Chinese Industry Group: Web3 & DeFi High-Returns May Mask Ponzi Schemes
Beijing Regulators Warn Retail Investors Against Crypto Pyramid Schemes
BIFA Issues Urgent Advisory on Fraudulent Investment Schemes
On July 9, the Beijing Internet Finance Industry Association (BIFA) released a critical notice urging retail investors to be cautious of investment proposals that disguise traditional pyramid schemes using cryptocurrency jargon.
Local media reports indicate that promoters have started marketing “stablecoin wealth plans” and “Web 3.0 dividends,” among other offers, which claim to provide guaranteed returns.
BIFA outlined five key indicators of illegal fundraising activities: operating without proper licensing, using complex terminology to exploit knowledge gaps, making false promises, utilizing new deposits to pay earlier investors, and being linked to fraudulent or money laundering schemes.
The association emphasized the importance of verifying a company’s licensing through national regulatory bodies and cautioned that high returns often come with significant risks. Additionally, it reminded potential victims that under China’s regulations regarding illegal fundraising, investors bear responsibility for any financial losses incurred. The warning, which comprises nearly 1,500 Chinese characters, was first disseminated via BIFA’s official WeChat account.
Historical Context of Fraudulent Activities
The collapse of PlusToken in 2019 serves as a stark reminder of the dangers associated with such schemes. This wallet service amassed approximately 200,000 Bitcoin and 9 million Ethereum, valued at over $4 billion in 2020, making it one of the largest Ponzi schemes that leveraged cryptocurrency terminology.
This incident illustrated how fraudsters can transfer digital assets across various exchanges and mixers, complicating enforcement efforts and leading to prolonged investigations.
Despite China’s ban on direct crypto-to-fiat exchanges in 2021, interest in cryptocurrencies remains high, with many users turning to offshore platforms and grey-market options. Regulatory bodies in major cities like Beijing, Shanghai, and Shenzhen have each issued consumer alerts regarding token-related scams this year.
Reasons Behind the Recent Warning
Retail speculation has surged on mainland social media platforms, where an unofficial index tracking “stablecoin concepts” has seen an impressive 88% increase since April, according to reports from Reuters.
Market enthusiasm has also been influenced by Hong Kong’s upcoming stablecoin regulations, set to take effect on August 1, as major tech companies explore the potential of renminbi-pegged tokens.
Furthermore, reports indicate that local blogs have begun promoting “USDT mining pools” and “insured CNH stablecoins,” prompting regulators to prepare for enforcement actions against these activities.
BIFA concluded its statement by providing a hotline for reporting unlicensed operations and encouraging investors to alert law enforcement or financial authorities about suspicious activities. The association pledged to pass credible reports to provincial task forces dedicated to tracking illegal public fundraising efforts.
Conclusion
As the landscape of cryptocurrency continues to evolve, the importance of vigilance among investors cannot be overstated. BIFA’s proactive measures aim to protect retail investors from falling victim to fraudulent schemes that exploit the allure of digital currencies.
