China Warns Public of Unregulated Cryptocurrency Risks

The Beijing Internet Finance Industry Association issued a warning on July 12, cautioning the public about the risks associated with unregulated cryptocurrency investments. The warning specifically highlighted the potential dangers posed by stablecoins and unauthorized digital assets, urging investors to exercise caution and verify the legal credentials of digital asset platforms before engaging with them.

The association emphasized the importance of due diligence, advising investors to check company licenses through official national regulator resources. This warning comes in the wake of previous fraudulent schemes, such as PlusToken, which underscored the recurring threat of unregulated cryptocurrency activities. The alert also cautioned against investment projects that promise 'risk-free profits' or 'guaranteed returns,' noting that such ventures often lack legal approval from China's financial regulators.

The advisory identified key risk factors, including false promises and dependence on new investment inflows, which can increase the likelihood of activities resembling Ponzi schemes. The public was encouraged to report any activities suggestive of illegal fundraising, prioritizing transparency and adherence to legal standards to ensure consumer safety.

The association's statement advised the public to be highly vigilant for investment projects advertising ‘risk-free profits’ or ‘principal guaranteed interest.’ It emphasized that high returns always carry high risk and urged the public to stay away from cryptocurrency hype, illegal token issuance, and unauthorized digital asset investments. In cases where evidence of illegal fundraising is discovered, the public was advised to report to regulatory or law enforcement authorities immediately.

There has been limited public reaction from significant cryptocurrency figures, indicating that while the alert did not cause immediate market fluctuations, it underscores ongoing regulatory scrutiny. This scrutiny, especially in unstable financial terrains, poses a potential deterrent to exuberant market behaviors. The warning serves as a reminder of the significant risks posed by unregulated cryptocurrency schemes, as demonstrated by the PlusToken scandal from 2019, which involved a substantial amount of Bitcoin and Ethereum.

China's cautionary stance likely indicates increased scrutiny and regulation in cryptocurrency markets. Investors are warned to be vigilant, expecting stricter financial checks and a potential slowdown in speculative crypto investments due to these ongoing advisories. The association's warning aims to protect investors from the risks associated with unregulated cryptocurrency activities, emphasizing the need for legal approval and transparency in digital asset investments.