FINMA Shuts Down E-Coin Racket Amidst Domestic Crackdown

FINMA, Switzerland’s Financial Market Supervisory Authority, has shut down a cryptocurrency racket as part of its latest efforts to tackle digital currency fraud. Per its latest edict, FINMA's victim was a fake cryptocurrency provider. It is at the same time pursuing as many as twelve other cases amidst an uptick of fraud in the country.

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The action came less than a week after China unveiled its own harsh measures. In addition to a blanket ban on ICOs, China-based cryptocurrency exchanges must stop trading and notify users of their closure by month’s end.

According to a Reuters report, QUID PRO QUO Association had been operating in Switzerland for over a year, and managed to accrue funds of over CHF 4.0 million ($4.2 million). FINMA uncovered a scheme in which the group had been providing e-coins to several hundred users, operating as a blatant scam.

Unlike other forms of investment, Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term in many jurisdictions operate outside the regulation. Those times are quickly coming to an end with regulators clamping down on these operations in an attempt to rein in on an industry that has been growing largely unimpeded.

With countries such as China leading the way, other domestic regulators have also strengthened their own resolve, helping police what has largely been a free-for-all. Indeed, cryptocurrencies possess a litany of risks in terms of fraud, with no shortage of companies looking to peddle these instruments to a vulnerable investment base.

According to a FINMA statement regarding the action: “This activity is similar to the deposit-taking business of a bank and is illegal unless the company in question holds the relevant financial market license.”

FINMA noted the distinction between e-coins and real cryptocurrencies, given that the former is not stored on distributed networks using Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term technology. Rather, the fraudulent e-coin was housed locally on QUID PRO QUO’s servers.

More work to be done?

FINMA is currently eying as many as three other companies on its warning list, part of a string of investigations that it is conducting. With companies flocking to this avenue in a bid to circumvent traditional regulations and rules, FINMA’s actions today could simply represent the beginning of a domestic crackdown in Switzerland.