Chinese Authorities Warn of Rising Stablecoin Fraud Amid Growing Interest

Chinese authorities have issued a warning about the rising trend of fraudulent activities involving stablecoins and digital assets. The Shenzhen Municipal Task Force for Preventing and Combating Illegal Financial Activities released a statement on July 7, 2025, highlighting the misuse of terms like stablecoins and virtual assets by fraudulent groups to deceive people into risky or illegal investments.

The warning comes at a time when there is growing 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 unsuspecting 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.

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.