Austrian Financial Watchdog Issues Warning About Unregistered Crypto Investment Firm

The Austrian Financial Supervisory Authority (FMA) has issued a warning concerning FXCrypto Club, a financial brokerage company which, as explained, has been providing financial services in the country without seeking approval. 

As Finance Magnates noted late last week, the financial watchdog noted that FX Crypto Club offers Contracts for difference (CFDs), which provide exposure to cryptocurrency instruments. The firm, which is based out of the Marshall Islands, has allegedly been seeing investors and collecting funds without authorization, and the independent watchdog is issuing a warning to members of the public. 

Identity and Registration Violations 

Ideally, any firm operating in the Austrian crypto space will need to apply for a license from the financial regulator. The country abides by strict Anti-Money Laundering (AML) regulations, and while the derivatives market isn’t covered by this, companies providing access to crypto-related financial products do need to get approval from the agency before selling their products to retail investors. 

Apart from the fact that the firm hadn’t registered to sell its products, the FMA pointed out that the company is based overseas, while it has been actively seeking investments via a website operated by CapCorp Ltd., its parent company, which is based out of Ottawa. The agency explained that investors would need to be extra vigilant when investing in cryptocurrencies, urging them to ensure that they can verify its identity before patronizing. 

The agency has been rather strict with its oversight of the crypto asset space, as the fine for violating the registration requirement lone has been set for €200,000 (about $222,000). However, it didn’t specify whether FX Crypto Club will be made to pay the same fine. 

The new FMA rules on compliance with registration requirements were published in a legal release earlier this year. Although the country does have a generally accepting stance towards cryptocurrencies, it stepped up its oversight of the space, as adoption grew, and the prominence of crypto investment products increased as well. 

Under the new rules, all crypto trading firms will need to register with the FMA, with requirements for approval, including the provision of sufficient proof of adequate liquidity, due diligence credentials, and trading resources. The guidelines cover trading activities related to the issuance, sale, exchange, and trade of virtual currencies, as well as all asset custodians in the space.  

Crypto Firms Prepare for AMLD5 Enforcement 

The warning is coming just on the heels of the Fifth European Union Anti-Money Laundering Directive (AMLD5); a set of privacy and consumer protection guidelines which are already being implemented across the EU, and which have been causing mass panic among crypto firms. Several of these firms announced last month that they would be closing their operations for good, adding that they wouldn’t be able to continue providing services to their customers while remaining compliant with the provisions of the AMLD5. 

Although some have tried to fight the implementation of these rules, no change seems to be in sight. However, some firms have also been able to adapt. Last month, Waves, a decentralized exchange, shutdown and relaunched as a hybrid platform, which the company believes will combine the benefits of decentralized exchanges (including transaction irreversibility, user control, and safety) with the benefits of centralized trading platforms.