The Financial Market Authority of Austria urges consumers to be extremely cautious buying or investing in cryptocurrencies because they are likely to be used in large-scale frauds and Ponzi schemes.

The FMA emphasises that virtual currencies pose a risk for investors because they are not subject to license obligations and are out of control of state institutions. The regulator mentions mining software and hardware among unreliable investment objects.

“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 official statement reads.

Many cryptocurrency projects are based on “Multilevel Marketing Plans” (MMPs) used by network marketing programmes.

“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,” states the regulator.

In 2016, several hundred Austrians, mostly residents of Tyrol, became victims of a virtual currency scam that promised high returns from investments into bitcoin mining. The project was called BitClubNetwork, writes Austrian newspaper TT.

Elena Platonova