Shenzhen Warns of Fraudulent Stablecoin Schemes Amid Rising Interest

The Shenzhen Municipal Task Force for Preventing and Combating Illegal Financial Activities has issued a warning to residents about fraudulent investment projects that exploit the growing interest in stablecoins and digital assets. The task force released a statement on July 7, 2025, cautioning the public about the misuse of terms like stablecoins and virtual assets by fraudulent groups. These groups often use flashy advertising and exaggerated investment promises to lure unsuspecting investors into risky or illegal activities, including pyramid schemes, gambling operations, fraud, and money laundering.

The warning comes at a time when there is a rising local interest in yuan-pegged digital assets. Authorities have expressed concern that some groups are exploiting this trend to conduct illegal fundraising schemes, promote dubious projects, and facilitate money laundering. These entities often masquerade as financial innovators, issuing so-called “digital assets” or “virtual currencies” to attract investors. In reality, they are unlicensed operators engaged in illegal activities.

The task force, citing “Regulations on Preventing and Dealing with Illegal Fundraising,” emphasized that individuals who fall victim to such schemes are responsible for their own losses. Citizens are urged to enhance their risk awareness, avoid blindly trusting exaggerated investment promises, and report suspected scams to local authorities. The task force's warning highlights the need for increased vigilance and education among the public to protect against these deceptive practices.

Despite the regulatory caution, there is a growing momentum around offshore yuan-pegged stablecoins. China-based tech firms, including JD.com and Ant Group, have been lobbying the People’s Bank of China (PBOC) to authorize the issuance of such tokens. These firms argue that yuan-based stablecoins are crucial for supporting the currency’s international use, especially as dollar-backed tokens like USDT dominate global trade settlements. Industry figures, including former Bank of China vice president Wang Yongli and HashKey chairman Xiao Feng, have also emphasized the risks of inaction.

China has yet to officially comment on the initiative, and the government’s response remains uncertain, particularly given its historical regulatory stance. Meanwhile, other regions in the Asia-Pacific have embraced stablecoins as part of a broader digital asset push. For example, South Korea is working on creating a legal framework to support Korean won-pegged stablecoins. This regional embrace of stablecoins contrasts with China's cautious approach, highlighting the differing regulatory landscapes across the Asia-Pacific region.