THE ban on initial coin offerings (ICO) is a necessary move to stop illegal fundraising and pyramid schemes but should not stop firms from studying blockchain technology, a senior central bank official told the Financial News newspaper yesterday.

Sun Guofeng, director general of the People’s Bank of China’s research institute, said in an interview with the newspaper that the central bank’s move to ban the practice of creating and selling digital currencies or tokens to financial startup projects Sept. 4 was “necessary and timely.”

“But this should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology,” he said.

“Blockchain itself is a good technology, and an ICO is not the only way through which one can carry out research into it.”

While there was already a sound regulatory framework for banks, it was relatively weak for technology firms which were now handling large streams of money flow, creating the risk of “regulatory arbitrage,” Sun said.

For example, companies were potentially violating privacy policies by using data from online retailers and social networks to analyze consumers’ personal credit conditions without their knowledge.

“In general, financial technology still holds strong risk characteristics and we must strengthen supervision,” he said.(SD-Agencies)