The Chinese government announced today that companies using distributed ledger blockchain technology in the country must adhere to strict new regulations requiring them to censor content, allow authorities access to data and identify users.

The new regulations go into effect on Feb. 15, and will be enforced by the Cyberspace Administration of China.

The CAC is the central internet regulator, censor, oversight and control agency for China and is tasked with enforcing regulations over usernames, appropriateness of remarks made online, virtual private networks, the content of internet portals and more.

The legislation, named “Regulations on the Management of Blockchain Information Services,” was proposed in October as a draft. The CAC said in a statement, reported by Reuters, that the regulation would “advance the industry’s healthy and orderly development.”

Under the regulation, blockchain service providers must register with the agency within ten days of offering services to the public. Companies found in violation of the proposed regulations could be subject to fines or prosecution.

According to Reuters, blockchain services will be required to provide real identities for blockchain users via China’s National ID or telephone number, censor content and store user data. The draft regulation submitted in October included provisions that required retain this data for six months and provide this information to law enforcement when required.

This level of in-depth user information, known in the financial industry as “Know Your Customer” or KYC, is usually common only in highly sensitive industries such as banking, lending, securities trading and payment processing as part of money laundering regulations. In the case of the CAC regulation, however, this rule will be applied to all blockchain services.

“The blockchain information services referred to in the regulations focus on the blockchain technology or system, providing the public with information services in the form of internet stations and applications,” Deng Jianpeng, a professor at the Central University of Finance and Economics, told Coinness.com. “Therefore, all internet companies should pay special attention to the fact that if they rely solely on the internet to provide information services, their actions shall be covered by the regulations.”

Also, as part of the legislation, blockchain providers in highly regulated fields would be required to obtain licenses from overseeing authorities before registering with the CAC. Such fields include news reporting, publishing, education and the pharmaceutical industry.

Even noncommercial implementations of blockchain networks running nodes in China would be subject to this regulation, requiring operators to register with the CAC and provide access.

China is no stranger to ever-increasing regulations regarding blockchain-based cryptocurrencies such as bitcoin and others. In September 2017, rumors that China planned to “crack down” on initial coin offerings, a funding method involving selling blockchain-generated currencies to raise capital for startups, came to light and then regulators banned ICOs pending review.

Later that month, the Chinese central government expanded that ban to cryptocurrency exchanges when the Central Bank of China ruled that all companies dealing with cryptocurrencies would no longer be legal.

In spite of crackdowns and increased regulation, major cities in China continue to fund blockchain projects in an attempt to encourage growth. They include $1.6 billion in funding from Hangzhou with the Xiong’An Global Blockchain Innovation Fund and a $1.5 billion blockchain investment fund launched by Nanjing City.

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