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Following The Beijing Shutdown, The Swiss Also Shut Down 'Fake' E-Coin

Following The Beijing Shutdown, The Swiss Also Shut Down 'Fake' E-Coin
In what is the latest clamp-down on the risks involving virtual money, Switzerland’s financial watchdog is investigating around a dozen other possible fraud cases after the agency closed down what it said was the provider of a fake cryptocurrency.
A few days ago, Chinese authorities had ordered the Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure and this move by the Swedish agency FINMA watchdog comes on the heels of that Chinese closure.
Virtual currencies such as Bitcoin are hailed by their supporters as a fast and efficient way of managing money and are not backed by a central bank and these currencies are issued and usually controlled by their developers.
But the risks of fraud in the burgeoning online cryptocurrency underworld have made the regulators and traditional banks increasingly concerned about this digital currency.
Bitcoin, the original and still the biggest cryptocurrency, “is a fraud” and will eventually “blow up”, said JPMorgan Chief Executive Jamie Dimon last week.
FINMA said in a statement on Tuesday that after funds of at least 4 million Swiss francs ($4.2 million) from several hundred users had been amassed by the QUID PRO QUO Association that has now been shut down by FINMA and this exchange had provided so-called E-Coins for more than a year.
“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, Switzerland’s Financial Market Supervisory Authority, said.
Because it was not stored on distributed networks using blockchain technology but was instead kept locally on QUID PRO QUO’s servers, E-Coin was not like “real cryptocurrencies”, FINMA said.
There were no immediate comments that were available from the Zurich-based QUID PRO QUO.
The FINMA said that it was conducting 11 investigations into other possible fake virtual currencies and it had three other companies on its warning list due to suspicious activity in cryptocurrencies.
Following a weakening of its bank secrecy rules during a global crackdown on tax evasion, the Swiss finance industry has been looking for new avenues of growth.
Attempting to turn itself into a hub for virtual currency firms is the small Swiss canton of Zug which is famed for low taxes that have drawn multinational companies.
But the pitfall of investing in the booming but still-murky cryptocurrency world is highlighted by the QUID PRO QUO case and is an example of that.
FINMA said it had so far seized and blocked assets worth around 2 million francs of the money users had invested.
From about $17 billion at the start of the year to a record high close to $180 billion at the beginning of September, initial coin offerings, or ICOs, have fueled a rapid ascent in the value of all cryptocurrencies.
An ICO is the practice of creating and selling digital currencies or tokens to investors to finance start-up projects.

Christopher J. Mitchell

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