Tencent blockchain report: embrace the chain into the rule of law, strictly control the risk of currency

Block chain governance: embrace chain into the rule of law, strictly control the risk of currency | 2019 tencent network law observation
Source: tencent research institute
Author: wang yanchuan, professor, school of humanities and economics, northwestern polytechnical university



On January 11, 2020, the third "science and technology to good" annual forum legal policy sub-forum "good law and good governance -- digital social governance" hosted by tencent research institute, tencent research institute released the fourth annual report on Internet legal policy "digital transformation and governance innovation: global Internet law and policy observation in 2019". The report, completed by the legal research center of tencent research institute, covers nine topics, including network platform governance, data governance, network copyright, digital competition, minors' network protection, Internet finance, artificial intelligence governance, block chain governance, and legal science and technology. Each topic will be published in the public account of tencent research institute one after another, and this is the block chain governance article! "block chain governance: embracing the chain into the rule of law, strictly controlling the risk of currency". For full report, please fill in the questionnaire at the end of the document.

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1. Launch the blockchain strategic framework and actively promote the development of blockchain

1. Governments are competing for the platform of blockchain, hoping to occupy the commanding high point of blockchain application

2. China advocates the application of block chain in all sectors of society to promote good governance of society

(ii) blockchain application belongs to the "land of law" and should be included in the national governance map

1. Recognize the legal status of cryptographic assets and smart contracts and seize the cryptographic trading market

2. Sorting out the types of digital currencies and implementing differentiated regulatory policies

(iii) to control the application risk of block chain through various regulatory methods

1. Blockchain service providers are the "grippers" of blockchain regulation

2. Crack anonymous trading to increase trading transparency

(iv) the regulator opposes the libra currency, and the central bank plans to introduce a national digital currency

1. International regulators' attack on libra currency

2. Central Banks plan to introduce national digital currencies

(v) outlook: from "rule of code" to "rule of law"

The body of the

2019 is an important starting point for global blockchain governance. Since the launch of the first bitcoin in 2009, governments around the world have failed to actively govern blockchain and its application. Second, there is no consensus on whether the application of cryptocurrency and smart contract on the block chain is subject to legal adjustment. Third, the cryptographic assets and transactions supported by blockchain are relatively small, which does not cause significant social risks. Ten years later, blockchain technology is becoming more and more mature, the wealth built around blockchain has taken shape, [1] academic research on blockchain and its application is also becoming more and more mature, these factors have changed the "inaction" attitude of governments in various countries, and promoted the governance of blockchain. In 2019, there are three phenomena in blockchain governance: first, countries generally recognize the economic value of blockchain, build the image of "blockchain friendly government" through various ways, and give blockchain application products legal status; Second, open the block chain substantive supervision, reduce the block chain application risk; The third is facebook's Libra white paper, which has sparked a global digital currency war, with major digital companies and central Banks contemplating their own digital currencies to capture domestic and global payments and settlement markets.

1. Launch the blockchain strategic framework and actively promote the development of blockchain

1. Governments are competing for the platform of blockchain, hoping to occupy the commanding high point of blockchain application

The us is the earliest and most active country in blockchain application, and the us government continues to encourage the development of blockchain. Book in the U.S. house of representatives financial services committee, face to the libra COINS to hold a hearing a few days ago, on July 9, 2019, the senate commerce, science and transportation committee approved in 2018 by the representative through the block chain promotion act, [2] asked the U.S. department of commerce, establish "block chain" as standard definition, broken block chain of states was sexual knowledge together, in order to promote business and government leaders in a way of understanding and coordination of discussions between the chain block and its application. In order to implement the act, the Commerce Department must establish a working group of interested agencies within 90 days and submit a report to congress within one year of the act's enactment, recommending blockchain definitions, research topics, and opportunities for federal agencies to use blockchain. The significance of the bill is as follows: first, the bill has been supported by both the house and the senate, indicating that blockchain technology has been recognized by the mainstream value of the United States. Second, the act advocates a breakthrough in the application of blockchain at the state level, [3] arguing that blockchain can provide services to the federal government, prevent and reduce tax fraud, eliminate bureaucracy and reduce waste. Finally, the enactment of the act marks the federal government's intention to establish a prudent governance framework to oversee the possible implementation of blockchain technologies in the various public sectors, providing guidance for future applications of emerging technologies and preventing their risks.

Other countries also see blockchain as an unstoppable technological force, and have implemented blockchain support plans. On March 18, 2019, Australia released the blockchain map strategy, which aims to promote the development of blockchain "regulation, technology and building capacity, as well as innovation, investment and international competitiveness and collaboration", hoping to help Australia become a global leader in the emerging blockchain industry. [4] on September 18, 2019, the German economy and the department of energy (doe) and the ministry of finance jointly issued the "German national block chain strategy", the German government plan by the end of 2021 in the five areas to take measures to encourage the development of chain blocks, "strategic", points out that block chain technology is the foundation for the future of the Internet, Germany will further consolidate the leading position in the field.

2. China advocates the application of block chain in all sectors of society to promote good governance of society

On October 24, 2019, the political bureau of the communist party of China (CPC) central committee conducted a collective study on blockchain. General secretary xi jinping pointed out the need to accelerate the development of blockchain technology and industrial innovation, and actively promote the integrated development of blockchain and economy and society. At the fourth plenary session of the 19th central committee of the communist party of China (CPC) held on October 31, general secretary xi jinping pointed out that social governance should be strengthened and innovated to improve the system of social governance supported by science and technology. If general secretary xi jinping's two important instructions are combined and analyzed, it can be seen that China's block chain positioning should not be limited to the economic level, but will expand to all sectors of society. Block chain can lay the foundation of trust for the digital society and promote good governance of society. [5]

(ii) blockchain application belongs to the "land of law" and should be included in the national governance map

1. Recognize the legal status of cryptographic assets and smart contracts and seize the cryptographic trading market

There is no worldwide consensus on whether cryptographic assets are protected property or whether smart contracts have legal force. [6] Britain has taken a crucial step. In November 2019, the UK issued an important legal statement establishing the legal property and contractual status of cryptographic assets and smart contracts. In his introduction to the declaration, Lord chancellor Geoffrey vos, who led the declaration, said that although cryptographic assets have characteristics that are different from traditional property, such as virtuality, cryptographic authentication and distribution, they still have all the characteristics of property and are therefore legal property. Smart contract is a legal way to transfer ownership and value between two parties. The UK's legal status for cryptographic assets and smart contracts is aimed at achieving the UK's position as a global fintech leader. [7]

Germany has long banned Banks and financial institutions from selling digital assets to customers, but the country is poised to pass legislation that would give Banks the right to sell digital currencies, including bitcoin, and recognise Banks as custodians of digital currencies. The bill is said to have been endorsed by the banking association. The new law could propel Germany to become the next cryptocurrency hub. [8]

2. Sorting out the types of digital currencies and implementing differentiated regulatory policies

On January 23, 2019, the financial conduct authority (FCA) issued the cryptocurrency asset guide, which shows the flexible and neutral attitude of the UK in the regulation of cryptocurrency, which is also a major good news delivered by the UK government to the digital currency market.

The main content of the guide is to give instructions on the classification and regulation of cryptocurrencies, clarify the responsibilities of regulators, and help consumers choose digital currencies and judge transaction costs and risks. The guide divides cryptocurrencies into three categories: first, decentralized exchange tokens such as bitcoin and litecoin are not regulated as they are not issued by national financial institutions and exchanges that exchange such currencies are not regulated. [9] second, securities tokens are assets "identical or similar to traditional instruments such as stocks, bonds or units in collective investment plans". These tokens are special investments, and [10] are subject to the regulated conduct act. As a negotiable security, securities tokens are traded on the capital market and are subject to the European Union's market in financial instruments directive. Third, practical tokens are those that give users access to the product but do not grant the same rights as security tokens, unless they are defined as electronic currency in order to be eligible for the electronic currency act, otherwise they are not regulated.
According to the guide, companies engaged in regulated token business need to apply for a licence and obtain authorization from the financial conduct authority, or obtain exemption from the requirements of prospectus, transparency and other requirements, otherwise the relevant personnel will be held criminally liable. The guidelines also aim to create a sandbox regulatory environment conducive to the development of crypto-assets, meaning that companies in the sandbox will enjoy separate guidance from the financial conduct authority and some exemption requirements.

Under the influence of the United Kingdom, on March 28, 2019, the securities and futures commission of Hong Kong issued the "statement on securities issuance", stating that securities issuance (STO) [11] should be included in the regulatory scope and should be licensed or registered in advance, otherwise it would be regarded as a criminal offence. Since securities tokens are "complex products" and can only be sold to professional investors, the issuer should take additional investor safeguards such as due diligence and risk warnings.

(iii) to control the application risk of block chain through various regulatory methods

1. Blockchain service providers are the "grippers" of blockchain regulation

On 14 January 2019, Singapore's parliament passed the payment services act, which aims to bring digital currency transactions into compliance through the licensing system. Under the act, licences relating to digital currency business are divided into money changers, standard payment institutions and large payment institutions. Money changers are less regulated because of their small volumes. Both standard payment institutions and large payment institutions are subject to more regulation. According to the act, digital currency exchanges, wallets, mining pools and OTC platforms are all considered payment service providers and need to apply for appropriate licenses to operate in compliance. Since the enactment of the act, the relevant organisations have filed with the hkma licence within six months. [12] companies applying for licences also need to meet anti-money laundering requirements, verify the identity of customers and report suspicious transactions to the hkma. Enterprises applying for licences should meet the basic technical safety requirements of the hkma. These companies need to be subject to regular spot checks by the hkma to avoid irregularities and penalties such as licence revocation. [13] the act removes Singapore's digital currency industry from the gray area of supervision and moves Singapore into a country with a digital currency regulatory system.

On March 15, 2019, Japan's cabinet approved an amendment to the financial Commodity Exchange act, which sets a time limit for cryptocurrency exchanges to apply for a license. Starting from April 2020, when the amendment is expected to take effect, quasi-exchanges that fail to complete their applications within 18 months will not be allowed to continue operating.

On January 10, 2019, four days after the adoption of the payment services act in Singapore's parliament, the state Internet information office (cac) issued the regulations on the management of blockchain information services, requiring both the block chain information service providers (including node ips) and users to complete registration procedures and register their real names. To be specific, the block chain information service provider [14] shall, within 10 working days from the date of providing the service, fill in the information of the name, service category, service form, application field, server address and other information of the service provider through the block chain information service filing management system of the state Internet information office, and go through the filing procedures. [15] the cyberspace administration of China (cac) shall regularly check the archival information of the block chain information service, and the providers of the block chain information service shall log into the archival management system of the block chain information service within a specified period of time to provide relevant information. In addition, blockchain information service providers should also fulfill relevant security obligations.

2. Crack anonymous trading to increase trading transparency

Anonymous transactions are a major feature of blockchain, but anonymity has also created regulatory headaches, such as digital currencies used for payments becoming "stealth currencies," potentially new tools for criminals to launder money and finance terrorism, and hampering law enforcement agencies from tracking money flows. To remove the anonymity of transactions, the way to track money and transactions on the blockchain is to "know your customer (KYC)," in which the blockchain service provider performs due diligence on the customer. 2019 saw a new move to eliminate anonymous transactions.

In June 2019, anti-money laundering financial action task force (FATF) released the encryption monetary regulatory standards, eliminate encryption of monetary anonymous Suggestions, will first virtual assets locked as the object of supervision, service provider or exchange for the registration or registration, then the service provider or exchange the originator and maintain accurate information and the beneficiary of the virtual assets transfer information, so that when the authorities need to provide. The service provider or exchange is required to keep transaction records and provide them to the relevant authorities when necessary. On October 30, 2019, anti-money laundering financial action task force and called on the authorities "set clear guidelines or regulations, in order to allow hit by anti-money laundering/funding terrorism purpose regulatory entity use reliable independent digital ID card system", at the same time, suggest that the regulated institutions (encryption currency exchange) should be "based on risk knowledge method, rely on digital ID system for customer due diligence." [16]

In South Korea, most cryptocurrency exchanges have a KYC program to process digital currency transactions, and exchanges must keep separate records and detailed personal information for each user. On October 25, 2019, South Korea is studying a tax on capital gains from the sale of digital assets. [17] the tax will increase the transparency of all aspects of digital currency transactions, allowing the government to obtain detailed histories and personal information of cryptocurrency transactions. With these measures in place, it is almost impossible to trade digital assets anonymously in South Korea, except for fully decentralised exchanges and obscure markets.

In contrast, the way to deal with anonymous transactions in China is more direct and more thorough. According to the regulations on the management of blockchain information services, the providers of blockchain information services shall, in accordance with the provisions of the network security law, authenticate the users of blockchain information services with real identity information based on the organization code, id number or mobile phone number. If the user does not authenticate with real identity information, the blockchain information service provider shall not provide relevant services for the user. [18]

(iv) the regulator opposes the libra currency, and the central bank plans to introduce a national digital currency

1. International regulators' attack on libra currency

On June 18, facebook released a libra white paper, saying the project will serve global payments and settlement. After the white paper was published, it attracted worldwide attention. The U.S. house of representatives financial services committee hearing held three consecutive in half a month, hearing many industry insiders lashed out at the libra COINS, a congressional hearing on the representative view, "such as payment and settlement infrastructure should not let a large bank or big technology companies to control, on the contrary, the federal reserve and other regulators need to continue to be a leader in banking innovation." [19]

There are two main reasons to object to the introduction of libra COINS by facebook. One is that stability COINS are high-risk digital currencies with a range of issues including value volatility, confidentiality and privacy, anti-money laundering, KYC, consumer protection and financial stability. [20] they should not be allowed to be issued until these issues are resolved. [21] the second is the fear that librans could threaten the central bank. "The core element of national sovereignty is the issue of currency, and we will not leave that to the private sector," said Olaf scholz, Germany's finance minister. [22] international institutions such as the financial stability board (FSB), the European banking authority (EBA) and the bank for international settlements (BIS) have said that international Allies should be kept in close contact to prevent the libra from becoming an alternative currency, as have regulators in Germany, France, India and Singapore.

2. Central Banks plan to introduce national digital currencies

The introduction of libra COINS prompted the central bank to promote national digital currency. [23] this initiative has a dual effect: it can prevent super-sovereign issuers from replacing the central bank, and strong regulation can also eliminate the risk of national digital currency by supporting digital currency with strong national credit. The other is the use of digital currencies as an alternative to the dollar-dominated international monetary system, which is plagued by problems such as liquidity shortages, downward pressure on government bond rates and uncertainty about reliance on the federal reserve.
China is one of the first countries to research and develop digital currency. In 2014, the central bank set up the legal digital currency research group to research and develop national digital currency. In order to publish and operate digital currency, the central bank has applied to the state intellectual property office for 74 patents related to digital currency. On July 8, 2019, wang xin, director of the central bank's research bureau, revealed that the state council has officially approved the central bank's digital currency research and development, and the central bank is now organizing market institutions to do the corresponding work. On August 10, mu changchun, deputy director of the payment and settlement department of the people's bank of China, revealed to the outside world that the digital currency of the people's bank of China is "ready to come out".

(v) outlook: from "rule of code" to "rule of law"

2019 is a crucial year for the development of blockchain. Countries have formed a general framework for blockchain governance. Although these frameworks are still relatively rough, they will undoubtedly affect the direction of blockchain governance in the coming years.

Chain management core philosophy is the difference between the block chain and digital currency, for the former, governments will continue to release the goodwill signal, we will vigorously support, the future will be more countries government to follow the United States, Germany, Australia, and the practice of our country, in the form of strategy and policy declared himself as an image block chain supporters, and compete each other, for the commanding heights of block chain technology and application, in order to obtain the maximization of the interests of the state. [24] for the latter, governments and legislative bodies of various countries will conduct empirical analysis, and launch and improve various systematic regulatory measures for the digital currencies included in the regulation, such as securities digital currencies. Institutions such as blockchain service providers and exchanges have become the "entry point" for the government to govern the blockchain ecosystem. By asking these institutions to file and apply for licenses, the government has achieved the effect of "taking each other by the point". Anti-money laundering and the fight against terrorist financing remain central to all regulatory programs, giving blockchain service providers and exchanges the obligation to conduct due diligence on their customers and obtain useful information for government use if necessary. Cracking anonymous transactions and enabling real-name transactions on blockchain remains the direction of efforts of regulators in various countries.

The use of efficient and convenient digital currencies for payment and settlement is becoming a major trend, and [25] publishing and operating digital currencies will be an area of intense competition for the next few years among large digital companies, as well as between companies and central Banks. As the central bank and the enterprise own digital currency, must also will produce a new round of social risks, such as operators, the network security risk, fraud, consumer protection and financial crime risk, as well as the potential financial systemic risk and stability problems, and research the causes of these risks, seek the measures to solve the problem, to reduce transaction risk, maintain financial market stability is the key of the national supervision. [26]

Block chain pursues "code governance", [27] however, the inevitable trend of block chain governance is from "code governance" to "law governance". Legislative and judicial organs of various countries will follow the example of the UK and recognize the legal status of cryptographic assets and smart contracts, so as to ensure the expectation of stakeholders in block chain transactions and protect their interests. Encryption, however, assets and intelligent contract is different from traditional property and features of the contract, [28] as the encryption assets and intelligent contract is recognized by the law, the resulting work is how to make these systems into existing "property law" "contract law" and other laws, through system innovation, let all of the assets encryption and intelligent agreement of the parties can get real legal protection.

References:

[1] according to data published by CoinMarketCap, as of October 7, 2019, there are 2,963 cryptocurrencies in the world, with a total market value of more than $200 billion. According to data from SECBIT lab's smart contract monitoring platform, a total of 95,139 smart contracts were created for ethereum's main network in October 2018.

[2] see https://www.cnet.com/news/senate-moves-blockchain-promotion-act-forward/

[3] as one expert pointed out, "the senate's passage of the blockchain facilitation act creates an opportunity to promote the technology at the federal level and to make more government organizations aware of how the technology brings greater transparency and efficiency to their work." See https://cointelegraph.com/news/us-moves-closer-to-accepting-blockchain-still-uncertain-over-crypto

[4] see People's Daily online: how do countries greet the arrival of the blockchain era? , https://www.jinse.com/blockchain/538440.html

[5] see wang yanchuan, blockchain: building the trust foundation of digital society, guangming daily (rule of law edition), November 1, 2019.

[6] although smart contracts are covered in the laws of several American states, the legal effect of smart contracts is not specified. For example, Arizona enacted a law in 2017 that states: "signatures protected by blockchain technology are considered electronic formats and are considered electronic signatures. Historical records or contracts protected by blockchain technology are considered electronic formats and are considered electronic records." In 2018, Florida enacted legislation stating: "a contract cannot be denied its legality simply because electronic records were used in the formation of the contract and because the contract contains a smart treaty."

[7] in response to judge vos's statement, some commentators argued that "this statement is an important milestone for the future of blockchain investment and application. By clearly understanding the legal status of cryptographic assets and smart contracts, enterprises can more confidently realize their potential in transforming financial markets and improving efficiency." See http://m.globallegalpost.com/big-stories/uk-gives-landmark-statement-on-cryptoassets-74649480/

[8] "Germany is becoming a cryptocurrency paradise," says the head of the crypto-asset platform. "German lawmakers are taking the lead in cryptocurrency regulation." See the block chain track: China leads to the German hugs encryption currency, establish national strategy for India, http://baijiahao.baidu.com/s? Id = 1651836389638369575 & amp; WFR = spider& For = PC

[9] the digital currency and its exchanges are still subject to the eu's article 5 anti-money laundering directive (5AMLD), which will be converted into UK law by the end of 2019. [10] FCA determines whether a token is a "special investment" by including but not limited to :(1) the holder of the token has acquired contractual rights or obligations; (2) the holder of the token may share in profits (dividends), earnings or other types of interests; (3) the holder of the token has control, ownership or voting power over the issuer; (4) specify or display tokens as investments in the project white paper; (5) tokens can be traded on cryptocurrency exchanges or other exchanges.

[11] STO refers to a specific token issue that has the attributes of a traditional security offering, which involves the use of blockchain technology to digitally express ownership of assets (such as gold or real estate) or economic rights (such as the share of profits or earnings).

[12] to extend the jurisdiction, applications for licences are not limited to organisations registered in Singapore but to those actually operating in Singapore.

[13] see the the payment services act formally by Singapore: exchange all needs to set out to apply for licence ", http://www.sohu.com/a/290337651_100112552

[14] the so-called blockchain information service provider refers to the subject or node providing the block chain information service to the public, as well as the institution or organization providing technical support for the subject of the block chain information service.

[15] article 11 of block chain information service management regulations.

[16] the financial action task force (FATF) released the global digital identity guide, http://www.bitcoin86.com/news/48022.html

[17] see South Korea: a tax on encryption currency trading is expected to begin in 2020 ", http://www.bitcoin86.com/news/49744.htm

L [18] article 8 of block chain information service management regulations.

[19] see https://www.banking.senate.gov/imo/media/doc/Brown%20Statement%207-30-19.pdf

[20] that was the consensus at talks in Switzerland on September 16th between libra and 26 central Banks, including the federal reserve.

[21] on 18 July 2019, g7 finance ministers and central bank governors agreed that the libra currency raised "serious regulatory and systemic issues, as well as broader policy issues that need to be addressed before such projects can be implemented". See http://www.g7.utoronto.ca/finance/180602-summary.html

[22] see the German government approved a block chain strategy, intended to prevent a stable currency become the alternative currency ", https://www.cebnet.com.cn/20190919/102602266.html

[23] in September 2019, France, Thailand, Saudi Arabia and the united Arab emirates made clear their intention to promote central bank digital currencies, and in October Canada and venezuela also started to promote national digital currencies.

[24] on October 7, 2019, the Ukrainian government plans to formulate policies and plans to legalize mining and establish cryptocurrency tax rules within three years. Currently, many countries, such as the United States and South Korea, also impose taxes on cryptocurrency transactions. In March 2019, Japan passed a draft amendment on cryptoasset-related transactions, stipulating that the tax rate on cryptoasset-related transactions could be up to 45%.

[25] in many developing countries and poor countries people without bank accounts, or state does not provide a good payment and settlement facilities, open an account the ability of the marginalized people, and now has been used widely in the global payment and settlement tools, such as Western Union is very expensive, and SWIFT number money can solve the above problem, as long as there is a new cell phone can surf the Internet, you can solve the problem of domestic and international payment and settlement.

[26] on October 6, 2019, the Liechtenstein parliament unanimously passed a "blockchain act". The bill aims to strengthen investor protection, combat money laundering and promote transparency in transactions. The parliament said the bill would make Liechtenstein the first country to fully regulate the token economy.

[27] see primavera DE philippe, [us] Aaron Wright, blockchain and law: code governance, translated by wang yanchuan, yuanzhao publishing company, 2019.

[28] see wang yanchuan, construction and risk prevention of intelligent contract, law journal, 2nd issue, 2019.

Source:weixin.qq.com

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