According to local media reports, China is witnessing an increase in CBDC-centered scams. To this, the Chinese police have sent out warnings for people regarding the digital Yuan usage as the nation’s CBDC plans have been rolling out at a significant pace.
Recently, the state-run news outlet CCTV (via Xinhua), stated that the officers in Shandong Province claimed they had seen a rise in digital Yuan-themened frauds. According to the reports, one recent scam has ensnared “tens of thousands of people.”
The officers investigating the crime have said that “some criminal suspects” have “seen opportunities” to strike amid digital-CNY adoption drives. Additionally, as per police’s investigation, many fraudsters had developed authentic-looking apps that make use of digital Yuan logos downloaded from official sites.
Then the scammers use these to convince citizens into thinking they can make easy “investment” money by downloading these apps and sending funds to what they think are legitimate financial firms. Investigations reveal these firms inevitably turn out to be private accounts.
In their warnings, officers have stated that many of these accounts turn out to be based overseas and that makes recovering victims’ funds difficult for Chinese authorities. The Shandong police explained scammers were infiltrating public group chats with offers of “digital Yuan credit lines” that could be used to purchase goods on e-commerce platforms such as Taobao and JD.com.
Officers warned that citizens should be cautious of digital Yuan-themed applications that are not distributed by the central People’s Bank of China (PBoC) or major, state-run commercial banks.
Additionally, the media outlet quoted a victim surnamed Zhang as explaining that scammers had persuaded him to pay an initial “registration fee” of just under $40. In return, he was told that he would soon receive a credit line worth thousands of USD. Not just that, the victim was also told that he could increase this further by “recruiting new members,” which he dutifully did. Zhang briefed the media :
My credit line eventually reached [around $700,000]. But I [eventually] found that the credit line was not available. I couldn’t use it to buy goods, and I couldn’t withdraw any cash. In the end, I couldn’t open the app at all. My friends were in the same situation as me. I felt that I’d been cheated, and then I told the police about it.
In their press release, the police said they had identified an app named Digital Credit (after translation) and the app was “counterfeit.” The officers claim that it had been “illegally developed by scammers overseas.” The police added the scammers used “forged PBoC documents and real digital Yuan logos to confuse the public.”
China has been one of the most rapidly advancing nations in terms of CBDC adoption. The Chinese cities are found to be rapid in their adoption of CBDCs and are in complete support of the nation’s CBDC project. In Changsha, a Chinese city, more than 420,000 merchants accept payments in the digital Yuan. According to officials, the city has 22 million digital Yuan wallets, and 800,000 “public” wallets have been opened for use by firms and government organizations based in Changsha.
The rise in CBDC-centered scams in China, as reported by local media, poses a significant challenge to the nation’s digital Yuan adoption efforts. With criminals taking advantage of the growing interest in digital currency, unsuspecting citizens are being lured into fraudulent schemes through authentic-looking apps and promises of easy money. The involvement of overseas accounts further complicates the recovery of funds for Chinese authorities. These incidents highlight the contradiction between the strict anti-crypto policy in China and the vulnerabilities associated with the implementation of a state-controlled digital currency.
While China has been at the forefront of CBDC development and adoption, the increasing threat of illegal activities surrounding the digital Yuan raises concerns about the effectiveness of its measures and the need for robust security measures to safeguard users from scams and fraudulent activities in the evolving landscape of digital currencies.