The Shenzhen government warned of a new wave of stablecoin scams in China. The growing adoption of stablecoins created a new wave of issuers, often generating fraudulent assets with no backing.
Stablecoins have the ability to inspire confidence, based on their intuitive price tracking the US dollar or other currencies. The Shenzhen government, however, warned against abuses of the stablecoin concept. Multiple new projects are advertising the alleged security of stablecoins, while engaging in fraudulent forms of financing.
The local Chinese authorities monitored newly created stablecoin projects, which are receiving growing attention. The authorities have discovered illegal institutions claiming to use financial innovation and stablecoins as gimmicks to play on the lack of real understanding of crypto. This allows the projects to extract fiat assets in exchange for tokens with no provable backing.
Some of the projects enable gaming, as well as Ponzi schemes and money laundering. The newly created stablecoins go beyond the scams related to existing stablecoins like USDT.
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.
Algorithmic stablecoins cut their supply in half in 2025, but asset-backed tokens carry a higher value. | Source: Dune Analytics
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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