 billion.  In 2013, the People ’s Bank of China and other financial regulators issued a “Notice on Preventing Bitcoin Risk”. In such documents, the “virtual currency” represented by Bitcoin has no clear meaning or extension. The regulations or detailed explanations indicate that  there are loopholes and gaps in legislation. Therefore, in specific judicial practice, Bitcoin is legal property or computer information, and the court's determination is different. Judicial judgments cannot play a guiding role, and even cases of different judgments in the same case occur. Some virtual currency holders even face the risk of judicial failure to protect or insufficient protection.  Second, it is difficult to determine the market price of Bitcoin. At present, there is no legal virtual currency trading platform in China at present. There are currently tens of thousands of trading platforms overseas, many of which have not been effectively regulated by the local government.  Therefore, Bitcoin lacks a reasonable, authoritative and credible price. Reference. The price of Bitcoin fluctuates violently. It is difficult for law enforcement and judicial personnel to issue authoritative judgments on the price of bitcoin involved in the case. It is easy for deviations in convictions and sentencing due to difficulties in determining the price of bitcoin, which may damage judicial authority or negatively impact judicial relief. Third, there are difficulties in jurisdiction and law enforcement. Bitcoin, a token-based asset, is different from traditional account assets (such as bank deposits). Bitcoin can be sent peer-to-peer, easily circumventing the financial supervision of a single sovereign country. In recent years, illegal transactions on the dark web have gradually used bitcoin as a payment method; some overseas ICOs suspected of fraud have raised bitcoins for Chinese citizens; some suspects have used bitcoin as a tool for money laundering. Due to the quasi-anonymity of Bitcoin, it is difficult to monitor and track illegal and criminal activities. Regarding cross-border cyber crimes involving bitcoin, its jurisdiction needs to be further clarified by legislation. 
Second, there are legal risks associated with ICOs. ICO in English is called "Initial Coin Offering", which means the first public sale of tokens. ICO is a way for blockchain startups to issue initial digital tokens for project financing, and it is also an important application of blockchain technology in the field of crowdfunding.
Although since September 2017, Chinese regulators have completely banned domestic ICO financing. However, because ICO financing crosses national borders, it is difficult to obtain comprehensive and effective supervision, and there are many illegal and criminal acts that involve black-box operations and even pyramid schemes. A large number of overseas ICO projects have exaggerated or even completely fictionalized the prospects of the project, defrauded Chinese citizens' property, and were suspected of fund-raising fraud.
Some virtual tokens issued by some ICO projects are monopolized by a very small number of investors. After that, the project parties vigorously hyped up their prices, manipulated the market, and evacuated after taking advantage of opportunities to realise profits. This behavior is similar to the insider manipulation of the securities market as stipulated in the Securities Law and Criminal Law, but is limited to the legal principle of criminal punishment. Can the Criminal Law be applied? Can virtual currency transactions be equivalent to securities market transactions? How do law enforcement agencies and judicial agencies impose legal sanctions on overseas criminal suspects? How to get evidence? There are huge difficulties with this. In addition, the complete ICO financing process includes the three stages of raising mainstream virtual currencies (fundraising), issuing virtual tokens (issuing), and trading tokens to the trading platform (listing). However, if the project party only raises coins, Its behavior is similar to angel financing; if it is issued but not listed, the nature is similar to the game currency QQ currency issued by Tencent.  According to this, the first two stages of the ICO are not illegal under the current Chinese law. The legitimacy of the injunction issued by the financial supervisory authority may be questionable.
Third, the legal risks of blockchain in the non-financial field will gradually emerge in the future, and it is worth planning for. The Internet can solve the problem of information transmission, but it cannot solve the problem of physical transmission and physical verification. It is not easy to rely on the blockchain Internet to solve the various issues such as tracking, anti-counterfeiting, and quality assurance during the transmission or delivery of various vouchers. For example, judicial evidence is currently achieved through the blockchain, which has been recognized by the judicial interpretation issued by the Supreme People's Court. However, the judicial evidence based on the blockchain can only ensure the authenticity of the information in the digital world, and it is difficult to ensure the authenticity and accuracy of the information outside the chain at the source and when it is written into the blockchain. Therefore, for judicially documented blockchains, relevant institutions need to perform qualification certification and strict review on the nodes that access the blockchain to ensure the credibility of information sources in advance. Similarly, in the future, various equity certificates (such as real estate certificates) will be on the chain, and the fake and traceable source of the blockchain will be traced. How to ensure that the source of these on-chain information is true? Requires the prior regulation of the law, otherwise once the negative consequences are caused, for example, the equity certificate of the on-chain transaction is forged in advance, and its loss is difficult to recover. In this regard, it is necessary to formulate corresponding specifications and set basic standards for nodes accessing the blockchain. 
As another example, some blockchain companies provide blockchain copyright deposit certificates, that is, original individuals, original authors upload original photographic works, and after passing the review, they can perform blockchain deposit certificates to generate blockchain registration certificates. Block information is synchronized to judicial institutions such as the Internet courts.  In this process, if the uploaded work is not the original of the uploader and cannot be verified during the review, the so-called copyright deposited through the blockchain may actually constitute infringement. In addition, the so-called international cross-border e-commerce traceability system conducts credible certification and transparent traceability of overseas product-related data such as milk powder. Manufacturers, quality inspection agencies, mainline logistics, customs, division agencies, express logistics, etc. are all important participating agencies on the traceability link. These agencies collaborate on each commodity circulation link to record relevant data and information on the chain, and use the Your own digital signature endorsement forms a complete record of traceability of milk powder products with upstream and downstream backlinks, cross-validation, and multi-party verification.  However, the traceability of the blockchain maintained by multiple parties that do not trust each other does not ensure that the products such as milk powder before the chain are free of any quality problems, nor that the products before the chain have been dropped.
The increasing popularity of smart contracts based on blockchains,  is generating some legal risks. For example, if the transaction subject involved in a smart contract is prohibited by laws and regulations, how can the author of this code be legally bound? If a civil subject that has reached a smart contract is a person who does not have full capacity for civil conduct, can a smart contract be considered a civil contract? Are such contracts legally effective? In this regard, further clarification of future legislation is required. In addition, some individuals' behavior data or privacy (such as medical information) is chained. In order to prevent personal privacy from leaking, it is necessary to have complete standards or rules in advance to set up information encryption and authorization anti-mechanism mechanisms on personal chains. 
Rethinking the Blockchain Supervision Policy
In the past decade, China has faced some difficulties such as economic slowdown and industrial restructuring. The rapid development of innovative technologies such as artificial intelligence, cloud computing and blockchain has improved the efficiency of economic operations, especially bringing changes and innovations to the financial industry. Greatly promoted the provision of financial markets, financial institutions and financial services. In recent years, especially the rapid application of blockchain in related fields such as finance, such as blockchain + insurance, blockchain + bills, blockchain + invoices, blockchain + deposit certificate, and blockchain + payment, Wait, it has aroused widespread concern in the world. At present, the development of China's blockchain is at the forefront of the world. However, while blockchain brings the ultimate convenience of financial products and services to people, it also raises many new problems.
The "gaseous" trend of blockchain challenges the ability to supervise. Drawing on the image classification of scholars, traditional financial institutions have a "solid form", such as bank buildings that are visible and tangible, so as to show customers strong strength and credit. The financial industry under the support of innovative technology mostly has "liquidity" characteristics, such as payment mobility, currency digitization and electronicization, all relying on "liquid" data or information to flow at high speed in the network.  In the past two or three years, blockchain, especially some industries supported by blockchain technology, has developed towards "gaseous". Its distinctive feature is that financial products based on blockchain technology can be sent peer-to-peer, which breaks national border restrictions and flows around like air. Solidified or liquid financial products and services, such as third-party payments, or bank remittances, are usually subject to restrictions such as bank accounts or third-party payment accounts. Accounts under these centralized mechanisms have clear national boundaries. Supervisors have built "dams" based on the account model to monitor the financial industry within their control. Most financial products or services supported by blockchain technology are based on the Token (virtual token) model. Through the unlimited and arbitrary generation of blockchain addresses at any time, direct point-to-point payment or sending can be performed to complete clearing and settlement simultaneously. Therefore, the circulation and transfer of such funds no longer require traditional accounts, breaking national boundaries and inherent regulatory methods.
The "gaseous" financial business format poses a huge challenge to traditional supervisors' inherent regulatory thinking and methods. For example, the sponsor of an overseas blockchain project finances Chinese citizens through ICO, or overseas virtual currency platforms provide transaction services to Chinese citizens, and the Chinese government has obstacles in regulating and regulating overseas business. 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 "gaseous" blockchains. There is currently no unified answer on how to overcome these difficulties.
Third, disruptive innovation has impacted existing rules and market order. Through disruptive innovation, some emerging blockchain companies, such as breaking the dominant position of some leading companies in certain fields and the existing competitive landscape, especially in the past four or five years, have rapidly emerged a number of new technology and new forces in the blockchain field. Change people's inherent understanding of currency, asset form or financing methods. During the development of the industry, the old order is being broken, but new rules have not yet been produced. 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 trading, undercurrents are flowing, and various suspected violations of laws and regulations are emerging. The formal opening of an exchange in China requires rigorous approval by regulatory authorities. However, in the field of virtual currency trading, as long as the relevant institutions and individuals have strong capabilities, they can basically open exchanges around the world 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. For example, related securities crimes such as internal trading or market manipulation, the current legal system is basically free to handle. 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.
There is an eternal contradiction between the rapid differentiation and combination of the blockchain industry and the particularity of the legal system. The development and change of the blockchain industry is very fast, but the legal system is solidified and often lags 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 currencies in recent years. This digital currency is a type of RMB. However, according to Article 2 of the Regulations of the People's Republic of China on the Administration of the Renminbi, Renminbi "refers to the currency issued by the People's Bank of China, including banknotes and coins." Current regulations do not yet include Renminbi in the form of digital currencies, which requires the legislature to promptly Amend laws to respond to changing times.
It often 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 legal system's solidification will exist for a long time. However, for a long time, China has always harbored the ideal of “universalism of law”, from the “Qualification of everything in the Qin Dynasty” to the current codification of codes advocated by some civil law scholars.  Scholars said that the incomplete legal system has become the norm of the times, and it will be even more so in the face of the rapid development of the fintech industry.  Therefore, how legislators and regulators can cope freely in the era of blockchain really needs great wisdom.
The new problems raised by the blockchain are mostly areas that are not covered by inherent laws and traditional regulatory countermeasures. The old regulatory mechanisms of financial regulators are increasingly stretched. For this reason, the times require regulators to adjust their supervision methods and supervision thinking. Decades ago, American futurists said: "The old way of thinking, the old formula, the old dogma, the old ideology, no matter how much respected and how useful it is in the past, is no longer the truth. New New values, new technology, new geopolitical relationships, new lifestyles and ways of contact have emerged, and the world has emerged quickly from these new things. Therefore, we urgently need new ideas, reasoning, classifications and concepts. We cannot The traditional mentality and ideas are no longer applicable by forcing the newborn tomorrow world into the old-fashioned pigeon cage of yesterday. "
Specifically, on the one hand, financial regulators should strive to improve the level of regulatory knowledge and regulatory technology, such as improving the in-depth understanding of the development status of cutting-edge fintech by regulatory officials and supervising information through self-construction (or outsourcing to regulatory technology service companies) System and dock it with the database of the supervised object. Continuously monitor the status of the industry through new technological means, analyze financial risks and provide risk warning information in a timely manner. As the commentator said, regulatory science and technology can be committed to the transition from "post-event supervision" to "real-time supervision", from "bypass supervision" to "active intervention".  On the other hand, regulators should adjust the inherent thinking of legislation, regulation and governance in the face of new technology and industry developments.
At present, the regulatory approach in the financial sector deserves further improvement. For example, in 2015, the State Council issued a policy to encourage the development of Internet finance. However, at the end of 2015, the "e-lease treasure" extreme event occurred, and the national policy immediately changed rapidly. As a result, regulators began to rectify Internet finance in 2016. For a long time, for the purpose of economic growth and other factors and poor consideration at the initial stage, the regulators easily relaxed the industry supervision at the beginning, causing the risk of the blockchain industry to gradually accumulate. Once extreme risk events occur in the subdivided industries, it is easy for regulators to place too much emphasis on financial security, thereby limiting industry growth. At this point, the industry has fallen into the weird circle of "controlling chaos", and the "release-control-hold" policy is highly volatile, which has greatly increased the operating costs of enterprises. For example, although financial regulators did not publicly object to the "mining" of the Bitcoin field, they also issued multiple documents internally. The leading group of the Internet Financial Risk Special Rectification Office issued a document in January 2018, requesting each locality to guide the enterprises in its jurisdiction to orderly withdraw from the "mining" business and submit regular work progress reports. Later, the National Development and Reform Commission issued a consultation draft to list it as a phase-out industry, so localities began to clear mines. However, in November 2019, the Chinese government website released the National Development and Reform Commission's "Industrial Structure Adjustment Guidance Catalogue (2019 Edition)", which became effective on January 1, 2020. The original "Industrial Structure Adjustment Guidance Catalogue (2011 Edition) ) (Amendment) "is also abolished. In the previous draft, "virtual currency mining" in the obsolete industry was deleted. [twenty one]
Excessive jumps in regulations and regulatory policies in the short term will affect the stable expectations of practitioners on the market prospects and impact the orderly and normal development of the industry. Therefore, policy risk has become an important risk in the current blockchain field. When market players are engaged in the blockchain industry, it is difficult to predict whether the industry can do it in the future, and it is difficult to determine the development trend and policy direction of the market.
In view of the above-mentioned problems, the author's humble opinion should be standardized from the perspective of the rule of law, so that the rule of law will become the cornerstone of improving the international competitiveness of China's blockchain industry. The Decision of the Central Committee of the Communist Party of China on Several Important Issues Concerning the Comprehensive Promotion of Governing the Country According to Law, adopted at the Fourth Plenary Session of the Eighteenth Central Committee, has opened a new era for China's rule of law. The "Decision" pointed out that the comprehensive promotion of governing the country according to law is a major strategic issue related to our party's governing and rejuvenating the country, to the happiness and well-being of the people, and to the long-term peace and order of the party and the country. Important aspects.  The rule of law is the foundation of the Chinese government's governance system and capacity. Incorporating various aspects of the innovation and development of blockchain technology into the track of governance according to law, and improving the innovation and competitiveness of the blockchain industry through the rule of law, is a concrete manifestation of the party's leadership of the people to realize the modernization of governance capabilities.
Fourth, the rule of law significance and the path of blockchain governance
First of all, regulators should abandon the highly volatile policies and sports-type law enforcement, which will help create a rule of law business environment for the development of the blockchain industry. 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, which emphasized that the rule of law is the best business environment. It is necessary to protect the property rights and legal rights of various market entities on an equal basis in accordance with the law, and adjust the interests of various market entities within the framework of the rule of law. On March 5, 2019, the "State Council Government Work Report 2019" emphasized the need to properly handle the relationship between the government and the market, vigorously promote reform and opening up, accelerate the establishment of a unified, open, competitive and orderly modern market system, and relax market access. Strengthen fair supervision, create a business environment of rule of law, internationalization and convenience, and make various market players more active.
The "Decision of the Central Committee of the Communist Party of China on Several Important Issues Concerning the Comprehensive Promotion of Governing the Country According to Law" adopted by the Fourth Plenary Session of the Eighteenth Central Committee of the Party has pointed out that governing the country according to law is the essential requirement and important guarantee for upholding and developing socialism with Chinese characteristics. An inevitable requirement for the modernization of governance capabilities. The rule of law is the foundation of the national governance system and capacity. Incorporating all aspects of the innovation and development of blockchain into the track of governing according to law, and improving the innovation and competitiveness of blockchain through the rule of law, is also a concrete manifestation of the party's leadership in realizing the modernization of governance capabilities. Guided by the spirit of the Politburo meeting on October 24, 2019, regulators and law enforcement agencies should pay attention to the regulation and governance of blockchain from the perspective of the rule of law, and enhance the competitiveness of Chinese blockchain companies.
Secondly, the strict implementation of the spirit of the rule of law in the field of blockchain industry is of great significance to give certain companies the industry's development certainty and market predictability. Only in a determinable state can an enterprise effectively plan investment, promote research and development, arrange production and expand the market. The essence of certainty and predictability is that, in accordance with the corresponding provisions of laws and regulations adopted in advance through legal procedures, the property security, transaction security, and other relevant laws of each blockchain-related enterprise and citizen are strictly guaranteed. rights and interests.
Regulatory rule of law means that, on the one hand, regulators should pay attention to existing laws and regulations to be implemented universally, stably and strictly; on the other hand, the laws and regulations that have been formulated should reflect the reasonable demands of market entities and the healthy development of the industry. Supervisors have a legislative thinking and fully realize that a good legal system and its healthy operation are a country's core competitiveness. To promote the normal development of the blockchain industry, we should rely on good legislation, not by chance, or changeable temporary policies or the will of the chief executive. To this end, regulators need to do top-level design and forward-looking research on the blockchain industry and future development trends, based on this, to establish a basic regulatory framework and long-term industry guidance to avoid direct shutdowns in the event of extreme risk events. Or restrict the brutal practices of an industry.
Some emerging industries do not yet have rules. Regulators should strictly establish a negative list within the scope prescribed by the law to maintain the consistency of the legal system, so that market participants have certain expectations of the industry. Pushing for flexible law enforcement, fully encouraging industry organizations to self-discipline, and reducing the rigid involvement of regulators can be beneficial to blockchain innovation driving economic development. At present, administrative forces and artificially created rules of regulatory agencies occupy a dominant position in the regulation of the blockchain industry. However, the necessary supervision of the blockchain industry should be based on considerations of improving the global competitiveness of China's blockchain technology and controlling related risks. As stated by scholars when analyzing the legal assistance obligations of third-party payment institutions in China, the principles of reasonableness and proportionality are important criteria for measuring the rationality of the exercise of administrative power.  The degree of supervision of administrative agencies should also be limited to an appropriate range. Excessive supervision will reduce the innovation capacity of the blockchain. Innovation is related to 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. To grasp innovation is to grasp development and to seek innovation is to seek the future." 
Blockchain innovation is a future-oriented exploration, often without too many precedents to follow. In this field of fierce global competition, regulators should not go beyond legal rules and set up vague negative lists to create unnecessary policy and regulatory risks for market participants and make market players blame. Setting a negative list beyond the law will affect the competitiveness of Chinese blockchain companies. Facing the challenges of global blockchain innovation and the lack of competitive market players, the country itself will bear huge risks. In the name of maintaining the security and stability of the financial market, treating market entities simply and rudely is likely to result in the real risk of "cutting and chaos", which is a major issue that requires careful treatment by regulators and market entities.
Third, we must promote the rule of law in regulatory legislation. The "law" referred to here includes laws and regulations, as well as broadly defined "laws" such as administrative normative documents. In recent years, some legislations are vulnerable to the impact or impact of some extreme risk events. Specifically, extreme events that occurred in the market, such as the "e-rental treasure" incident in 2015, and the ransomware ransom of virtual currencies in 2017, etc., caused shock and pressure on rule makers and directly increased some administrative norms. The volatility of the content of national documents, national policies, and departmental regulations has caused the lack of consistency in the content of some regulations or policies, resulting in some practitioners and consumers (investors) being confused.
Some administrative normative documents related to blockchain supervision and governance have the characteristics of randomness, temporaryness and departmentalization. The formulation process and some contents of some administrative normative documents are contrary to the idea of rule of law. For example, they violate laws and regulations, create new obligations for market entities at will, or directly set prohibitive regulations without legal basis. Some administrative normative The document and the spirit of the party and government conferences have changed too much, which have both negatively affected the practitioners' expectations of market stability. The aforementioned "Decision" of the Fourth Plenary Session of the Eighteenth Central Committee of the Communist Party of China proposed: "All regulatory documents shall be included in the scope of record review, and the normative documents that are unconstitutional or illegal shall be revoked and corrected in accordance with the law." . Therefore, the supervisory authority should ensure the rule of law and review the legitimacy of administrative normative documents and supervisory measures. At the same time, the blockchain industry needs regulators to combine prudent top-level design and public participation in legislation based on long-term judgments on future technological developments.
To this end, before the regulators formulate various regulatory documents and policies, they can first guide and promote industry self-discipline organizations to create their own internal governance rules, and through market repeated testing and trial and error, the existing rules in the industry can mature. . As the author's previous research has stated, China's lawmaking has long had obvious characteristics of artificial creation, and social self-sustaining rules (such as custom) are often excluded from the law.  This should be noted in current legislation. Second, when regulators promote the introduction of regulatory documents, departmental regulations or policies, they fully attract market participants to participate in the formulation of formal rules and are committed to formulating "good law". Restraint of the will of the chief executive will become the sole guide for regulations and policies to reduce future enforcement obstacle. As the commentator said: Only those laws that reflect the laws of social development have the characteristics of good law. Only good law can maximize the public's approval and give full play to the effectiveness of the rule of law.  Finally, regulators should promote relevant legislation at the national level through a comprehensive consideration of the blockchain industry and risks, such as the introduction of long-term regulatory rules for the system, changing the current simple response to the impact of extreme risk events, and the piecemeal mode The status of the publication of regulatory documents; legislative bodies and judicial authorities have given a clearer legal characterization of the blockchain industry. Based on the above-mentioned synergy, a complete legal and regulatory framework is gradually established to promote the healthy development of the entire blockchain industry.
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. Good law is a prerequisite for good governance. Scientific legislation, perfecting the legislative process, and expanding the full and orderly participation of market players in the blockchain field, so that legislation accurately reflects the interests of all parties in the market and conforms to public opinion in order to meet the future trend of the blockchain. 
Secondly, we must promote the rule of law in risk management. After the risk occurs in the blockchain industry, it should be handled in strict accordance with the universality and consistency requirements of the rule of law. Risks in some of the current subdivisions of the blockchain have emerged one after another, such as the collapse of the pyramid scheme “funds” under the banner of the blockchain, and the “closing” of contracts by some overseas virtual currency exchanges, which has affected thousands of domestic Investors, the negative impact is huge. In this regard, in terms of risk management of the industry, we should strictly follow the procedures prescribed by the legal system to avoid extreme lines.
In reality, after the above-mentioned risks occur, individual law enforcement agencies either do not respond to investors' reasonable claims for rights protection or impose compulsory measures on individuals in charge of individual blockchain practitioners who are still in normal operation but have some negative rumors. Market entities cannot 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. As a result, investors with legitimate rights and interests infringed have no way to defend their rights, and then seek some more extreme means of rights protection, affecting social stability.
Failure to implement laws and regulations will certainly weaken the authority of the legal system and affect the normal development of the industry. General Secretary Xi Jinping pointed out: "If there are laws that are not implemented, put on the shelf, or implemented poorly, and make superficial articles, it will not help to formulate more laws."  To promote the rule of law in the field of blockchain, law enforcement should be eliminated. Issues such as laxity and illegal investigation. 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, it is necessary to promote the development of rule of law procedures for risk disposal 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, so as to make the disposal process transparent and stable. Investor sentiment; Finally, individual institutions or public officials who violate the universality and consistency requirements of risk disposal shall be promptly investigated for their legal responsibilities.
Finance is the "blood" of the economy. It handles risks and disputes in the blockchain field under the framework of the rule of law, maintains a good business environment, and establishes a sound regulatory and governance system that matches the competitiveness of the blockchain, thereby improving China. The global competitiveness of the blockchain can further enhance the economic vitality and competitiveness of the entire country. In short, the blockchain field requires state regulation and even legislation to promote the secure and orderly development of the blockchain industry.
Finally, due to the technical characteristics of the distributed ledger and multi-centralization (or even decentralization) of the blockchain, it will be very difficult to rely solely on one country's supervision. To effectively implement the rule of law in regulation, we suggest that regulators should also strengthen international collaboration on specific operational paths, especially with countries such as the United States, Western Europe, Japan, and South Korea that have developed blockchain technology research and development and virtual currency trading markets. Regional cooperation.
Blockchain technology is different from other fintech industries, especially the point-to-point sending and decentralized (or multi-centralized) features of public blockchains. Many related industries in the blockchain field often do not have specific legal subjects (especially public chains), and a large number of participants are free to enter or exit at any time and any address worldwide. This is particularly typical of the Bitcoin issuance mechanism and the self-maintenance mechanism of some blockchain-based communities (such as decentralized organizations "DAO"), which makes it difficult for a ban to achieve the expected results and goals during the implementation . Therefore, regulators simply suspend certain businesses directly, which may prevent related risks in the short term, and the long-term effects remain to be discussed.
The US blockchain policy has a profound pragmatism and empirical spirit. Regulators will not easily issue a polarization policy that is absolutely forbidden or fully encouraged on the blockchain, but is going through various federal agencies, including the blockchain technology hearings held by the US Congress many times, and the stablecoin Libra project hearings Various measures such as the SEC's prosecution of the ICO project party that violated the regulations, etc., step by step to evaluate the different risks in the blockchain technology field through wait-and-see, understanding and supervision, and comprehensively examine the blockchain technology in the exploration. Prospects and risks, grasp the rhythm of supervision. The pragmatic and empirical spirit of the UK's first regulatory sandbox mechanism is in line with that of the United States. The regulatory sandbox has similarities with China's inherent "pilot" mechanism. For any emerging industry, the improvement of supervision and laws and regulations is a long-term and specific work. To avoid the traditional dilemma of "death as soon as you manage, regardless of chaos," innovative regulatory thinking and supervision mechanisms are needed. Therefore, the author suggests that Chinese regulators may consider introducing a regulatory sandbox to avoid the consequences of “regardless of chaos” and “death as soon as possible” for emerging industries. In fact, there are similarities and differences between the UK's regulatory sandbox principle and the "pilot" mechanism promoted by the Chinese government since the reform and opening up in 1978. The regulatory sandbox helps regulators to play a constructive role in innovation. It actively promotes market innovation through the active adjustment of regulatory measures, and transforms the regulatory concept of passive response and waiting for risk events into the concept of active guidance. This coincides with China's inherent political wisdom.  We believe that Chinese regulators can consider this mechanism and explore the application prospects of blockchain technology on the premise of balancing risk control and protecting consumer rights.
At present, there are some securities tokens (virtual tokens) in the market and a large number of violations of the rights and interests of Chinese citizens. Given the practical difficulties of cross-border judicial coordination and regulatory enforcement, it is difficult for Chinese regulators to implement overseas enforcement. The detailed legal classification, legal application requirements, and regulatory policies of ICOs of Switzerland and Singapore may give us reference. In combination with Japan's legislative practice, China's future regulatory rules, in addition to mandatory registration, should also focus on the network and information security technology standards of trading institutions, third-party depository of trader funds (cash and virtual currency), and earnestly implement anti-money laundering mechanisms , Risk disclosure and protection of traders' rights, etc., while promoting the healthy development of the virtual currency and blockchain industry, effectively controlling risks and preventing various illegal and criminal acts.
The second is to conduct a pilot ICO supervision sandbox to reduce ICO risks. Supervisors can encourage qualified local governments to launch ICO supervision sandbox parks and pass local relevant professional institutions for record, review and sandbox testing. In terms of specific future regulatory guidelines, we recommend that the central bank design and plan the basic regulatory framework, with the CSRC taking the lead in issuing specific rules and supervising business operations. Local financial regulatory agencies are responsible for cracking down on illegal fundraising and other criminal acts in this area. 
Third, the legal definition of the tokens issued by the ICO is clear. In the future, China can refer to the experience of Switzerland and Singapore and make a classification based on the economic function of the tokens-payment tokens, application tokens and asset tokens. The regulatory authority quickly determines the specific laws and regulations that the ICO project or virtual currency should comply with. At the same time, the ICO project party can reasonably avoid legal risks before issuing tokens. In terms of specific legislation, in the field of securities law in the future, it may also be considered to increase the small-scale exemption system for raised funds and expand the legal concept of "securities" to adapt to the changing times.
Fourth, strengthen the threshold for qualified investors and investor risk education. In recent years, some overseas virtual currency exchanges have ignored Chinese laws and regulations, and through the inductive publicity on various networks, have encouraged people without risk tolerance and risk identification ability to participate in such high-risk investments, causing great risks. Individual qualified investors and institutional qualified investors in the field of blockchain are more academic concepts controversial and discussed by scholars, and have long been in a blank state in law. Except for professional investment institutions, there are no clear legal requirements for entry barriers for individual investors. For this reason, laws should regulate it.
Fifth, regulators should adjust regulatory thinking and supervision methods to promote the integration of blockchain technology and regulatory technology on the premise of balancing and encouraging fintech innovation and risk control. Specifically, regulators can use blockchain technology and smart contracts to turn some legal requirements into internal rules for code. For example, the software and hardware that make up cyberspace regulate this space, and "code is law."  Conversely, legal rules can be transformed into part of code. These rules will be automatically executed by the underlying blockchain technology, and part of the legal norms will be assumed by the technical rules, thereby reducing the need for direct government supervision and continuous implementation to reduce compliance and law enforcement costs. At present, blockchain technology is still far from mature. Regulators can use the above methods to "rule the chain with chains" to shape new norms and automatically implement part of the internal governance of the blockchain through procedures.
 See http://www.gov.cn/xinwen/2019-10/25/content_5444957.htm , access time: November 6, 2019.
 See Huang Zhen and Jiang Songcheng: "Data Controller's Rights and Restrictions", Journal of Shaanxi Normal University (Philosophy and Social Science Edition), Issue 6, 2019.
 See Deng Jianpeng: "Legal Supervision of Blockchain Must Keep Up", published in Legal Daily, November 6, 2019.
 Babbitt (eds.): "Ten Years of Blockchain: What Future to See", China Friendship Publishing Company 2019, p. 62.
 Data source, see https://www.feixiaohao.com/, access time: November 6, 2019.
 See Deng Jianpeng and Huang Zhen: "Internet Finance Law and Risk Control" (2nd Edition), Machinery Industry Press 2017, pp. 259-262.
 See Deng Jianpeng and Sun Penglei: "Blockchain International Supervision and Compliance Response", Machinery Industry Press, 2019 Edition, p. 31.
 See Deng Jianpeng and Sun Penglei: "International Blockchain Supervision and Compliance Response", Machinery Industry Press 2019, p. 41.
 See Deng Jianpeng: "Legal Supervision of Blockchain Must Keep Up", published in Legal Daily, November 6, 2019.
 See Deng Jianpeng: "Regulatory Supervision of Blockchain: Dilemma and Way Out", published in Financial Law Science, Issue 3, 2019.
 See Deng Jianpeng: "Legal Supervision of Blockchain Must Keep Up", published in Legal Daily, November 6, 2019.
 See China Academy of Information and Communication Technology (eds.): "Chain" Connects the Future: The Practice of Trusted Blockchain, People's Posts and Telecommunications Press, 2019 Edition, p. 14.
 See China Academy of Information and Communications (ed.): "Chain" Connects the Future: The Practice of Trusted Blockchain, People's Posts and Telecommunications Press, 2019, pp. 139-140
 For the characteristics of smart contracts, please refer to Huawei Blockchain Technology Development Team (editor): "Blockchain Technology and Application", Tsinghua University Press 2019, pages 30-31.
 See Deng Jianpeng: "Legal Supervision of Blockchain Must Keep Up", published in Legal Daily, November 6, 2019.
 See Huang Zhen and Deng Jianpeng: "On Internet Finance", Mechanical Industry Press, 2014 edition, p. 25.
 See Deng Jianpeng: "The Rational Thinking of the Codification of Chinese Civil Code", Journal of Nanchang University (Cultural and Social Science Edition), Issue 3, 2019.
 See Huang Zhen: "Incomplete Law and Fintech Risk Supervision", Tsinghua Financial Review, Issue 5, 2019.
 [United States] Alvin Toffler, The Third Wave, Huang Mingjian (translated), CITIC Publishing Group Co., Ltd. 2018 edition, "Preface" p. XI.
 See Du Ning, Wang Zhifeng, etc .: "Supervision Technology-The Road to the Application of Artificial Intelligence and Blockchain", China Finance Press, 2018, p. 46.
 See http://www.gov.cn/xinwen/2019-11/06/content_5449193.htm , access time: November 7, 2019.
 See http://theory.people.com.cn/n1/2016/0817/c49150-28642089.html , accessed on November 20, 2019.
 See Chu Meng: "Research on Issues Related to the Judicial Assistance Obligations of Third-Party Payment Institutions", Journal of Shaanxi Normal University (Philosophy and Social Science Edition), Issue 5, 2019.
 See http://www.xinhuanet.com//politics/2015-03/06/c_1114549235.htm , access time: November 7, 2019.
 See Deng Jianpeng: "Internalization" and "Externalization": Spatial Differences in the Effectiveness of Customary Laws in the Qing Dynasty, "Law and Business Studies", Issue 1, 2019.
 Wang Liming, Rule of Law: Good Law and Good Governance, Peking University Press, 2015, p. 5.
 As the commentator states, governing the country according to law must adhere to the leading and promoting role of legislation in reform, expand the orderly participation of the public, and fully listen to opinions from various quarters so that legislation accurately reflects the interests of all parties. See Ma Yide: "Advancing the Rule of Law to a New Height in History", published in Qiushi 2015, No. 2 2015.
 See http://theory.people.com.cn/n/2015/0413/c40555-26834603.html , accessed on November 7, 2019.
 See Deng Jianpeng and Li Xuening, "The International Practice of Supervision Sandbox and Its Enlightenment", Journal of Shaanxi Normal University (Philosophy and Social Science Edition), Issue 5, 2019.
 See Deng Jianpeng and Li Xuening, "The International Practice of Supervision Sandbox and Its Enlightenment", in Journal of Shaanxi Normal University (Philosophy and Social Science Edition), Issue 5, 2019
 [United States] Lawrence Lessig, "Code 2.0: Law in Cyberspace", Li Xu, Shen Weiwei (translated), Tsinghua University Press, 2nd Edition, 2018, p. 6.