- Shenzhen warns public about rising fake stablecoin schemes targeting new investors.
- Fraud groups misuse stablecoin hype, harming economy and shaking investor confidence.
- Officials urge caution, promise rewards for reports of illegal stablecoin fundraising activities.
Authorities in Shenzhen, China, have issued a strong warning to the public. On Monday, the city’s special task force for fighting illegal financial activities released an alert. This warning is to warn the citizenry of illicit fundraising in the name of stablecoin and crypto investments.
Stablecoin Scams Harm Economy, Mislead Unaware Investors
In China, recently, stablecoins and other digital assets have gained very wide popularity. Digital currencies are regarded as new opportunities by plenty of investors. Nevertheless, not all people know how these digital goods operate. Due to this, there are dishonest persons/groups who take advantage of this lack of knowledge and cheat on the people.
The task force states that such unlicensed groups facilitate phony investment plans. They promise large returns of money by promising virtual currencies and digital assets. However, in the real sense, they are deceiving people so that they can get their money unlawfully. Such frauds seem to be highly professional. To make people trust them, they employ different popular terms such as “financial innovation” or “blockchain technology.”
The law does not give these groups the right to demand money from people. Only qualified financial institutions are allowed to do fundraising under Chinese law. Any other person who does so is breaching the law. Furthermore, it is not the only thing that people would lose due to those scams. They harm not only to the economy but also destroy financial stability.
According to the officials, lots of scams lure with the use of stablecoins to appear safe. They inform individuals that stablecoins are distinguished by actual money or assets. Yet, in many cases, such assertions are not true. It is so hard to retrieve money after investing in it.
Thus, the Shenzhen government is cautioning people. It teaches everybody to ensure that a company is licensed before investment. People must not believe in large claims of easy gains. When it sounds good it is more likely not to be true.
Shenzhen Offers Rewards for Reporting Unlicensed Stablecoin Fundraisers
The city’s anti-fraud office also explained how these scams operate. First, scammers create fancy websites and fake documents. Next, they target people through social media or cold calls. Then, they push people to invest quickly, promising huge returns. Finally, when people try to withdraw money, the scammers disappear.
Because of these risks, officials advise the public to stay alert. Individuals ought to know more about the functioning of stablecoins and cryptocurrencies. They need to learn what hazards may come along before they invest money to any investment company.
Notably, the government has pointed out that anyone who engages in illegal fundraising will be doing this at his/her peril. When one loses money due to such scams, the state will not compensate him/her. That has been clearly stated in the section on Chinese Regulations on the prevention and handling of illegal fundraising.
The Shenzhen task force is urging people to report suspicious events to prevent such scams. In case anyone has come across an unlicensed group raising funds in the name of a stablecoin or digital asset, he has to report them. They can call to local authorities or police. The government has assured that it would look into every allegation within the shortest time possible. Individuals who blow the whistle on such scams can even be given a certain reward in case the report aids the prevention of a crime.
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