The People’s Bank of China (PBoC), the country’s central bank, said that blockchain investment bubbles are apparent, and that the government should strengthen supervision.
In a working paper titled “What can a blockchain do and cannot do?,” the Research Bureau of the PBoc advised local Chinese government agencies to enhance supervision of financing into the blockchain sector in order to prevent “speculation, market manipulation and other irregularities.”
“Currently, the bubble in the blockchain investment and financing sector is obvious,” the paper said. “Speculation, market manipulation, and even violations of laws and regulations are common, especially for token projects involving public offering transactions. Relevant government departments should strengthen supervision and prevent financial risks.”
The PBoC further said that the low physical performance of blockchains and the shortcomings of the tech’s economic functions are the reasons why there are few blockchain projects that really produce social benefits.
“To date, no technological innovation has had a disruptive impact on the financial system, and blockchains are no exception,” the paper said. “There is no flexibility in the supply of cryptocurrency, lack of intrinsic value support and sovereign credit guarantees, the inability to perform monetary functions effectively, and the inability to subvert or replace fiat money. The anonymity of the blockchain will increase the difficulty of implementing anti-money laundering (AML) and know your customer (KYC) in financial transactions.”
The working paper came after the central bank extended its regulatory scrutiny to crypto airdrops, which it characterized as “disguised” initial coin offerings (ICO). The central bank warned that crypto airdrops are evading regulation around the public token sale model by issuing free assets to investors. It added that airdrops earmark a token reserve and then capitalizing on speculation in the market to inflate the assets’ value and drive their own profits.
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