The Swiss financial regulator is looking closely into the business with digital currencies and today stepped in to stop a blatant case of a fake coin. More may follow.
Finma, Switzerland’s financial market regulator, today made it clear that it won’t turn a blind eye to dubious sellers of so-called cryptocurrencies. The Bern-based authority closed down the unauthorized providers of the fake currency E-Coin, it said in a statement today.
The Quid Pro Quo Association, working with Digital Trading AG and Marcelco Group AG, for more than a year sold so-called E-Coins via an online platform, receiving more than 4 million Swiss francs, Finma said.
The regulator added that while real cryptocurrencies were stored on distributed networks and used the Blockchain technology, E-Coins had been kept under the control of the providers.
Illegal Business Activity
The business model applied by the association is similar to the deposit-taking of a bank and illegal unless the company holds the relevant financial market license, Finma said. To protect the interests of hundreds of creditors, Finma initiated enforcement proceedings against the involved parties: «Finma found that the three legal entities had seriously breached supervisory law by failing to obtain the required authorization.»
Finma liquidated the association and the two companies and since the three entities are insolvent, the authority also launched bankruptcy liquidation proceedings. It seized assets worth about 2 million Swiss francs.
Finma's Warning List and 11 Investigations
The watchdog also put three other companies on its warning list due to suspicious activities in the same industry: Suisse Finance GmbH, in liquidation; Euro Solution GmbH and Animax United LP. Furthermore, Finma is conducting eleven investigations into other, presumably unauthorized business models involving coins.
«As with any other investment opportunity, market participants should carefully weigh up the risks before they invest in instruments of this kind,» Finma said.
An Industry in Need of Supervision
The Swiss regulator isn’t the first to become active against dubious activities of this kind. The Chinese central bank a few days ago banned in principal so-called initial coin offerings (ICOs).
More than 800 digital currencies are in circulation and observers say that most of those are worth nothing as they are based on the snowball principle.
The fledgling cryptocurrency industry lacks the necessary business standards, making it easy prey for tricksters. Finma is publishing information about how to protect yourself on its Website.
