China to design comprehensive national Web3 development strategy

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The Chinese Ministry of Industry and Information Technology (MIIT) has announced plans to create a comprehensive national plan for Web3 development tailored to the country’s situation.

Although the ministry did not explicitly reference cryptocurrencies, this initiative aligns with Beijing’s backing of Hong Kong’s aspirations to establish itself as a significant hub for digital assets.

The MIIT said the proposed draft for strategy focuses on government affairs and industry sectors. Particularly, the strategy aims to promote “new business models” like non-fungible tokens (NFTs) and decentralized applications (dApps). It also aims to enhance public awareness of Web3 technologies.

The strategy would mark China’s first national-level Web3 policy, building on recent attempts by major cities like Beijing and Shanghai to create local development strategies for Web3.

China launches government-backed blockchain IDs to minimize data leaks

In line with the Web3 initiative, China is running trials on a blockchain-based real-name verification system, which allows internet users to access online platforms without sharing personal information like phone numbers.

The Real-Name Decentralised Identifier (RealDID) system was introduced by China’s state-backed Blockchain-based Service Network (BSN) and the Ministry of Public Security’s First Research Institute. Anicert, a subsidiary of the research institute, will manage user identities through its Cyber Trusted Identity (CTID), which is already used by banks and institutions to verify Chinese identities.

The Chinese government aims for the system to reach all 1.4 billion Chinese citizens. BSN recognizes that the expansion must occur gradually. The network plans to issue 5 million RealDIDs through multiple pilot projects in the upcoming year.

RealDID operates exclusively within China on the BSN China-run Yanan Chain blockchain. It is inaccessible to IP addresses outside mainland China.

BSN China functions independently from the international organization and is a collaboration involving state-owned enterprises China Mobile and China UnionPay. Red Date, the technological architect of BSN, maintains separate operations between mainland China and Hong Kong.

Both Red Date Hong Kong and the recently established BSN Foundation located in Singapore have attempted to distance themselves from China. BSN and Red Date were named in recent U.S. legislation aiming to restrict government use of China-associated blockchains.

Yanan operates through public key infrastructure (PKI), allowing users to store their public cryptographic keys in a RealDID document. Before publication, the CTID system verifies user identities through a “three-factor verification process,” examining government ID, legal name and facial recognition.

After verification, users can generate numerous public-private key pairs for use on different platforms. They log in using an anonymous DID address. These keys can also sign files, leaving a watermark that confirms the file’s origin.

The government holds access to user identities through the “national regulatory organization.” Chinese law mandates linking online accounts to real-name identification, often a phone number. However, companies won’t have visibility into these data.

China supporting Hong Kong to become Web3 hub

Chinese officials have doubled down on their support for Hong Kong to become a global Web3 hub. Cao Shumin, deputy director at China’s Cyberspace Administration (CAC), suggested at the Digital Economy Summit 2023 that Hong Kong should actively strategize its advancement in cutting-edge technologies like semiconductors, quantum computing, artificial intelligence (AI) and blockchain.

Chen Dong, deputy director at the Liaison Office of the Central People’s Government in Hong Kong, commended the city government’s recent actions to enhance its digital economy. He praised their focus on blockchain applications, the introduction of clear licensing rules for virtual asset platforms, and the establishment of a Web3 institute amid Hong Kong’s new initiative to become an international Web3 hub.

The Institute of Web3.0 Hong Kong is led by former Chief Executive of the Hong Kong Monetary Authority Norman Chan. Key founding members of this institute include China Mobile, China Merchants Energy Shipping, Huawei Technologies and the Hong Kong University of Science and Technology.