Shenzhen Warns Public of Unbacked Stablecoin Scams

Shenzhen authorities have issued a stern warning to the public regarding illegal fundraising activities involving stablecoins and digital assets. The alert, released on July 7, 2025, underscores the significant financial risks and socio-economic dangers associated with these deceptive schemes. The Shenzhen Special Task Force Office has identified groups that are exploiting the term "stablecoins" to deceive investors, operating without the necessary approvals and capitalizing on the public's lack of understanding about these digital assets.

The warning emphasizes the high risk involved in these activities, particularly for new investors who may not be aware that these new stablecoins are unbacked. Individuals who fall victim to these scams face substantial financial losses, with no legal recourse available to recover their investments. It is important to note that this warning does not affect established stablecoins such as USDT or USDC, which are backed by reserves and operate within regulatory frameworks.

Historically, China has seen similar scams involving unregulated digital assets, and the current action by Shenzhen authorities is part of an ongoing effort to curb illegal fundraising. The public is encouraged to remain vigilant and report any suspicious activities related to stablecoins or digital assets. The Shenzhen Special Task Force Office has stated that monitoring has revealed illegal organizations using terms like "financial innovation" and "digital assets" to mislead the public, leading to trading speculation and disrupting the economic and financial order. These activities foster various illegal practices, including gambling, fraud, pyramid schemes, and money laundering.

In response to the warning, market participants have shown increased caution, reflecting a heightened awareness of the risks involved. Future developments may include more stringent regulations on digital assets, as well as enhanced vetting procedures and public awareness campaigns aimed at combating these scams. Analysts predict that these measures could help mitigate the risks associated with unbacked stablecoins and protect investors from financial losses.