Data Security Damages Paid in Advance?

NYCCoin and New York-based Stacks pose a billion dollar question: Are Hong Kong data rules the same as China data rules? 

We recently reported that former Communist China has not been known for access to justice. In fact, recent protests in Hong Kong sprung up due to China’s Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation. Yet Communist China is experiencing a Social Spring (a transformation from Communism to Socialism). What role will China’s Communist roots play in future access to justice? 

The Cyberspace Administration of China (and Hong Kong) issued new guidance on third-party products and services that cause damage to users. According to the Cyberspace Administration’s guidance, users can request Internet platform operators to pay compensation in advance for data violations. 

Hong Kong is the data hub for Stacks, where internet platform operators shall assume data security management responsibilities for third-party products and services connected to their platforms. Hong Kong mandates clarity of data security responsibilities for third parties through contracts and other forms, and urges third parties to strengthen data security management, and adopt the necessary data security protection measures.

• Stacks’ strong third-party presence in Hong Kong extends to China. One of Stacks’ board members has served as a leader of a Shanghai based incubator. 
• Stacks maintains a legacy of top investors based in China. With a Hong Kong data warehouse, it is safe to say that NYCCoin powered by Stacks raises a few cybersecurity concerns. 
• The looming question is if Proof of Transfer (PoX) Stacks’ extension to Proof of Burn (PoB), where miners compete by ‘burning’ (destroying) a Proof of Work (PoW) from an established blockchain, is allegedly illegal in Hong Kong, under the Cyberspace Administration’s new guidance. 

PoX, when used for participation rewards (Such as with MIA Coin, NYCCoin and STX), could lead to miner consolidation. Because miners that also participate as holders could gain an advantage over miners who do not participate as holders, miners would be strongly incentivized to buy the new cryptocurrency and use it to crowd out other miners. In an extreme case, this consolidation could lead to a centralization of mining, which would undermine the decentralization goals of the public blockchain. 

China, along with Hong Kong, has outlawed various forms of threats to international peace and security. Hence, Hong Kong likely will support all reasonable TPF ligations up for consideration.