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European Consumer Centre (ECC) Italy Bolzano office
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07.07.2016

Criptocurrency: risks and dangers behind the corner

 
Curiosity concerning criptocurrency is dramatically increasing as it represents a fatal attraction for those who want to rapidly multiply their money. However, even in the criptocurrency market, there are offers circulating that prove to be veritable illegal pyramidal systems. The European Consumer Centre Italy tries to give clarity about this topic and invites to be careful concerning the criptocurrency named Onecoin.
Let´s begin with Bitcoin: What is it? How does it work?
Bitcoin is a virtual currency adopted to finalize purchases of goods and services trough commercial operators who accept them. In order to use Bitcoins the user needs to dispose of a online wallet, identified through a couple of cryptographic keys.
Bitcoins are provided trough transactions, we can imagine them as cheques, which are sent to all the “knots” of the Bitcoin network. Among these knots there are the so-called “miners” who receive transactions, verify their validity and insert them in the Blockchain, the public available ledger registering all the Bitcoin transactions occurred so far. There is no way to cancel Bitcoin transactions once submitted.
This criptocurrency essentially represents a way of carrying out payments for goods and services.

The risk of criptocurrencies as illegal pyramidal systems
The market of virtual currencies is continuously evolving. Indeed it is not rare to come across criptocurrencies, which are hiding veritable illegal pyramidal systems. According to the Italian law n.173/2005, selling activities mainly based on the mere recruitment of new members, are forbidden and criminally punishable.
The most famous pyramidal system using cryptocurrency is, until now, Gemcoin: after a complaint submitted by the SEC (U.S. Securities and Exchange Commission) (https://www.sec.gov/news/pressrelease/2015-227.html), the bank accounts of the owner and of the members at the top of the pyramidal system have been confiscated by the US-judicial authority and the same people reported for fraud. The scheme foresees the offer of investments in criptocurrency promising investors high short term return.The user is invited to buy a package, associated to a certain amount of inactive virtual currency as bonus. Finally, there is a system of remuneration for those who are capable of recruiting other people into the system.

Many doubts concerning the cryptocurrency Onecoin
It is also important to underline that the mentioned law states that only financial advisors, listed in the register of the Commissione Nazionale per la Società e la Borsa (CONSOB, National Commission for Companies and the Stock Market) can submit an investment proposal. Always according to the legislative decree, the financial advisor has to submit those documents, that include properties and risk-profiles of the investment, to the aspiring participant. The absence of these documents must be perceived as a warning-sign.
“Moreover, in all these cases, no one informs participants about the fact that Banca d´Italia published an important warning stating that the issuing of virtual currency and the conversion of legal currency into virtual currency belongs to the exclusive responsibility of the authorities entitled by law. From its infringement can derive criminal penalties”, explains Rebecca Berto, ECC advisor.
It is important to notice that in case of criptocurrency the user will never have the availability of the currency in his “wallet”, since banknotes and coins – the means of payment foreseen by law - can only be printed and coined by central banks.

For all these reasons, the ECC calls for caution!

For more information
It is possible to contact the European Consumer Centre in Bolzano: Tel. 0039 0471/980939 or email info@euroconsumatori.org

Bolzano, Press Release
7th July 2016

 

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