China’s central bank says that domestic research and development of blockchains will continue despite the recent crackdown on initial coin offerings and the shutdown of several of the countries leading Bitcoin exchanges.
Sun Guofeng (孙国峰), the head of the People’s Bank of China’s research department, said in an interview with the central bank’s official publication that blockchain’s were a “good technology” whose development the central government would continue to encourage.
“This will not at all prevent Fintech companies, industry organisations and tech companies from continuing to research blockchain technology.
“Blockchains themselves are a good technology, and research into blockchain technology doesn’t need to be conducted solely through ICO’s – they can also be researched by various other means.
“For this reason, we need to separate blockchain technology and ICO’s. Blockchain technology can be utilised in multiple areas and spheres, including certain social management areas.”
In early September the People’s Bank of China issued the “Public Notice Concerning the Prevention of Cryptocurrency Issuance Financial Risk” (关于防范代币发行融资风险的公告) in conjunction with six other central government departments, prohibiting any individuals or organisations from engaging in ICO’s.
The directive called for the immediate suspension of all cryptocurrency financial activities, as well as for individuals and organisations that have raised funds via cryptocurrency issuance to make arrangements for repayments to investors.
It also stated that “so-called cryptocurrency financing and transaction platforms” are prohibited from engaging in transactions involving virtual currency, the conversion of virtual currencies into fiat money, and the provision of services including pricing and information intermediation in relation to virtual currencies.
In the wake of the directive three of China’s top Bitcoin platforms suspended operations, leading to a brief boom in arbitrage opportunities.
Huang Zhen (黄震) head of the China Internet Financial Institute (中国互联网金融创新研究院) said that the measures were intended to “better protect the interests of China’s financial consumers, prevent Bitcoin risk spreading to China’s financial system, and maintain the safety and security of Chinese finance.”
Yang Dong, vice-head of Renmin University’s faculty of law, said that many virtual currency platforms in China had been operating without licenses, artificially inflated prices, engaged in money laundering, dodged foreign currency controls, or were suspected of fraud and insider trading.
“The current shutdown of platforms is to fulfil the requirements made by President Xi Jinping at the National Financial Work Conference to prevent system financial risk,” said Yang.
According to Yang there is “no conflict whatsoever between shutting down virtual currency platforms and banning Bitcoin platform transactions, and the ongoing, vigorous development of block chains.
“Our eradication of risk does not at all mean the eradication of innovation,” Yang said. “Only be driving out the use of virtual currency platforms and other tools to engage in financial crimes such as pyramid sales and illegal fund-raising will it then be possible to create a sound and healthy Fintech environment for the realisation and development of blockchain applications.”
