Authorities in Shenzhen have issued an urgent warning regarding a surge in fraudulent stablecoin schemes targeting Chinese investors, as scammers exploit the growing popularity of digital assets pegged to fiat currencies.
Crypto scams have been plaguing the crypto community in recent months.
In their statement, the Office of the Special Working Group for Preventing and Combating Illegal Financial Activities highlighted that scammers are leveraging terms like “financial innovation” and “digital assets” to promote fake investment opportunities disguised as stablecoin projects.
Authorities say they have identified several newly launched tokens without any real reserves to back them, but lure investors on false promises of attractive returns and financial stability. The illegality of these projects and schemes extends to illegal gambling, money laundering, and operating Ponzi schemes.
Unlike established and regulated stablecoins such as Tether (USDT) and USD Coin (USDC), the fraudulent tokens lack fundamental safeguards, including the ability to freeze funds, and often deploy vulnerable or intentionally malicious smart contracts that enable “rug pulls” abrupt exits where developers drain investor funds.
In many instances, unsuspecting victims find themselves without legal means to recover lost funds.
Shenzhen authorities urged residents to remain cautious, avoid unregistered stablecoin projects, and report any suspicious fundraising activities.
What’s happening on the global regulatory front?
Despite these localized challenges though, global stablecoin adoption remains robust. Fiat-backed stablecoins dominate the market, with a combined supply approaching $250 billion. USDT on the TRON network and USDC on Ethereum continue to lead trading volumes and power most decentralized finance (DeFi) interactions worldwide.
Pan Gongsheng, Governor of China’s central bank, recently acknowledged the transformative impact of stablecoins and central bank digital currencies on international payments but emphasized the risks posed by unregulated innovations.
Meanwhile, Chinese tech giants like JD.com and Alibaba-affiliated Ant Group are urging the People’s Bank of China (PBOC) to authorize the creation of stablecoins backed by the offshore yuan.
In May, Hong Kong’s Legislative Council passed a stablecoin licensing bill, establishing a framework for official issuers. Hong Kong’s Financial Secretary Christopher Hui indicated licenses could be issued later this year, although approvals will be selective.
In the United States, the Senate recently advanced the GENIUS Act, a landmark stablecoin regulation bill currently awaiting consideration in the House.
In the United Arab Emirates, Abu Dhabi became the first city globally to integrate a government backed stablecoins directly into its taxi payment system.
