BEIJING (Reuters) – It is the interest of the long-term development of blockchain technologies for the rapidly growing market for fundraising through the issue of digital currencies to be regulated, an adviser to China’s central bank said on Tuesday.
Sheng Songcheng, adviser to the People’s Bank of China (PBOC), said regulation was needed for a healthy market.
Sheng’s comments, in an interview with financial magazine Yicai, came a day after China banned and deemed illegal the practice of raising funds through the so-called initial coin offerings (ICOs).
Under such offerings a digital currency based on blockchain technology is sold publicly and often traded on secondary exchanges.
The value for the holder lies not in the product for which funds are being raised, but in the potential for the currency’s worth to rise.
“A large number of individual investors, including ‘da ma’ (middle-aged, retired women) entering the market was a signal that ICOs have entered the regulation phase,” said Sheng. “This rectification is mainly to warn of risks and protect investors’ rights.”
But Sheng said that blockchain technology should be supported and that China could be a global leader in the adoption of the technology.
Sheng also suggested coin issuances could still take place in China following the current market reset, once new rules were in place, according to Yicai.
Sheng has said previously that virtual currencies like bitcoin are assets but bitcoin in itself does not have the fundamental attributes needed to be a currency that could meet modern economic development needs.
Reporting by Elias Glenn Editing by Jeremy Gaunt.