In light of the surging popularity and increasing adoption of stablecoins, the Chinese authorities have issued a stern warning about the prevalence of ongoing scams associated with stablecoins and other crypto assets.
In a recent report, the Shenzhen Municipal Task Force for Preventing and Combating Illegal Financial Activities warned that some illegal organizations are preying on the public’s lack of understanding of stablecoins by using fancy words like “financial innovation” and “digital assets” to absorb funds through the issuance of dubious “virtual currencies,” “virtual assets,’ and “digital assets.”
According to a translated version of the report, the Chinese agency warned that these organisations “induce the public to participate in trading speculation, disrupt the economic and financial order, breed illegal fundraising, gambling, fraud, pyramid schemes, money laundering and other illegal and criminal activities, and seriously endanger the property safety of the public.”
Shenzhen Cracks Down on Stablecoin Scams
In a bid to protect the public, the task force strongly emphasized the importance of public awareness, cautioning individuals to refrain from investing in any crypto project that has not been duly approved by the relevant national financial management authorities, as stipulated by law, or that violates existing financial regulations.
The authorities also urged the public to remain cautious about unregulated projects, conduct thorough research on investment opportunities, and avoid projects that make overly optimistic promises. Any individual who disregards these warnings will bear full responsibility for any losses resulting from their involvement in unauthorized fundraising schemes.
To curb the existence of such illegal institutions, the task force encouraged citizens to report suspected scams to local authorities, with potential rewards for useful tips.
China’s Crypto Enforcement
China has consistently maintained a strict stance against unregulated cryptocurrency projects and scams.
In May of last year, government authorities in Sichuan Province, Southeastern China, cracked down on an underground bank that used the USDT stablecoin for illicit foreign currency transactions.
The criminal group, which operated across 26 provinces, municipalities, and autonomous regions, facilitated illegal transactions worth about $2 billion (13.9 billion yuan) using Tether’s USDT stablecoin.
In another report, Chinese authorities seized cryptocurrencies linked to the notorious PlusToken Ponzi scheme, which duped investors out of billions between 2018 and 2019. Part of the confiscated crypto assets were liquidated, and the proceeds were channeled into its treasury to strengthen its financial position amid economic challenges.
