The Financial Markets Authority (FMA) of Austria has warned the country’s consumers to exercise caution while using digital currencies, particularly when related to business and investment models based on virtual currencies.
With a nod to its brethren of regulators around Europe, the Austrian FMA has warned the country’s citizens to “exercise the utmost caution” when engaging in virtual currencies.
The warning, released yesterday, reminds users that digital currencies are not subject to regulation and are therefore exempt from the FMA’s supervisory purview.
The authority added:
Consequently, the risk of their misuse for criminal purposes, particularly with regard to fraud or breach of trust is therefore especially high, with any form of legal enforcement of claims for damages sustained being particularly difficult or even impossible.
While the warning did not seek to explain the merits of digital currencies and the reasons behind which they are seeing adoption, the regulator did not criticize them either, besides highlighting the potential for their misuse as stated above.
Instead, the warning focused on addressing the increasing number of business models and investment schemes that use digital currencies. Promising high returns, these investment products have seen a number of enquiries from consumers questioning them, the FMA revealed.
“The models and products are designed in such a way that they are not subject to licence obligations, and therefore consequently are not supervised,” the authority stated.
Typically, an investment product involves purchasing a hardware miner through which digital currencies are procured, the regulator added. The other model, based on multi-level-marketing (MLM), is also seeing a traditional unsustainable business and investment model turning to digital currencies.
The warning, as published, reads:
The FMA therefore explicitly warns consumers to exercise the utmost caution with regard to their contact with virtual currencies as well as business models or investment products based on such virtual currencies.
There is a notable increase in pyramid- and MLM-schemes related to digital currencies like bitcoin, across the world. For instance, a bitcoin MLM scheme went bust in Vietnam in recent months, after stacking up deposits of well over $1 million. An unrelated pyramid scheme in Vietnam last month that also misused bitcoin had the Vietnamese government warn citizens against using the cryptocurrency.
Closer home, the Austrian FMA referred to recent warnings from other regulators in the wake of the rising popularity of a lesser-known altcoin, OneCoin. First, the Belgian Financial Services and Markets Authority issued its warning in June 2016, urging consumers against using OneCoin. Based on a centralized system unlike cryptocurrencies like Bitcoin, OneCoin has frequently seen accusations of being a pyramid-scheme. Following Belgium’s official warning, the UK’s Financial Conduct Authority (FCA) issued its own warning for consumers dealing with bitcoin.
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Last modified: May 21, 2020 10:12 AM UTC