Shenzhen Warns of 100% Risk in Stablecoin Investments Due to Fraud

The Shenzhen Municipal Office has issued a stern warning to its residents about the escalating risks associated with stablecoin investments. The alert, released on July 7, 2025, underscores the potential for misuse by fraudulent entities, particularly in activities such as illegal fundraising, gambling, pyramid schemes, and money laundering. The office cautioned that some illegal institutions exploit 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 institutions often use new concepts such as stablecoins to speculate and fabricate investment projects, falsely advertising to attract public funds and engage in illegal activities.

The warning highlights that these entities exploit stablecoin concepts to lure investments, leading to risks like money laundering. Authorities urge the public to report any suspicious activities and avoid unregistered projects. The Shenzhen Municipal Office has emphasized that such institutions do not have the qualifications to publicly absorb public deposits without the permission of the national financial management department. The public is advised to be cautious and avoid participating in trading speculation related to stablecoins, as these activities can disrupt the economic and financial order and endanger the property safety of the public.

This event underscores rising concerns over financial scams, with Shenzhen's proactive approach aiming to shield residents from fraudulent activities. The Shenzhen government's warning comes amid a rise in public interest in stablecoins and digital assets. The regulatory watchdog has sounded the alarm on scams and fraud tied to these investments, urging caution and offering rewards to tipsters who provide information on illegal activities. The regional regulations and licensing aim to curb stablecoin-related fraud, even attempting to build trust through fake global licenses. The authorities have flagged stablecoins as a vehicle for scams, including illegal fundraising and fraud, and have warned the public about the potential risks involved in digital asset speculation.

Historically, China’s crackdowns have led to a decrease in retail participation, influencing local stablecoin liquidity and financial flows. However, major assets like USDT and USDC remain unaffected, despite indirect reputation impacts. Potential outcomes of this warning could encompass increased regulatory scrutiny and tightened control measures on digital assets, considering past trends and enforcement actions by the Chinese government. The Shenzhen Municipal Task Force Office for Preventing and Combating Illegal Financial Activities has issued a warning regarding the escalating risks associated with stablecoin investments. The warning highlights the potential for misuse by fraudulent entities, particularly in activities such as illegal fundraising, gambling, pyramid schemes, and money laundering.