Chinese Task Force Flags Illegal Stablecoin Schemes Amid Growing Interest

Growing Stablecoin Popularity

A Chinese task force created to combat illicit financial activities has warned Shenzhen residents to be wary of fraudulent investment projects preying on the public’s limited understanding of stablecoins. In an alert issued July 7, the Shenzhen Municipal Task Force Office for Preventing and Combating Illegal Financial Activities suggested that fraudsters are increasingly targeting stablecoins due to the widespread attention these have garnered recently.

Despite these tight controls, Chinese officials and prominent business executives have voiced increasing apprehension regarding the potential for stablecoins to solidify the U.S. dollar’s dominance in global finance. This concern underscores a strategic imperative for China to explore alternatives.

In a notable development, Bitcoin.com News recently reported that two major Chinese tech giants are actively lobbying Beijing for authorization to issue yuan-based stablecoins. This move signals a potential shift in approach, indicating that while general cryptocurrency activities remain restricted, there’s a growing interest in leveraging stablecoins for China’s own financial and geopolitical objectives, particularly in promoting the internationalization of the yuan.

Meanwhile, the Shenzhen task force reminds prospective stablecoin investors that institutions engaged in this practice are operating illegally because they lack required approvals.

“The Office of the Municipal Task Force for Preventing and Combating Illegal Financial Activities reminds you: Such illegal institutions are not qualified to publicly absorb public deposits without the approval of the national financial management department in accordance with the law or in violation of national financial management regulations,” the task force warned.

Besides hyping stablecoins, the illegal institutions are also accused of “fabricating” virtual currency or digital assets and other investment projects. In addition, the institutions face allegations of absorbing public funds without the requisite permissions, illegal fundraising, gambling, fraud and pyramid schemes.

The task force also reiterated that under China’s Regulations on Preventing and Dealing with Illegal Fund Raising, investors in fraudulent fundraising schemes have no legal recourse; therefore, any losses incurred will be borne by the participating investors. It also advised investors to report institutions operating illegally to the public security department in a timely manner.