China bans anonymity but is actually helping crypto

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The Chinese Communist Party (CCP) is notorious for preventing their citizens from accessing certain information on the internet, while also policing the creation and dissemination of content by the same people. This has become known as “the Great Firewall” and has a number of implications:

  1. Chinese citizens have very little access to information that goes against the beliefs or desires of the CCP. Many times this information would aid the population in forming diverse opinions, being educated on historical facts, or having a greater ability to communicate and/or coordinate resources in private.

  2. Many internet giants of the western world have been kicked out of China because they refuse to grant the Chinese government’s censorship requests. These include Facebook, Google, Twitter, etc. Each company would benefit significantly from signing up the country’s 1.3 billion people — just think of the advertising revenue alone.

  3. Chinese citizens have a number of China-based information or communication platforms available to them, but each of these is heavily monitored by the government. For example, the CCP will publish lists of words, phrases or topics that are prohibited from being used on different news or messaging services. These lists can be enforced because the government has significant control and power over the service providers.

This level of censorship is used to control the population and ensure there is as little dissent as possible. Which brings us to blockchain technology — an immutable ledger that has been celebrated as a censorship resistant option for transferring information and value.

The hope has been that truly decentralized networks could empower the oppressed to gain access to previously forbidden information, allow them the ability to conduct financial transactions at will, and create a unique way for them to publish information that may have been suppressed in the past. As you may expect, some Chinese citizens have found this value proposition to be incredibly compelling.

Last year, two separate incidents gained popularity on Chinese social media, were subsequently removed and blocked by the government, and then eventually posted on the Ethereum blockchain to circumvent the CCP’s censorship. The first was when a female accused her university of improper handling of a sexual harassment case from 20 years ago and the second was an investigative article that highlighted the wrongdoings of one of China’s largest pharmaceutical companies. In both cases, blockchain technology was used as a last resort to escape the censorship of the government and ensure that specific information could be widely disseminated.

The Chinese government is obviously not a fan of their citizens having the ability to do this, so they are finally fighting back. Yesterday, the Cyberspace Administration of China (CAC) released new rules titled “Regulation for Managing Blockchain Information Services.” This is noteworthy for a few reasons:

  1. The Cyberspace Administration of China is essentially the government arm responsible for censoring and policing the internet in China. They have previously been involved in creating new censorship rules, requesting certain services take down specific content, and even issuing directives to Chinese media companies on what and how to report certain news.

  2. The rules released yesterday will require any website or mobile app involved directly or indirectly with blockchain technology to register their names, domains, and server addresses with CAC within the first 20 days post-February 15th (the day rules go into effect). They also require that any company grants the government access to stored data, while also documenting their user bases through collection of ID cards or mobile numbers.

  3. Any blockchain company will also be subject to monitoring and enforcing all censorship rules that are imposed by the Chinese government. If a company fails to do so, they could be fined or face criminal charges.

The goal of these rules appears to be the removal of anonymity from blockchains, along with an increase in control for the Chinese Communist Party. Honestly, it shouldn’t be surprising to anyone that the leaders of one of the most censored countries in the world wants to continue censoring.

But just because the government wants to censor their people, doesn’t meant that they will be successful though. Any blockchain run by a centralized entity in China will have a hard time sidestepping this new regulation, but decentralized public blockchains like Bitcoin and Ethereum should be immune. In these cases, the CCP has no centralized entity or individual leader to shut down, fine, jail, or kill. The are simply defeated by decentralization.

Some are already talking about the negative impact these rules will have, but I don’t agree. I actually think the Chinese government is inadvertently helping the blockchain and crypto industry. By fighting the anonymity and benefits of the technology, they are increasing awareness among Chinese citizens, while also clearly articulating the value proposition. There are plenty of individuals in China who won’t change their daily activities because of this, but a subset of the population is likely to flock to the censorship resistant public blockchains.

People don’t like being told what to do. They hate it even more if they feel like their government is doing something that hurts the population but helps those in power. Similar to the previous ban on alcohol in the US, this move by the Chinese government is likely to drive increases in adoption.

As we watch how the situation plays out, remember this is why we are here. There are few times in history where a piece of technology can materially improve the way of life for a large percentage of the global population — fortunately, blockchain has that chance.

Whether it is money or information, every human deserves to live in a world free of censorship and oppression.


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