Swiss Regulator Closes Association Due to ‘Fake’ Cryptocurrencies

The Swiss financial regulator announced on Tuesday that it has closed the association QUID PRO QUO due to irregularities in the distribution of the digital currency e-coin, and has also launched a series of investigations into separate potential fraud cases.

QUID PRO QUO has been distributing e-coins for over a year, raising at least four million Swiss francs from several hundred users, according to a statement released by FINMA on Tuesday.

“This activity is similar to banking operations for collecting deposits and is illegal if the company engaged in it has not obtained the appropriate financial services license,” the agency stated.

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E-coin is not like real cryptocurrencies as it is not stored on distributed networks using blockchain technology but is kept on the servers of the association QUID PRO QUO, FINMA explains.

The association did not immediately respond to Reuters’ inquiries for comments on the closure information. Regulators, however, emphasize that they have warned of possible malfeasance in the case of three other companies due to suspicious activities in the cryptocurrency sector. They also add that they are conducting 11 investigations into possible fake virtual currencies.

The Swiss financial industry is seeking new growth opportunities following relaxed banking secrecy regulations as part of the global fight against tax evasion. The canton of Zug has particularly distinguished itself in efforts to attract companies active in the virtual currency sector.

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The action by the Swiss FINMA follows an order from Chinese authorities to cryptocurrency exchange platform operators to suspend trading and promptly inform users of the closure.

Virtual currencies like bitcoin are issued and controlled by their creators. They are not backed by central banks, and supporters consider them a fast and efficient way to manage money. Regulators and traditional banks are increasingly concerned about frauds that they believe lurk in the growing gray area of internet cryptocurrencies.

Thus, the CEO of American bank JPMorgan, Jamie Dimon, stated last week that bitcoin is a “fraud” and that it will ultimately “burst like a soap bubble.”