Shenzhen Cracks Down on Stablecoin Scams – Investors Beware in 2025

Stablecoin fraudsters, meet your maker.

Shenzhen authorities just issued a blistering warning about 'guaranteed returns' crypto schemes plaguing China's tech hub. No specifics on casualties yet—but when governments start shouting, wallets start emptying.

The irony? These scams thrive on the very stability promises that make stablecoins attractive. Another day, another reminder that 'trustless' systems still require trusting someone (usually yourself not to FOMO into obvious traps).

Pro tip: If a 'stable' investment sounds too good to be true in 2025, it's probably backed by hot air and hope rather than reserves.

Stablecoin-based illegal fundraising offers no resort to compensation

The Chinese authorities called on users to increase their vigilance, avoiding offers to deposit funds to unregistered institutions. Users are also urged to flag any unregistered institutions aiming to raise funds for stablecoin issuance. 

The recent crypto fraud is unrelated to entirely fake investments used in phishing scams. In the case of illegal fundraising, the investors have no resort to compensation or attempts to retrieve funds. 

Risky stablecoins are much fewer compared to asset-backed USDT and USDC. However, some are still in circulation, posing the risk of de-pegging. For new, unvetted projects with little connection to DeFi infrastructure, the stablecoins may be merely a gimmick, with no way to access funds. 

While USDT and USDC can be tracked and frozen, newly minted stablecoins for small-scale projects remain difficult to trace, and most are created without an option to freeze or control funds. Small projects also pose risks of rug pulls or flawed smart contracts. 

Stablecoins reach peak supply 

Regulations for stablecoins in the USA and the Euro Area affected the supply positively. Both USDC and USDT have near-record supply. 

USDT on TRON also expanded, offering wider access for international traders. Currently, USDT and USDC are also among the busiest smart contracts on Ethereum, showing heightened stablecoin activity. Some of that activity is related to scams, but most of the use cases involve exchange trading and DEX swaps. Based on Artemis data, stablecoins have a supply of $249.8B.

In 2025, algorithmic stablecoins are a niche, due to the heightened risk of de-pegging or exploits. Currently, this asset class carries around $750M in value locked, down by 50% since 2024.

Crypto-backed stablecoins expanded their value to $11.3B, up from $8.7B in 2024. The favorable regulations for fiat-backed assets led to supply expansion, with over $116.9B locked in fiat-backed stablecoins or those secured by US bonds. 

Some crypto-backed stablecoins are still used in DeFi, though mostly are linked to highly liquid protocols. After the crash of Terra (LUNA), stablecoin issuers turned more conservative, growing the stablecoin supply more gradually.

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