tl;dr
Shenzhen officials have warned the public to exercise caution with stablecoins due to increasing scams exploiting limited knowledge and using misleading terms like "financial freedom" to attract victims. Despite China's plans for a yuan-backed stablecoin, authorities highlight the rise of illegal ac...
Officials from Shenzhen have issued cautionary advice to the public, recommending that they pay maximum attention when operating with stablecoins due to mounting reports of abuse from certain schemes. As these assets become more widely adopted and discussed, this appears to be a step back from the country’s plans to introduce a yuan-backed stablecoin.
The hype around a product does not mean legitimacy. China’s government has released a notice stating that certain bad actors are exploiting the public’s limited knowledge of stablecoins, using flashy terms to lure in their victims. Slogans such as “financial freedom” and “digital wealth” are used to tempt people into various scams.
In this notice, the Office of the Special Working Group for Preventing and Combating Illegal Financial Activities advised that these entities exploit new concepts such as stablecoins to hype up so-called investment projects involving “virtual currencies,” “virtual assets,” and “digital assets.” The perceived lower volatility compared to other cryptocurrencies may make stablecoins a driving force behind increasing connections to illicit activities.
The authorities further stated that these bad actors engage in false public advertising to solicit funds from the public, giving rise to illegal activities such as fundraising, gambling, fraud, pyramid schemes, and money laundering. This is a worrying trend, especially considering cryptocurrency trading has been banned in China along with prohibitions on mining, all while the country attempts to move forward with its own state-backed stablecoin plans.
Circle’s CEO, Jeremy Allaire, expressed optimism during Binance Blockchain Week about the global adoption of stablecoins, noting a preference for stablecoins over central bank digital currencies (CBDCs) among users.
The stablecoin market has experienced significant growth recently, adding approximately $50 billion to a total of $255.6 billion this year according to DefiLlama. Tether’s USDT remains the leading stablecoin with a market share of $159.4 billion, followed by Circle’s USDC at $61.9 billion. USDC recently joined the New York Stock Exchange with ticker symbol CRCL, bolstering a market capitalization of $45.7 billion.
This widespread adoption is likely fueled by increased regulatory frameworks like the GENIUS Act, which passed the U.S. Senate with a 68–30 vote last month. Major retail companies are also interested in launching their own stablecoins to reduce costs and improve customer experiences, with some of the largest U.S. banks pursuing similar projects.