Shenzhen Regulator Warns of Illegal Fundraising via Stablecoins

The Shenzhen Office of the Special Task Force for Preventing and Combating Illegal Financial Activities has issued a risk warning regarding the illegal fundraising activities conducted by entities posing as stablecoin issuers. The warning highlights that these entities are exploiting the public's lack of understanding of stablecoins to absorb funds through the issuance of so-called "virtual currency," "virtual assets," and "digital assets." These activities are disrupting economic and financial order and fostering illegal criminal activities such as gambling, fraud, pyramid schemes, and money laundering, which seriously endanger the public's property security.

The regulatory body has emphasized that these unlawful institutions do not have the qualifications to openly accept public deposits as they lack the approval of national financial regulatory authorities or violate national financial management regulations. These entities hype up stablecoins and other new concepts, fabricate investment projects, and engage in false propaganda to attract public funds, leading to illegal fundraising and other criminal activities. The "Regulations on the Prevention and Treatment of Illegal Fundraising" stipulate that the state prohibits any form of illegal fundraising, and any losses incurred from participating in such activities shall be borne by the participants.

The public is urged to enhance their awareness of rational investment, not blindly trust enticing promises, and establish the correct concept of money and investment. It is crucial to effectively raise risk awareness and avoid falling victim to fraud. The regulatory body has called on the public to report any institution found engaging in illegal fundraising activities under the guise of investing in stablecoins to the lead department in the city or district or to the public security department. Relevant departments will verify the reports based on the clues and take law enforcement action, rewarding those who provide the reporting clues in accordance with regulations.

The warning issued by the Shenzhen Financial Regulatory Authority underscores the importance of regulatory compliance in the digital asset sector. The authority has been actively monitoring the market for any signs of illegal activities and has taken enforcement actions against entities found to be in violation of the regulations. The issuance of this warning reflects the growing concern among regulators about the potential risks posed by unregulated digital assets. As the use of digital currencies and stablecoins continues to gain traction, regulatory bodies are increasingly focused on ensuring that these financial instruments are subject to appropriate oversight. The authority's warning serves as a reminder to investors to be vigilant and to rely on credible sources of information when considering investments in the digital asset space.