China's Central Bank Warns Against Blockchain Investment Bubble
Xu Zhong, Research Head of the PBoC, and Zou Chuanwei, Associate Research Fellow of the PBoC and Chief Economist of Bitmain, wrote a related research report published on November 6.
As the paper put it, currently bubbles in blockchain-related financing and investment have become apparent. Financial irregularities including speculation and market manipulation in these two sectors are quite common in China, especially token projects that involve ICOs and crypto assets.
The working paper advised the government to step up supervision on investment and financing activities in blockchain and crypto fields to fend off financial risks.
The paper also warned that it’s unwise to overstate the effects of blockchain or to have blind faith in it.
It said that financial systems are expected to embrace all kinds of technical innovations, as long as they can improve the efficiency of financial resource allocation and help carry out financial transactions in a safer and more efficient manner. According to the paper, no technical innovation has had a disruptive impact on financial systems to date, and blockchain is no exception.
As cryptocurrencies have an inflexible supply and lack intrinsic value, the PBoC believes that it's impossible for cryptocurrencies to overthrow or replace fiat currencies.
The anonymity of blockchain will also make it harder to implement anti-money laundering (AML) and know-your-customer (KYC) policies.
As Cryptonews Hub previously reported, “the PBoC made unprecedented mention of ICOs and crypto assets in its annual China Financial Stability Report and underlined the risks crypto investors need to take, while highlighting the importance of tightening regulation.”