Digital currencies, and, more especially stablecoins have attracted its fair share of attention, again. Recent concerns raised by the Beijing Internet Finance Industry Association has warned against the risks associated with illegal fundraising. Especially when using stablecoins or other digital currency concepts. In some public circles there is a limited understanding of these new financial concepts. It therefore takes just one unscrupulous individual or organization to exploit this to their advantage.
Illegal activities influencing the financial industry
An industry body in China warned against illegal fundraising risks involving stablecoins amid a market frenzy over cryptocurrencies and digital assets. The Beijing Internet Finance Association said in a statement late on Wednesday that some unscrupulous institutions and individuals have been luring investors into stablecoin and other crypto schemes that promise high returns under the guise of financial innovation.
“Highย returns and high risks go hand in hand,”
the association said, urging investors to be vigilant and to stay away from unauthorized crypto projects.
The Internet Finance Association has been set up as a means to supervise the carrying out of policies on internet finance for the central bank. It also aims to facilitate communication between policymakers as well as members. It also works to enhance consumer protection as well as to promote industry standards. Data and industry research is collected and then disseminated to regulators as well as members of the public.
Breaking things down, one stablecoin at a time
Stablecoins are digital tokens pegged to liquid assets such as the U.S. dollar and have the potential to disrupt traditional payment systems, according to some analysts. Four primary types of stablecoins are available. These are:
- Commodity-backed
- Fiat-collateralized
- Algorithmic, as well as
- Crypto-collateralized
Although the benefits of these are plentiful, stablecoins also do involve third-party auditors for the verification of reserves. This introduces a risk in a system that aims to minimize third-party reliance. China’s Hong Kong, the United States and some other regions and countries are racing each other to set up regulatory frameworks for stablecoins, competing for a greater reach in global digital finance and trade.
Reflecting rapidly growing investor interest, an index tracking stablecoin concept stocks in China has surged 88% over the past three months, while a gauge of stablecoin-related shares in Hong Kong has more than doubled. The Beijing Internet Finance Association said some investment schemes are attracting investors with buzzwords such as “stablecoins”, “decentralized finance (DeFi)“, and “Web 3.0”, paying early investors with money taken from new joiners as in traditional Ponzi schemes.
China’s perspective on all these matters
The DeFi is regarded as an emerging financial system. It operates on blockchain technology and allows individuals as well as entities to transact directly without using intermediaries such as banks. It further encompasses a very range of financial applications that are permissionless, open source as well as transparent. This makes the financial services accessible to everyone.
“These activities can easily evolve into crimes such as illegal fundraising, financial fraud, pyramid schemes, and money laundering, which would severely disrupt economic and financial order, and endanger public interest and social trust,”
the association said. China banned crypto trading in 2021 due to concerns over financial stability. Chinese tech giantsย JD.com9618.HKย andย Ant Group688688.SSย have said they would apply to issue stablecoins in Hong Kong, where stablecoin legislation is scheduled to take effect on August 1 as part of the city’s push to become a digital asset hub.
Up until recently, there has been some lack in a comprehensive regulatory framework for stablecoins. No uniform regulatory requirements guided intermediaries and issuers of stablecoins. State laws and regulations provided more of a basic guidance on this. In the U.S., a federal stablecoin law has recently been enacted under the Trump administration. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025) was signed into law on 18 July 2025.
GCN.com/Reuters.