China’s central bank warns of bubbles in blockchain industry

The People’s Bank of China published a paper on Tuesday delineating the vulnerabilities of certain blockchain applications to “bubbles,” particularly those linked to new cryptocurrencies, Caixin reports.

The paper, titled “What can a blockchain do and not do?” called on the central government to tighten up supervision of China’s emerging blockchain industry to contain financial risks.

“Speculation, market manipulation, and even violations of laws and regulations are common, especially for token projects involving public offering transactions,” the paper wrote.

Beijing has largely embraced blockchain and even included  development of the technology into the government’s 13^th Five-Year plan in 2016. In May of this year, President Xi Jinping called blockchain “a part of the technological revolution.”

However, Beijing has been much more hostile toward the use of blockchain in cryptocurrencies. In September of last year, initial coin offerings (ICOs) were named a form of illegal fundraising and all local crypto platforms were shut down.

The central bank’s paper recommends caution and practicality with respect to blockchain’s potential. “Firstly, don’t exaggerate the function of the blockchain,” it said. “Some industry practices in recent years have proven the some blockchain applications are not feasible.”