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BITCOIN

Vienna gets its first Bitcoin digital currency ‘bank’

The Austrian capital Vienna has its first 'Bitcoin bank', located on the popular Mariahilfer Strasse shopping street. Customers can exchange cash for Bitcoin, and find out information about the digital currency.

Vienna gets its first Bitcoin digital currency 'bank'
Photo: ORF

In January Bitcoin saw its value top $1,000 (€940) for the first time in three years after it ended as the best-performing currency of 2016. However, on February 9th its value fell dramatically, although it recovered quickly.

Analysts attributed the January high to increased demand from China, which is where most Bitcoin trading takes place.

Bitcoin relies on web-based transactions handled across thousands of computers and is used as an anonymous way to move money globally. Magdalena Isbrandt, managing director of Bit Trust says the advantages of the digital currency are that transactions “are simply much faster and can be done without a middleman.”

There are no fees or bank involvement but the secrecy surrounding the currency have led some to question its stability and transparency. The value of Bitcoin has been volatile since it was first launched in 2009. Like all currencies, its value is determined by how much people are willing to exchange it for.

To receive a Bitcoin, a user must have a Bitcoin address – a string of 27-34 letters and numbers – which acts as a kind of virtual post box to and from which the Bitcoins are sent.

Since there is no register of these addresses, people can use them to protect their anonymity when making a transaction.

Andreas Petersson of Bitcoin Austria says this is an advantage: “If I pay online with Bitcoin, I have a certain level of privacy. The vendor does not have my credit card number. If I pay for purely digital goods, like computer games, I have a much better feeling as I’m not handing over all my private data.”

However, for Gabriele Zgubic of the Vienna Chamber of Labour, the currency holds too many risks. “It is subject to strong fluctuations, which could mean you end up losing money. There’s also the security risk, as it’s very attractive to hackers, and you have to be aware of the security on your smartphone. As it’s an unregulated currency, if you do get hacked, there’s no one you can claim compensation from.”

Last year, Switzerland's national rail service (SBB) launched a new service selling Bitcoin at all ticket machines across the country.

FRAUD

Suspected Austria bitcoin fraud sparks Europe-wide probe

Authorities investigating a suspected bitcoin-related scam centred in Austria have asked Interpol to help determine whether there might be perpetrators - and victims - of the scheme across Europe.

Suspected Austria bitcoin fraud sparks Europe-wide probe
PHOTO: JACK GUEZ / AFP
“Hundreds” of people across Austria have complained of being defrauded by the “Optioment” scheme dealing in the digital currency, Christina Ratz, spokeswoman for the Vienna public prosecutor's office, told AFP on Thursday. Die Presse, a daily, put the number of possible victims as high as 10,000.
 
Two Austrians have been identified as being accused of fraud in the case, with more suspects possible as the case progresses, Ratz said.
 
Investors were promised returns of up to four percent per week for investing bitcoins into the opaque scheme, which initially did offer dividends before suddenly collapsing in November.
 
In January Austria's financial market watchdog brought Optioment to the attention of prosecutors, saying it suspected fraud, a pyramid scheme or violations of capital markets regulations.
 
The scheme appears to have used “multi-level marketing” in order to grow, with investors encouraged to find new clients themselves.
 
“I got my whole family involved. We put around 50 bitcoins in. The money's gone. I'm sure of it,” one young woman told a joint investigation by Die Presse and the public ORF TV station.
 
Another investor recalled an event promoting the scheme at the Pyramide hotel in Voesendorf, just south of Vienna: “They ran on stage and started running around, they were playing air guitar. It felt like a cult”.
 
Reports of the number of bitcoins invested in the scheme go as high as 12,000, worth around €95 million at current value, or more than double that at the peak of the boom in the currency.
 
Lawyers acting for the Austrians identified as the frontmen for the scheme issued a statement saying their clients did not handle any cash or bitcoins themselves, Die Presse reports.
 
The paper reported the men as saying that they were themselves defrauded by two mysterious figures behind the scheme, a Danish man, Lucas M., and a Latvian, Alex P.