Swiss regulator FINMA takes action against providers of fake crypto currency “E-Coin”
FINMA has liquidated the “E-Coin” providers that lacked the necessary banking license.
Switzerland’s Financial Market Supervisory Authority (FINMA) has targeted unlicensed providers of fake crypto currency “E-Coin”.
In an announcement, out today, the Swiss regulator said it had closed the unauthorised providers, who had accepted several million Swiss francs in public deposits without holding the required banking licence. FINMA has also launched bankruptcy proceedings against the legal entities involved.
According to the regulatory findings, at least since 2016, the QUID PRO QUO Association has been issuing E-Coins, a crypto currency developed by the association itself. In collaboration with DIGITAL TRADING AG and Marcelco Group AG, the association provided interested parties with access to an online platform on which E-Coins could be traded and transferred. These three entities accepted funds amounting to at least four million Swiss francs from several hundred users and operated virtual accounts for them in both legal tender and E-Coins.
FINMA notes that these activities are similar to the deposit-taking business of a bank and are illegal unless the company in question holds the necessary licence.
FINMA has launched enforcement proceedings against those involved. In its proceedings, FINMA found that the three legal entities had violated supervisory law by failing to obtain the required authorisation. The regulator has liquidated the association and the two companies. Since the three legal entities are insolvent, FINMA has also launched bankruptcy liquidation proceedings against them.
The regulator has been able to seize and block assets to the value of approximately two million Swiss francs.
In its announcement, FINMA explains that E-Coins were completely under the providers’ control and stored locally on its servers. The providers had claimed that E-Coins would be 80% backed by tangible assets, but the actual percentage was markedly lower. In addition, substantial tranches of E-Coins were issued without sufficient asset backing, leading to a progressive dilution of the E-Coin system to the detriment of investors.
FINMA stresses that it welcomes innovation, but when innovative business models are misused for unauthorised activities, it will intervene.
The regulator said it was conducting 11 investigations into other presumably unauthorised business models relating to such coins.
The action by the Swiss regulator happens amid a large-scale wave of regulatory warnings against crypto currencies and initial coin offerings, in particular. Regulators from the United States, the United Kingdom, the Netherlands, Russia, Hong Kong, Singapore, and China, have been among those to raise their concerns recently.