Legislation paves the way for blockchain technologies but Beijing is determined national security will not be undermined.
China’s legislature passed a cryptography law on Saturday aimed at safeguarding national security while continuing to promote a rapidly growing encryption industry.
The cryptography law was endorsed by the Standing Committee of the 13th National People’s Congress and will take effect on January 1, 2020, after years of lobbying and public debate.
The law comes at a time when rivalry between China and the US is heating up in areas relating to cryptography, and just a day after President Xi Jinping urged the country to accelerate development of blockchain technologies.
“Cryptography is an important strategic resource for a country,” an official with the State Cryptography Administration was reported to have said by news agency Xinhua on Sunday. “It’s directly related to the country’s political security, economic security, national defence security and information security,” the official added.
According to the law, China’s codes will be categorised into two groups – “core and common codes” that are handled by the state and “commercial code” that can be developed and applied for profit.
In particular, the law stipulates that all business entities, including foreign funded enterprises, should be treated equally in “study, development, production, sales, service and trade” of commercial codes. “Administrations and its employees shall not force transfer of commercial cryptography technologies,” the law stipulates.
At the same time, the main purpose of the law is still about security, experts said.
Zhou Youjun, a law professor at Beihang University, said the law was aimed at “strengthening the management of passwords and to set standards for cryptography for the purpose of protecting cybersecurity and national security”.
Zeng Liaoyuan, an associate professor of information and communication engineering at the University of Electronic Science and Technology of China, said the law was important to safeguard national security. “The [cryptography] technology develops so fast. If we don’t have laws to support and regulate it, there would be uncontrollable situations,” Zeng said.
For instance, the cryptography law required the government to set China’s encryption standards and encourages Chinese government agencies, business entities and individuals to use these standards, so that China could ensure it had the technology under control, including blockchain technology, Zeng said.
“On that basis, when blockchain technology is applied to different fields, it will have a solid foundation.”
Cryptography is an integral underpinning of blockchain technology, which Xi said China should apply in the fields of finance, education, employment and health care.
Meanwhile, five years after China’s central bank started researching digital currency and blockchain, the country is now rushing to launch a digital currency, with added impetus following Facebook’s announcement in June that it planned to launch its own digital currency, the Libra, next year.
Facebook’s founder, Mark Zuckerberg
, said at a congressional hearing last week that China’s quick move in the digital currency could put the US dollar at risk. “If America doesn’t innovate, our financial leadership is not guaranteed,” he said.