Shenzhen warns citizens of investment scams using stablecoins

Local authorities alert residents to beware of fraudsters using stablecoins as a front for pyramid schemes.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Authorities in the Chinese city of Shenzhen have warned residents about fraudulent investment schemes tied to digital assets and stablecoins.

In a statement published on July 7, the city’s Office of the Municipal Task Force for Preventing and Combating Illegal Financial Activities cautioned against deceptive platforms posing as legitimate crypto investment opportunities.

According to the task force, bad actors are exploiting public enthusiasm for digital assets. They are promoting false investment opportunities using terms like “stablecoins,” “virtual currency,” and “digital assets.”

These groups use flashy advertising to lure victims into illegal activities, including pyramid schemes, gambling operations, fraud, and money laundering.

The statement emphasized that such schemes violate China’s financial regulations. According to the authorities, most of these organizations are unlicensed and are illegally raising funds from the public. In such cases, any financial losses are not protected and must be borne by those who invested in the fraudulent projects.

As a result, the city urged investors to avoid offers that promise unrealistic returns and report suspicious platforms.

According to the statement:

“If you find that relevant institutions are engaged in illegal fundraising in the name of investing in stablecoins, please report it to the non-leading department of the city or district or the public security department in a timely manner. The relevant departments will verify the reported clues, crack down on them according to law, and reward the informants according to regulations.”

Stablecoins draw international attention

Shenzhen’s warning comes amid a global rise in stablecoin adoption, with demand growing in both emerging and developed markets.

Stablecoins, which are digital assets pegged to fiat currencies like the US dollar, have gained popularity for offering price stability in volatile markets. This utility has made them a go-to option for users looking to store value or transact across borders.

The stablecoin market, worth an estimated $256 billion, is primarily dominated by US dollar-pegged tokens like Tether’s USDT and Circle’s USDC.

Due to this, Chinese companies such as JD.com and Ant Group have reportedly expressed interest in developing CNY-pegged stablecoins. This move aims to counterbalance the dominance of US dollar-based assets and increase the Chinese yuan’s international use.

However, authorities in the US are also working on further entrenching the dominance of dollar-based assets.

As a result, US lawmakers recently introduced the GENIUS Act—a new bill aimed at regulating and promoting stablecoin innovation. US Treasury Secretary Scott Bessent recently stated that the regulation would allow dollar-linked stablecoins to exceed a $2 trillion market cap.

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