SheKnows year-end ultimate debate | 2020, the year when the public chain supervision will break?

Since the "10.24 speech", the entire industry has set off a wave of blockchain applications. At the cusp of the times, opportunities and challenges coexist.

From January 2nd to 3rd, Babbitt launched the "SheKnows End-of-year Debate: 2020, the big change of the blockchain", inviting representatives of entrepreneurs, investors, research institutions and law firms in the blockchain field to participate in the block. Chain practitioners look for directions, find their way, and greet the year of big changes in blockchain in 2020.

On the evening of January 3, the third event "2020, the year when the public chain supervision broke the game? In the book, Zhu Youping, deputy director of the China Economic Network Management Center of the National Information Center, Bai Liang, founder of Zero One Finance and executive vice president of the Digital Asset Research Institute, Zhang Ye, partner of Wanshang Tianqin Law Firm, and Babit Chang Helen, discussed the issues of public chain supervision together.

The following is the full text of the live broadcast, organized by Babbitt.

• On Decentralized Liquidity Mechanism: Taking Uniswap, Bancor, etc. as Examples
• Opinion | Central bank digital currency and other digital currencies, both temporarily or little impact
• 2019 DeFi Industry Research Report: DeFi lending continues to grow and expand in 2020, and stablecoins will continue to grow

Blockchain global supervision, who should be supervised?

Moderator: We say "the year when public chain supervision is broken", but how do global regulatory authorities define the subject to be supervised? Who are the subjects?

Zhu Youping:

There are three concepts of supervision, Chinese companies, Chinese citizens, and within China. The core policy is the 94 ban. 2017.9.4 The central bank led the policy documents of the seven ministries and commissions. Although this document is weaker than regulations, it is very clear and precise.

There are two red lines: companies cannot issue tokens to Chinese investors, and they cannot open digital currency exchanges in China.

Tokens cannot be issued to Chinese investors, neither domestic companies nor overseas companies. For example, it is illegal to issue an ICO in Singapore, but it is illegal to sell to Chinese citizens. Even if Chinese citizens buy tokens in Singapore, China's policies still work.

China's subsequent policies also have supplementary regulations, and propaganda, fan base, and payment to support illegal tokens are also illegal.

It is also illegal to open an exchange in China. Exchanges opened overseas cannot support Chinese citizens' speculation.

Here are two key words: unauthorized and suspected illegal fundraising.

We understand tokens as two levels: accounts and coins. We think there is actually a bit of space here.

The account refers to the token issued on the blockchain. If it is only used for bookkeeping and points, it is similar to the labor points of the commune. This is the nature of sending money, not collecting money. It does not involve fund raising. Naturally, it does not involve illegal fund raising. It does not require financial permits or licenses, and is legal.

Coin means that the tokens issued on the blockchain are used to raise funds. Whether it is ICO, STO, etc., China is prohibited according to the 94 ban. No license has been issued for the act.

There are two gray areas here. One is citizen speculation, and the other is mining. The state discourages them, but does not explicitly say that the two acts are legal and illegal. But if something goes wrong, the state still protects. For example, someone in Beijing stole another person's bitcoin. The court ruled that the crime of illegally hacking into another's computer and stealing data has defined bitcoin as a data asset for protection. There is also a law enforcement issue. Regarding some vague areas, the people do not tell the officials, they have their own points of view.

As for mining, it is possible. After the general secretary's speech, the National Development and Reform Commission's removal of mining from the elimination category is an improvement.

Bai Liang:

Various regulatory agencies will define according to their own regulatory agencies. For example, the United States SEC and Hong Kong SFC both use "securities" as the main regulatory object. The supervision of cryptocurrencies by the central bank and local financial regulators in mainland China have different purposes. The central bank mainly regulates anti-money laundering and financial security. Local financial supervisory authorities conduct supervision mainly from the perspective of cracking down on illegal fund raising.

We look at the regulatory attitudes of some countries and regions:

Mainland China: Bitcoin is a special virtual commodity, and ICOs are classified as illegal financial activities. No organization or individual may engage in ICO activities.

Hong Kong, China: Digital currencies usually have the characteristics of "virtual commodities", but some digital currencies may be "securities" as defined in the Securities and Futures Ordinance. Unified supervision of digital currencies. Institutions must register with the SFC or obtain a license for ICO activities.

United States: ICO activities are governed by the United States Securities and Exchange Commission (SEC). The SEC believes that digital currencies generated through ICOs are securities, and the issuance process must comply with the provisions of the securities law. Bitcoin is not generated by ICO. Bitcoin is not a security and is not under the supervision of the SEC.

Japan: The Japanese cabinet has voted to treat digital currencies such as Bitcoin as digital equivalents. Support the legalization of ICOs and take appropriate supervision of ICOs. "Mining" is prohibited.

Singapore: Implement a sandbox regulatory model for digital currencies, with a more relaxed regulatory environment. However, the Singapore government believes that digital currencies such as Bitcoin are not legal tender, and companies must undergo necessary investigations before using digital currencies such as Bitcoin to make payments. Classified supervision of different types of digital currency issuance.

Zhang Ye:

First, analyze the related concepts of public chain and its supervision.

First, what is the public chain. The public chain is a concept opposite to the alliance chain and the private chain. From another perspective, it is a non-permissive chain.

Secondly, we should distinguish public chain projects from public chain ecology. The goal of the public chain project is to develop and form a public chain ecology, but the regulatory logic of the two is somewhat different.

Then, maintaining a public chain is not the same as using a public chain. The legal relationship between the maintenance of the public chain as infrastructure and the use of the public chain, the legal relationship formed, the rights and obligations arising, and the supervision logic are different.

Finally, due regulation is not the same as actual regulation. Whether it is developed as a public chain project or as an ecological public chain, it is a new thing to the legal systems of various countries, and the relative lag of laws is a logical necessity. Therefore, the continuous development of public chain projects and public chain ecology, and the continuous establishment and improvement of the corresponding legal system, as a process, the regulatory issues formed may be different.

Then, the main body of supervision is the founding team first, and relevant actions in the development of code, fundraising, brand promotion, ecological construction, and community governance may be included in the supervision object. Secondly, it is related to node operations, including chip development, mining machine purchase and sales, and mining machine operation and maintenance related subjects. Then there are relevant entities using the public chain, including wallet and browser-related development and users, as well as relevant entities for redevelopment and utilization, including asset-holding and transaction-related entities.

Supervised boots need to land, which links should be strictly monitored?

Moderator: What links in the blockchain industry do you think need to be strictly regulated? What links can be more inclusive?

Zhu Youping:

The 94 ban was timely and effective. But over the past two years, the blockchain industry has undergone tremendous changes, and policies need to be adjusted. "One size fits all" is fast and efficient, but it lacks flexibility and is not conducive to innovation.

We believe that policy protection for innovation is far more valuable and difficult than risk prevention. We suggest that the time is ripe for the implementation of classified supervision and penetrating supervision with the supervision sandbox.

DC / EP is naturally legal. The biggest concern is whether licensed financial institutions can issue coins? Can a licensed exchange trade digital currencies? Furthermore, can private companies issue currency for financing and exchanges? Article 28 of the state's support for the private economy has policies to encourage private finance. Registration systems and private banks are all underway. Are these policies expected to be introduced in the future?

Bai Liang:

The core link is the Token transaction, especially the transaction link between Token and fiat currency. Financial transactions involving non-specific objects. First, conflicts with existing financial systems and rules need to be reconciled, and second, prone to fraud, market manipulation, money laundering, and terrorist financing.

It's much simpler if you only trade within the community. Two-way transactions will face complex issues and involve a series of financial issues such as financing.

Zhang Ye:

From the perspective of China's regulatory practices, including the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Internet Information Office, the Central Bank and the China Banking Regulatory Commission, relevant regulatory measures have been introduced. Currently, they are mainly focused on three aspects.

The technical supervision led by the Ministry of Industry and Information Technology is mainly to formulate relevant technical certification systems and standard systems;

Central bank-led financial supervision is mainly aimed at illegally raising funds and related illegal financial activities to prevent systemic financial risks;

The content or information data supervision led by the Cyberspace Office is mainly aimed at activities that affect data security, including illegal collection, use, release, and transfer of data and information.

What are the difficulties and opportunities of blockchain regulation?

Moderator: Can the blockchain industry be incorporated into the traditional legal policy framework? Where would it be incompatible?

Zhu Youping:

China still has a long way to go before issuing tokens and legalizing digital currency exchanges. The prerequisites are: First, the blockchain industry is truly capable of self-discipline. Second, the killer application came out. Third, the majority of investors have the ability to prevent flicker. Fourth, the technical means for policy supervision have matured.

The policy has not changed, and everyone should not step on the red line. Don't bet on the policy coming out right away, because it's far away.

If you make a currencyless blockchain, policies are encouraged. There is no question of non-integration and incompatibility here. You can roll up your sleeves and dry.

Bai Liang: The problem with public chain supervision is how to integrate decentralized community governance with strong center supervision. They are not completely contradictory, but there are realistic conflicts in terms of the concept, scope, and methods of supervision. From the perspective of technical supervision, there is no regulatory compatibility issue, and the blockchain can be treated in accordance with the normal technical supervision mode. But the difficulty of financial supervision lies in the tokens generated based on the blockchain model.

The strong central supervision here refers to the centralization of the supervision object, that is to say, a subject must be determined first, and rules must be formulated for it. However, in decentralized community governance, it is not necessary to specify the subject, and most of them advocate anonymity, and the subject's code of conduct is regulated by procedures. It is more difficult for external supervision to formulate a code of conduct for these ambiguous subjects and let them comply. Not to mention that many people think that procedures are norms, so why need supervision to regulate them?

It does not refer to the strong centralization of the supervisory agency. Since it is a supervisory agency, it must be centralized and decentralized, so it is not an institution.

At present, there are two commonly used supervision methods of financial supervision: one is subject supervision (who is doing it), and one is behavior supervision (what is it doing).

From the perspective of main body supervision: Although the public chain is decentralized, most of the public chain's initiation teams and management methods are still centralized or semi-centralized. Of course, overall, it is difficult to supervise the main body.

From the perspective of behavioral supervision: First, the connection between Token and the fiat currency trading market. This part of the compatibility issue is relatively large and is the focus of current regulatory disputes. The second is the transaction rules of the Token market. Community transactions are relatively simple. Cross-community and transactions between different tokens still require regulatory rules.

Zhang Ye:

The actual and due supervision I just mentioned reflects a certain tension in innovation and supervision. In fact, there is always tension between technology and law. From the logic of legal operation, all activities should be carried out within a framework consistent with legal requirements. If the law is relatively lagging due to the development of science and technology, it cannot properly reflect the requirements of advanced productive forces, and it cannot reflect the actual needs of social and economic development, and it should be revised accordingly in accordance with procedures.

The current SEC's regulatory model is under the existing legal framework, but recently it is said that the United States is drafting the "Cryptocurrency Law", speculation is to form a more appropriate legal framework.

However, the amendment of the law needs to be based on a certain mature practical experience. In this process, many countries have proposed a sandbox model such as supervision.

In my opinion, the reason why blockchain is incompatible with the law is that we use new technologies to solve existing business problems, but the existing legal regulatory framework is no longer applicable. We say that this is not entirely the result of the decentralization feature.

Moderator: Is it feasible to be regulated after the chain reform? In general, China's policy on blockchain is to encourage the empowerment of the physical industry, but to suppress the financial attributes. What do you think?

Zhu Youping:

Chain reforms have empowered the real economy, and asset on-chain is the general trend, including asset dataization, data tokenization, and token securitization.

Token is one of the core elements of asset on-chain. The role of tokens: financing and incentives.

We believe that compliance has three paths.

First, under the regulatory policy, compliance tokens can follow the path of combining traditional finance with chain reform + listing. First, open up traditional compliant financial financing channels. Second, open up a compliant secondary market trading channel. The Stock Exchange is a path that works.

Second, token points incentives, which belong to the account, not the coin, are in the category of currencyless blockchain.

Third, the use of foreign capital. Financing overseas legal tokens, and then using foreign capital to promote the application of domestic blockchain projects. This is a legitimate thing to do in a legal place, to achieve a win-win situation.

Moderator: Will there be a compliant virtual asset trading platform in mainland China in the future?

Zhu Youping:

The emergence of compliant virtual asset trading platforms in China is still far away.

I know that the Cyberspace Office is launching a project to discuss the regulatory policies for token and digital currency transactions. Some research shows that there have been improvements, but the policies are not immediately forthcoming.

Supervising Shahe, a sunny avenue for blockchain supervision?

Moderator: Li Wei, Director of the Science and Technology Department of the Central Bank, mentioned in September 2019 that the Chinese version of the “regulatory sandbox” will be the first to be piloted in 10 cities including Beijing, Shanghai and Guangzhou. However, including Guiyang, Ganzhou, Qingdao, and Hangzhou, blockchain sandboxes were started in 2017 and 2018. Is this the same thing as the sandbox we are discussing today?

Zhu Youping:

The “Supervision Sandbox” mentioned by the Director of the Science and Technology Department of the Central Bank is the implementation of the policies issued by the CBRC. It's a real policy sandbox. Guiyang, Ganzhou, Jiangxi, Laoshan District, Qingdao City, Hangzhou Bay and other sandbox concepts. Mr. Cai Weide's Tianmin (Qingdao) International Sandbox Research Institute is engaged in sandboxing, such as "Taishan Sandbox". They are projects, not policy sandboxes.

The policy sandbox is characterized by the use of blockchain technology platforms for supervision and determination of the policy red line, allowing enterprises to break through non-red line policy provisions and innovation. Successful promotion, failure reminder, punishment, shutdown, and maximum protection for innovation.

The private sandbox provides a blockchain technology platform for policy use, or calls it a sandbox, and runs blockchain projects on it.

Moderator: At present, many countries around the world have regulatory sandboxes. What are the similarities and differences between these sandbox systems? What aspects are worthy of attention and reference?

Bai Liang:

There are different regulatory agencies, for example, the departments that issue regulatory sandbox rules vary from country to country:

Mainland China: Central Bank, Local Financial Supervision Bureau

United States: National Economic Council (NEC)

United Kingdom: Financial Conduct Authority (FCA)

Singapore: Singapore Financial Supervisory Authority (MAS)

India: Indian Ministry of Insurance Regulation and Development (IRDAI)

Hong Kong, China: Hong Kong Monetary Authority, Hong Kong Securities and Futures Commission, Hong Kong Insurance Regulatory Authority

In addition, there are some differences in dimensions, as follows,

Entry methods are different: approval system, record system.

Entry subjects are different: licensed, non-licensed.

Entry conditions are different: number of users, risk exposure limits, etc.

The focus of the experiment is different: financial innovation, fintech innovation.

The goals and focuses are different: encourage innovation, prevent risks, and build a financial center.

The value is not worth learning. The key lies in what our development goals are and whether such experimental rules are conducive to achieving the goals.

Where is the way to break the public chain and digital currency supervision?

Moderator: You have predicted that "digital currency builds a new global currency system", "the digital asset market is booming and maturing", super-sovereign digital currency and digital asset market, what are the challenges facing these two areas of regulation?

Bai Liang:

Regarding digital currencies, the regulators and central banks of major economies have responded quickly, but due to different interests, positions, ideas, regulations, etc., their final attitudes and supervision methods are different.

The current operating cost of the global monetary system is very high, and digital currencies will inevitably impact the existing system. In addition to Libra, other strong non-sovereign currencies are expected to emerge. How to get along with them, how to compete with them, and how to establish international competitiveness under the new currency system are new challenges.

Difficulties in the innovation and supervision of non-sovereign currencies: the initial stage of innovation under control. It should be noted that the understanding and controllable scope of controllability of different economic regulators are different, so the differences will be very large. However, it is a consensus to innovate and face.

At present, the biggest difference in supervision between countries is the transaction of virtual currency (a part of digital assets). The issuance and trading of virtual currency is completely prohibited in some economies, and some economies are permitted on a small scale with conditions. Among the major economies, they have not been fully liberalized.

Mainland China's current policy is to completely ban virtual currency transactions. But the regulatory sandbox pilot has already begun. Within the scope of the sandbox, it is unknown whether public currency-based virtual currency issuance and trading pilots are allowed. Beijing's regulatory sandbox is currently only open to licensed financial institutions.

Capital markets based on blockchain technology, based on the Token system, and based on the digital world will definitely develop in order to meet the needs of technological development and economic development. However, such capital market rules also need to be constructed from scratch. There will be a breakthrough in the next ten years.

Moderator: How is the alliance chain regulated? How is the public chain regulated? Is it necessary to set a node with super privileges?

Bai Liang:

Blockchain regulation is not only financial, but also involves other rights of participants. Such as privacy protection issues, data ownership and flow issues. It is a gradually completed system construction, and there is still a long way to go. Both the alliance chain and the public chain are still in the early stages of development.

The alliance chain is relatively easy to monitor because the participating entities are easier to confirm. There may be two methods of public chain supervision, or a combination of the two: on-chain supervision and off-chain supervision. The community can decide whether to accept in-chain supervision. But there should be more uniform rules for off-chain supervision.

In-chain supervision refers to the introduction of supervision nodes in community governance. The community can decide for itself whether to introduce regulatory nodes. Supervision can determine the rules and intensity of off-chain supervision depending on whether there is on-chain supervision.

Regulation cannot be forced into the chain unless the community accepts and becomes part of community governance. But regulation can set rules outside the community. Communities need to face regulatory rules if they want to interact and transact outside the community.

Moderator: On December 27, the China Securities Regulatory Commission, Beijing Securities Regulatory Bureau issued the "Risk Tips on Further Regulating the" Virtual Currency "Trading Activities". Shanghai Municipality issued a notice jointly with the Joint Office of Financial Stability and the Mutual Funds Remediation Office of the Shanghai Headquarters of the People's Bank of China. Why are the subjects of the two rectification documents different?

Zhang Ye:

Generally speaking, China's financial supervision of digital currencies mainly has three relatively independent and related bases.

The first was established by the State Council on January 8, 2007, and the inter-ministerial joint meeting system for disposing of illegal fund-raising led by the CBRC [Guo Han [2007] No. 4] belongs to the "Disposal of Illegal Fund-raising", which is second only to the administrative regulation level The Regulations are expected to be promulgated soon during the consultation draft stage.

The second is the "Decision of the State Council on Clearing Up and Rectifying Various Trading Places and Effectively Preventing Financial Risks" issued by the State Council on November 24, 2011. Except for the establishment of trading venues for futures trading in accordance with the law with the approval of the State Council or the State Council's futures regulatory agency, any Units are not allowed to conduct standardized contract transactions through centralized trading methods such as centralized bidding, electronic matching, anonymous transactions, and market makers. Trading venues engaged in trading of insurance, credit, gold and other financial products must be established with the approval of the relevant financial management department of the State Council.

Third, on April 12, 2016, the General Office of the State Council issued the "Notice of the General Office of the State Council on Printing and Distributing the Implementation Plan of Special Rectification Work on Internet Financial Risks". The special rectification work on Internet financial risks carried out based on this is to encourage and protect the truly valuable Internet Financial innovation, rectifying illegal behaviors, effectively preventing risks, establishing a long-term regulatory mechanism, and promoting the orderly development of Internet financial regulations. It was originally planned to be launched for a year, mainly targeting online lending platforms, but it has been in operation until now and is expected to exist for a long time, and the rectification has been oriented to digital currency related activities.

Many of the above three bases and related regulatory agencies are actually overlapping. For example, the CSRC and the relevant local securities regulatory bureaus will participate in and dispose of the above three types of illegal and criminal activities, but the specific bases may be slightly different when handling individual cases.

For example, the “Announcement on Preventing the Financing Risk of Token Issuance” issued by the seven ministries and commissions on September 4, 2017. From a practical point of view, this regulatory action is mainly led by the Internet financial risk special rectification work leading group.

From the regulatory announcement issued by the Beijing Securities Regulatory Bureau and the central bank's Shanghai headquarters, the basis is still the announcement of September 4, 2017.

However, there is some new information, such as clarifying some previously unclear regulatory calibers. For example, companies that provide drainage and services for exchanges registered overseas are also included in the scope of remediation.

Moderator: At present, China does not have a long-term regulatory mechanism for blockchain, which has given entrepreneurs a sense of uncertainty and insecurity to a certain extent. What are the common legal questions about blockchain projects? Where is the latest policy trend and constant red line?

Zhang Ye:

Some people think that our policy is universally against currency, and I do not agree with it.

General Secretary Xi proposed that the application of the blockchain industry should "open up the innovation chain, application chain and value chain". My understanding is that the blockchain technology should be combined with specific application scenarios to create an innovation chain. Blockchain applications must follow specific business logic and carry real transactions to build an application chain. The blockchain ecosystem as a system must be able to output real value to the outside world to build a value chain.

The application of blockchain technology is carried out under the conditions that follow the development logic of the application of blockchain technology, which is legal and compliant. I personally think that the regulatory activities in China have not negated the role of tokens, but they cannot be used to illegally raise funds and related excessive speculation in illegal financial activities or even fraudulent activities.

Moderator: On September 10th, Gemini and Paxo formally announced the launch of Gemini Dollar (GUSD) and Paxos (PAX), compliant stablecoins approved by the New York Financial Services Authority (NYDFS), which are anchored to the US dollar at a 1: 1 rate. Do you think it is possible for the Chinese regulatory authorities to approve the stablecoin anchored in RMB? In addition, is it possible for China to follow up with the STO?

Zhang Ye:

The stablecoin is essentially to meet the needs of investors and users in the use of digital currency and the value scale of transactions. The reason for its creation is to solve the exchange between cryptocurrencies and fiat currencies. An ecologically stable coin is enough to affect the currency systems of major countries in the world, such as Libra.

In my opinion, on the one hand, China does not currently recognize that securities can be issued in the form of tokens. On the other hand, DC / EP is "coming out" and it is unlikely that the regulatory authorities will approve the RMB stablecoin.

STO is a security token issuance. From the perspective of the US operation, token financing activities are mainly regulated and included in the supervision according to relevant securities issuance exemptions. These exemptions are mainly for small and medium-sized enterprises and technology-based startups that meet certain conditions. For financing needs, mainstream IPOs have not yet entered this framework.

China's securities issuance system is different from foreign countries. It is quite likely that the securities issuance exemption clauses on which the STO is issued are based on the equity crowdfunding that China once planned to include in the regulatory system. However, China's equity crowdfunding laws and regulations have gone from the draft for comments to the draft amendments to the Securities Law and were finally deleted in the formally adopted Securities Law. It is unlikely that corresponding laws and regulations will be promulgated in the short term.

In the future, will it be possible for China's token securitization issuance transactions to be gradually incorporated into the legal framework? Article 2 of the newly revised China's "Securities Law" stipulates that within the territory of the People's Republic of China, the issuance and trading of stocks, corporate bonds, depositary receipts and other securities recognized by the State Council in accordance with the law shall apply this law. Article 39 provides that the securities bought and sold by the parties to a securities transaction may be in paper form or other forms prescribed by the securities regulatory authority under the State Council.

In theory, these regulations preserve the possibility of future adoption of blockchain technology in the field of traditional securities issuance and trading. Session 2: "SheKnows' End of Year Debate | Talking about Bubble Discoloration?" Layout of blockchain, capital will never sleep! 》 Https://www.8btc.com/article/542012

Session 1: "SheKnows's End of the Year Debate | Big Companies Get Into the Game, Can a Startup Company" Anten the Elephant "? 》 Https://www.8btc.com/article/541891

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