The Beijing Internet Finance Industry Association (BIFA) recently issued a notice on July 9 warning retail investors to be cautious of pyramid schemes disguised as crypto investments. According to local news outlets, promoters are using terms like “stablecoin wealth plans” and “Web 3.0 dividends” to lure investors with promises of fixed returns.
In the circular, BIFA outlined five red flags of illegal fundraising activities, including operating without a license, using technical jargon to confuse investors, making false guarantees, recycling new deposits to pay earlier participants, and involvement in fraud or money laundering. The association advised the public to verify a firm’s license with national regulators and to understand that high returns often come with high risks.
The warning comes in light of past scams, such as the collapse of PlusToken in 2019, which saw the loss of over $4 billion in Bitcoin and Ethereum. This incident highlighted how scammers can manipulate cryptocurrencies across exchanges and mixers to evade detection.
Despite China’s ban on direct crypto-to-fiat exchanges in 2021, interest in crypto investments persists through offshore platforms and grey-market on-ramps. Regulators in Beijing, Shanghai, and Shenzhen have issued consumer notices to warn investors about token scams.
The warning from BIFA may be driven by the increasing retail speculation on mainland social platforms, where an unofficial “stablecoin concept” stock index has surged by 88% since April. Additionally, the upcoming stablecoin regulations in Hong Kong have sparked interest from large tech companies exploring renminbi-pegged tokens.
Reports have also surfaced about domestic blogs promoting “USDT mining pools” and “insured CNH stablecoins,” prompting local regulators to prepare for enforcement actions. BIFA has provided a hotline for investors to report unlicensed activities to the authorities, and the association will work with provincial task forces to combat illegal fundraising.
Overall, investors are urged to exercise caution and conduct thorough research before investing in any crypto-related schemes to avoid falling victim to fraudulent activities.