Chinese regulators are taking action against fake stablecoins that pose a threat to investors, issuing warnings about unsafe investments.
Identified Fraud in the Market
Local regulators have identified several new projects offering fake stablecoins with no actual reserves. These tokens promise high returns and stability, but are actually used to lure investors through unregistered platforms. Behind the scenes, some projects are running Ponzi schemes, laundering money, or linking crypto to gambling. Victims of these scams are often left without legal recourse after losing their funds.
Differences Between Fake and Real Stablecoins
Unlike regulated stablecoins such as USDT and USDC, these newer tokens are often created without necessary safeguards like fund freezing, and their smart contracts are frequently vulnerable or designed for rug pulls. The government urged users to stay vigilant and report unauthorized fundraising operations posing as stablecoin issuers.
Global Stablecoin Market Situation
Despite these scams, global stablecoin adoption remains strong. Fiat-backed tokens continue to dominate the market, with a combined supply nearing $250 billion. USDT on TRON and USDC on Ethereum are particularly active, powering most trading and DeFi interactions. In contrast, algorithmic stablecoins have shrunk considerably, while crypto-backed stablecoins have seen growth, reaching $11.3 billion in value—supported by more cautious issuance and improved regulatory clarity.
The current state of the stablecoin market highlights the need for caution among investors, especially in light of the active fake projects. Regulators continue to strengthen oversight to protect users from financial fraud.
