The UK’s Financial Conduct Authority (FCA) has issued a warning to consumers to be wary of dealing with OneCoin, which describes itself as a virtual currency, with the FCA saying that City of London Police are currently investigating OneCoin.
OneCoin has offices in Bulgaria’s capital city Sofia. Its site says that its founder is Rousse-born Ruja Ignatova.
“We believe consumers should be wary of dealing with OneCoin, which claims to offer the chance to make money through the trading and ‘mining’ of virtual currencies,” the FCA said.
The FCA, the conduct regulator for 56 000 financial services firms and financial markets in the UK and the prudential regulator for more than 24 000 of those firms, said that OneCoin markets itself as “a digital currency, based on cryptography”.
OneCoin claims to have a finite amount of currency units which means it is unaffected by factors such as inflation, and that it is not bound by a central bank, the FCA said.
The City of London Police are currently investigating OneCoin, the statement said. “If you believe that you have been a victim of fraud in this regard, or have had dealings with OneCoin, then please contact Action Fraud or telephone them on 0300 123 2040,” the FCA said.
“This firm is not authorised by us and we do not believe it is undertaking any activities that require our authorisation. However, we are concerned about the potential risks this firm poses to UK consumers.”
As OneCoin is not authorised, consumers who deal with it will have no protection from the Financial Ombudsman Service or the Financial Services Compensation Scheme, the FCA said.
OneCoin was also the subject of a notice by Bulgaria’s Financial Supervision Commission (FSC) in September 2015.
“The FSC informs the potential investors and consumers on the internet that the activities related to acquisition, trading and settlement with OneCoin are not regulated by the acting European and national legislation in the area of the capital markets. Currently, OneCoin or other virtual currencies are not recognized and are not considered financial instruments under the MFIA and the requirements of the MFIA are not applied to them,” the commission said.
“Potential investors and consumers should note that investment in such crypto currencies which already exceed 400 different types is associated with a high risk. In case the organizer of such an activity becomes insolvent, the individuals are not subject of compensation by the Investors Compensation Fund,” Bulgaria’s FSC said.
OneCoin – and cryptocurrencies in general – have been the subject of statements by various bodies, including the Hungarian central bank in June 2016, Latvia’s financial supervision body, German and Belgian financial regulators, according to media reports.
Belgium’s Financial Services and Markets Authority (FMSA) said in July: “Certain people have recently been promoting OneCoin, said to be a virtual currency based on cryptography, in Belgium. The FSMA wishes to warn the public that OneCoin has not received any form of recognition whatsoever from the FSMA. The same is true of the persons who are promoting OneCoin: They do not hold an authorization or any other form of recognition from the FSMA.”
Some media reports and bloggers have alleged that the system is a pyramid scheme. The company has rejected these allegations as baseless.
In response to the statement by the UK’s FCA, OneCoin said: “OneCoin is disappointed that the FCA has issued a statement without having first contacted the company. OneCoin has not been contacted by the City of London Police. No allegations of any wrongdoing have been put to OneCoin and the basis for and scope of any investigation has not been explained”.
In the statement, OneCoin described itself as a global software and technology company, with offices in Bulgaria, Hong Kong and the United Arab Emirates, which has developed a cryptocurrency. “It shares some features with other digital currencies, but has a unique centralised model, which includes maintaining a database record of each transaction and client and the implementation of Know-Your-Customer (KYC) rules. These measures help protect its clients,” the statement said.
“OneCoin is committed to following good business practices and the relevant rules and regulations in the countries in which it operates. It will co-operate fully with the authorities in pursuit of this objective,” the statement said.