Cryptoassets for investment and financing

Regulatory threshold

What attributes do the regulators consider in determining whether a cryptoasset is subject to regulation under the laws in your jurisdiction?

The Austrian Financial Market Authority (FMA) operates a ‘technology-neutral’ approach, meaning that products and services involving cryptoassets are subject to the same regulatory framework as traditional products and services. The underlying rationale is ‘same risk, same rules’. Whether and to what extent financial services regulation and securities laws apply depends primarily on the actual product features and business model.

Business models involving cryptoassets may be subject to licensing requirements and are governed by:

  • the Austrian Banking Act – for example, if funds are raised for investment into cryptoassets or in the case of dealing as principal or agent in cryptoassets which qualify as financial instruments under the EU Markets in Financial Instruments Directive (MiFID) II (2014/65/EU);
  • the Austrian Payment Services Act 2018 – for example, if information from several fiat payment accounts is consolidated, fiat payments are initiated or fiat currencies are transferred in the course of cryptocurrency transactions;
  • the Austrian Securities Supervision Act 2018 – for example, if investment advice or portfolio management provided or trading platforms are operated in relation to cryptoassets which qualify as MiFID II financial instruments.
  • the Austrian Act on Alternative Investment Fund Managers – for example, if funds are raised for investment into cryptocurrencies or cryptoassets according to a pre-defined investment strategy; and
  • the Austrian Electronic Money Act – when issuing electronic money.  

Purely technical services do not require a licence under financial services regulation. If, however, a technical billing service also included transfer of fiat funds, this would no longer be considered a mere technical service and would need to be tested against licensing requirements under Austrian financial services regulation.

Given the diversity, complexity and rapid evolution of business models in the fintech space, the regulatory treatment of any business models involving cryptocurrencies and cryptoassets will need to be assessed on a case-by-case basis. Therefore, the FMA encourages discussion of the regulatory treatment before engaging in any business activity. It has set up a dedicated specialist team and the Fintech Contact portal dedicated to those areas, which handle all fintech-related queries and published guidance on the regulatory treatment of certain activities on its website.

Investor classification

How are investors in cryptoassets classified and treated differently?

There is currently no specific regulation in place for classifying investors in cryptoassets and treating them differently. General investor classification under Austrian securities and consumer protection laws apply.

Initial coin offerings

What rules and restrictions govern the conduct of, and investment in, initial coin offerings (ICOs)?

Currently there is no specific regulation in Austria governing the conduct of and investment in ICOs. As a result, ICOs are governed by general securities and commodities laws. Depending on a token’s terms and conditions or features, certain token offerings or sales may be subject to prospectus requirements under Austrian securities laws unless a prospectus exemption applies. Each offering must be assessed on a case-by-case basis and the regulatory assessment will depend on the specific technical, functional and economic design of the instruments offered.

ICOs may trigger licensing and prospectus requirements under financial services regulation and securities laws.

For Austrian supervisory law purposes, the FMA has broadly classified tokens as below, noting that in practice hybrid forms and overlaps frequently occur and that such classification is subject to any further national and international legal developments:

  • Security/investment tokens – tokens that represent assets, in particular payment claims against a specific issuer (eg, to participate in future earnings or cash-flows or tokens that represent membership rights within the meaning of corporate law). The design of such tokens are often similar to that of classic securities in particular bonds or shares. Security tokens are therefore frequently considered as transferable securities pursuant to the Austrian Capital Markets Act 2019 and the Austrian Securities Supervision Act 2018. If a token is classified as a transferable security, this has far-reaching regulatory implications not only for the token issuer (as this may trigger prospectus requirements under Austrian securities laws), but also for the trading platforms on which such a token is traded (as they will need to become authorised as stock exchanges or regulated trading venues) or custodial or wallet providers (as they will need to become authorised for safekeeping and administration). Even if a security token does not classify as a transferable security (in particular because that token or coin is not transferable or its transfer is restricted), but provides access to capital or returns for a risk-sharing group of investors, it may classify as a Capital Markets Act investment and its offering may trigger prospectus requirements under the act unless a prospectus exemption applies.
  • Utility tokens – there are many designs of utility tokens. While these are often comparable to vouchers, utility tokens occur in many different forms and also fulfil the function of payment tokens or security tokens (hybrid design), making their classification for supervisory law purposes rather difficult. If the token can be used only for designating a product or a service and is not otherwise associated with any claims or if the token only grants access to a product or a service without simultaneously serving a payment purpose, then such tokens will not be covered by supervisory laws. If, on the other hand, the token may be redeemed with the issuer or other users of the platform for the use of a product or a service, then it fulfils a payment function similar to a payment token.
  • Payment/currency tokens – tokens that are accepted as means of payment for the purchase of goods or services, or tokens that serve the purpose of transferring money and value but do not confer any claims against a specific issuer (eg, bitcoin or ripple).
Security token offerings

What rules and restrictions govern the conduct of, and investment in, security token offerings (STOs)?

Currently there is no specific regulation in place in Austria governing the conduct of, and investment in, STOs, so these are governed by general securities and commodities laws.

Security tokens are usually qualified as transferrable securities as defined in the Austrian Capital Markets Act 2019 and the Austrian Securities Supervision Act 2018. They could also be considered an investment as defined in the Austrian Capital Markets Act 2019, in particular if a token is not transferrable or its transfer is restricted but claims to capital or returns are embodied and a risk-sharing group exists.

Security tokens and other types of investment token will typically be subject to prospectus requirements. An exemption applies if:

  • the respective tokens are offered only to qualified investors;
  • the offering is directed to fewer than 150 persons who are not qualified investors of a European Economic Area member state; or
  • the minimum investment is at least €100,000 per investor.

In addition to issuers, platform operators may also have the obligation to publish a prospectus as they may be considered to be offerors for these instruments under the Austrian Capital Markets Act 2019.

Stablecoins

What rules and restrictions govern the issue of, and investment in, stablecoins?

Currently there is no specific regulation in place in Austria governing the issue of and investment in stablecoins. General securities, commodities and trade laws apply.

Airdrops

Are cryptoassets distributed by airdrop treated differently than other types of offering mechanisms?

Austrian law does not differentiate between cryptoassets distributed by airdrop compared to other types of offering mechanism and thus these are subject to the general securities, commodities and trade laws of Austria.

Advertising and marketing

What laws and regulations govern the advertising and marketing of cryptoassets used for investment and financing?

Currently there is no specific regulation in place in Austria governing the advertising and marketing of cryptoassets. Therefore, the advertising and marketing of cryptoassets is governed by general securities and conduct of business laws which might require specific disclaimers and should be true, fair and not misleading, and must respect unfair competition laws and honest business practices.

Trading restrictions

Are investors in an ICO/STO/stablecoin subject to any restrictions on their trading after the initial offering?

Investors in an ICO/STO/stablecoin are currently not subject to any statutory trading restrictions in Austria after the initial offering. However, there may be contractually agreed trading restrictions. In addition, the subsequent re-sale of cryptoassets that classify as transferable securities may trigger prospectus requirements under applicable securities laws.

Crowdfunding

How are crowdfunding and cryptoasset offerings treated differently under the law?

The Austrian Alternative Financing Act, which is the main regulation for public offerings of securities and investments with emission volumes below the thresholds of the Austrian Capital Markets Act 2019 – also known as ‘crowdfunding’ – does not treat offerings of cryptoassets differently from offerings of other securities or investments. If the cryptoasset is classified as a security or investment, the public offering of the cryptoassets falls under the scope of the Austrian Alternative Financing Act, unless the Austrian Capital Markets Act 2019 applies.

Transfer agents and share registrars

What laws and regulations govern cryptoasset transfer agents and share registrars?

Currently there is no specific regulation in place in Austria governing cryptoasset transfer agents and share registrars. If the cryptoasset qualifies as a security or investment, general securities, commodities, trade and banking laws apply.

Anti-money laundering and know-your-customer compliance

What anti-money laundering (AML) and know-your-customer (KYC) requirements and guidelines apply to the offering of cryptoassets?

Activities involving cryptoassets are subject to Austrian/European AML requirements if they require a licence under financial services regulation (eg, as provision of payment services) or if they are subject to the AML requirements under trade laws (eg, because under Austrian trade law, commercial operators, including auctioneers, are subject to the AML requirements if they make or receive cash payments of at least €10,000).

From January 2020 onwards, certain providers of services in relation to cryptocurrencies will become subject to the AML/KYC and customer due diligence requirements, reporting obligations and registration requirements with the FMA. This affects providers offering one or more of the following services:

 

  • services to safeguard private cryptographic keys to hold, store and transfer virtual currencies on behalf of a customer (custodian wallets);
  • exchanging virtual currencies into fiat currencies and vice versa;
  • exchanging one or more virtual currencies into each another;
  • transferring virtual currencies; and
  • the provision of financial services for the issuing and selling of virtual currencies.

If money laundering or terrorist financing is suspected, this needs to be reported to the Money Laundering Reporting Office.

Sanctions and Financial Action Task Force compliance

What laws and regulations apply in the context of cryptoassets to enforce government sanctions, anti-terrorism financing principles, and Financial Action Task Force (FATF) standards?

Anti-terrorism financing principles and the FATF standards are covered in the Austrian Financial Markets Anti-money Laundering Act and in the Austrian Trade Act. Where applicable, EU law sanctions legislation may also apply.

Law stated date

Correct on

Give the date on which the above content is accurate.

1 December 2019.