The range of virtual currencies available on the Internet is constantly increasing, with terms like “digital currency”, “alternative currency”, “crypto currency” or similar constructions being used in combination with the terms for money or currencies. The FMA explicitly advises that such offerings are currently not subject to any form of regulation, and in particular are not subject to supervision by the FMA. 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 or enforcement of claims for damages sustained being particularly difficult or even impossible. The FMA therefore warns consumers to exercise the utmost caution in relation to virtual currencies.
Furthermore the FMA receives enquiries on an increasingly frequent basis with regard to business models or investment products that are based around such virtual currencies. The models and products are designed in such a way that they are not subject to licence obligations, and therefore consequently are not supervised. Such models and products, for example, involve the purchasing or investing in software or hardware, with which virtual money can be created, or which can be used to trade in virtual money, with particularly high returns. Other examples involve virtual currencies, where in order to ensure their use to gain high returns information or training materials must first of all be purchased. Many such schemes are based on similar “Multilevel Marketing Plans” (MMPs) as those used by network marketing programs. Such plans are characterised by the fact that every customer simultaneously acquires new customers and sellers, and receives a percentage of their sales on the basis of an elaborate system. There is the particular risk that such plans are fraudulent “snowball” schemes: in such cases pay-outs are made to early participants in the system from the money paid in by later participants, until the system collapses for purely mathematical and statistical reasons. Alternatively the system is a legally prohibited pyramid system, which is defined as follows in Article 168a of the Penal Code (StGB – Strafgesetzbuch): “Speculative schemes that promise the prospect of a financial advantage for participants in return for a stake and conditional upon the participant in turn attracting further participants to participate under the same conditions, and in which the gaining of the financial advantage is dependent either partially or fully upon further participants also behaving in accordance with such conditions.”
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. Such financial products are as a rule not subject to any kind of regulation and supervision, and generally fall outside of the FMA’s supervisory competences. Furthermore, they are also particularly susceptible for being misused for the purpose of fraudulent acts.
The legal assessment of whether a criminal offence is committed in connection with such business models does not fall under the FMA’s competence, but instead falls within the area of competence of the public prosecutor as well as the criminal courts. In the event that the FMA becomes aware of the existence of such cases giving rise to the suspicion of a criminal offence being committed, the FMA reports such occurrences to the Public Prosecutor’s Office in the form of a short statement of the known facts.
Since virtual currencies as well as business models and financial products based upon them as a rule operate on a cross-border basis, foreign sister authorities and consumer protection organisations also publish warnings about these issues. The FMA therefore recommends, prior to entering into any business relationship, to also conduct Internet Research and to establish whether warnings have already been published in relation to the Provider in question.
The FMA also refers to the following warnings in relation to virtual currencies:
http://www.eba.europa.eu/-/eba-warns-consumers-on-virtual-currencies
The FMA also, for example, refers to warnings issued in relation to a specific provider “OneCoin”:
https://stmk.arbeiterkammer.at/beratung/konsumentenschutz/achtung_falle/onecoin_betrugsverdacht.html (in German only)
http://www.fsma.be/en/Site/Repository/press/warnfsma/2016/07-08_onecoins.aspx
https://www.fca.org.uk/news/news-stories/beware-trading-virtual-currencies-onecoin
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-6006
+43/(0)676/882 49 516