A global campaign to rein in the rampant and unregulated multi-billion cryptocurrency seems underway.
Although financial watchdogs across the world have not commented on a joint operation to control some of the more unruly elements of cryptocurrency, after a week of raids and closures, their actions seem co-ordinated.
In the latest moves, the Chinese government has ordered Bitcoin exchanges in Beijing and Shanghai to close by the end of September.
The ban follows the Chinese central bank calling a halt to ICOs (initial coin offerings because trading Bitcoin or other cryptocurrencies for shares or rewards offered by start-up businesses were risky investments.
“Increasingly Bitcoin is used as a tool in criminal activities, such as money laundering, drug trafficking, smuggling and illegal fundraising,” said a bank spokesman.
Fake cryptocurrency scammers
Regulators in the US and UK quickly followed suit with China and stopped ICOs as well. Because of the actions, the Bitcoin price dropped but recovered slightly to $3699.
Now, Swiss regulators have closed three companies allegedly scamming millions of pounds from hundreds of investors by offering them a fake cryptocurrency – e-coin.
The three companies offering the bogus online currency were:
- Quid Pro Quo Association
- Digital Trading AG
- Marcelo Group AG
More than £10 million e-coin have been sold.
Unlike other cryptocurrencies, where transactions are virtual and recorded in a database called a blockchain, e-coin were issued without asset backing and are almost worthless as the owners cannot hold or trade them.
Fraudster warning
The Swiss financial regulator Finma is also warning that other companies are trading in e-coin against the rules.
“Unlike real cryptocurrencies, which are stored on distributed networks and use blockchain technology,” said the warning.
“E-Coins were completely under the providers’ control and stored locally on its servers. The providers had suggested that E-Coins would be 80% backed by tangible assets, but the actual percentage was significantly lower.
“Moreover, 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.”
The three other companies under investigation are:
- Suisse Finance GmbH in Liquidation
- Euro Solution GmbH
- Animax United LP
