Growing Crypto Fraud Prompts Official Action in China
Authorities in the Chinese tech hub of Shenzhen have issued a public warning about a rising wave of stablecoin-related scams, particularly targeting retail investors through fraudulent investment platforms and fundraising schemes.
The warning, published by the Shenzhen Municipal Financial Regulatory Bureau, highlights the misuse of stablecoins like USDT (Tether) and others in illicit fundraising operations. As the crypto space grows in popularity—even within tightly regulated markets like China—scammers are exploiting public interest and a lack of crypto literacy to defraud unsuspecting individuals.
How the Scams Work
According to the report, scammers are promoting high-return investment opportunities. They ask participants to convert Chinese yuan (RMB) into stablecoins using unauthorized over-the-counter (OTC) channels or shady online exchanges. Once converted, the funds are funnelled into unregulated trading platforms or fake crypto projects. Many of these platforms vanish shortly after collecting investor money.
“Investors are being promised unrealistic profits,” warned officials, adding that these operations violate existing financial regulations and may involve cross-border money laundering.
The scams often come disguised as:
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Investment clubs or private WeChat groups offering insider tips
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Decentralized finance (DeFi) “opportunities” requiring upfront USDT
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High-yield digital savings programs tied to stablecoin staking
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Fraudulent ICOs promoted by influencers or fake official-sounding accounts
Stablecoins Gaining Popularity—And Risk
Crypto developers designed stablecoins like Tether (USDT) and USD Coin (USDC) to match the value of traditional currencies such as the US dollar.
This 1:1 peg has made them a go-to option for transferring money and trading digital assets.
However, many new users mistakenly view them as completely safe or government-backed.
This false sense of security often pushes people to invest without fully understanding the risks, making them easy targets for scams.
China banned crypto trading and mining in 2021, but underground crypto activities persist, especially in tech-forward regions like Shenzhen. Authorities now fear that the ease of access to stablecoins is giving scammers a loophole to conduct illegal fundraising and circumvent capital controls.
Stablecoins like USDT and USDC offer convenience for crypto transactions; however, despite their design to mirror traditional currencies, many users wrongly assume they are risk-free and fully regulated.”
What the Public Should Know
In response, the Shenzhen government is urging residents to:
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Avoid converting RMB to crypto via unofficial channels
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Verify any investment platform or crypto offering through regulatory websites
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Report suspicious crypto-related activity to financial authorities
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Understand that no stablecoin is legally recognized as a currency in China
The government also emphasized that stablecoin use in fundraising is illegal, and that individuals involved in such operations—whether knowingly or unknowingly—could face criminal charges.
Broader Implications for Asia’s Crypto Scene
Shenzhen’s warning reflects a growing trend across Asia, where regulators are tightening scrutiny on stablecoin usage amid rising fraud. In recent months:
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Singapore issued new stablecoin guidelines emphasizing licensing and compliance.
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Hong Kong regulators cracked down on unauthorized OTC crypto vendors.
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South Korea continues to monitor stablecoin flows amid rising Ponzi-style schemes.
With stablecoins playing a central role in global DeFi and cross-border payments, regulatory oversight is expected to increase further in 2025 and beyond.
Final Thoughts
The latest warning from Shenzhen serves as a reminder of the risks associated with unregulated crypto investments, even when they involve seemingly “safe” assets like stablecoins. As the industry evolves, staying informed and cautious is more important than ever.