Blockchain 2021 Comparisons

Last Updated June 17, 2021

Contributed By PFR Attorneys-at-law

Law and Practice


PFR Attorneys-at-law is an independent law firm specialising in financial markets law. The firm is seated in the heart of Vienna and works with clients at the forefront of the latest fintech developments in Austria, advising on cutting-edge products in the banking, payments and blockchain sectors. PFR advises credit institutions, payment and e-money institutions, fintechs, IT companies, investment firms, alternative investment fund managers, insurers and service providers in connection with virtual currencies. Clients rely on PFR’s profound legal expertise and its pragmatic, goal-oriented approach.

The blockchain market in Austria and its fields of application are changing dynamically. Currently, blockchain technology is used primarily for transferring virtual currencies through electronic payment systems and as a financing instrument for start-ups. In this vein, 2020 saw a rise of virtual asset service providers (VASPs), with 23 VASPs being registered by the Austrian Financial Market Authority (FMA) since January 2020. One digital assets provider even became the first Austrian start-up to achieve so-called unicorn status, which means a valuation of more than USD1 billion before going public.

However, the trend seems to be moving away from using blockchain technology primarily for cryptocurrency exchanges to more extended applications. Raiffeisen Bank International has started to work on a new form of national currency tokenisation to accelerate cross-border interbank or intercompany transactions and improve liquidity management. Furthermore, Erste Group (one of the leading bank groups in CEE) and infrastructure company ASFINAG have issued a promissory note loan of EUR20 million via a digital issuance platform based on a blockchain solution. This was the first capital market issuance in Europe to take place purely via the blockchain technology. It also needs to be noted that the Vienna Stock Exchange became the world’s third officially regulated market to list a bitcoin product, in September 2020. This enables Bitcoin and Ethereum products of the Swiss issuer 21Shares AG to be traded on the regulated market of the Vienna Stock Exchange for the first time.

Looking ahead, the European Commission’s recently published Markets in Crypto-Assets Regulation (draft MiCAR) will be a game changer for all crypto-based service providers in Austria and the European Union. The draft regulates all issuers and service providers dealing with crypto assets. For this purpose, the MiCAR divides crypto-assets into different categories (eg, asset-referenced token, e-money token, utility token) and provides specific reporting and supervisory requirements for each of them. These regulations are supplemented by provisions for the prevention of market abuse. The MiCAR is scheduled to come into force at the beginning of 2022 and is eagerly awaited by the relevant issuers and other cryptoservice providers.

Blockchain applications have been implemented quite intensively in the financial sector. This includes the transfer and exchange of virtual assets and virtual currencies through decentralised ledgers. Furthermore, blockchains are used for the financing of companies and projects via the settlement of initial coin offerings (ICOs), initial token offerings (ITOs) and security token offerings (STOs), as well as for the settlement of financial transactions. In addition to these successful use cases from the financial and fintech sector, blockchain technology is recognised as having the potential to fundamentally change entire processes and business models in the private and public sectors.

The most promising “proofs of concept” – even if they qualify as pilot projects at the current stage – are applications for the management and transfer of rights (tokenisation). Such applications can be used to manage and transfer real assets without the need for a physical transfer. It is possible to map already concluded contracts through computer programs like smart contracts, which then handle the processing of the agreed rights and obligations. A smart contract may automatically execute the legal consequences without the need to involve a trusted third party. Smart contracts are already in use in the automatic payment of compensation for flight delays. It is also possible to automatically pay out royalties or licence fees for the use of a copyrighted work to the author without the need for collecting societies or other third parties.

In this vein, the Austrian electricity provider “Wien Energie” is testing to extend the possibilities of blockchain and smart contracts in electricity sharing models, intending to sell electricity generated by photovoltaic systems via blockchain. While high fees would be incurred for feeding in, distributing and reselling via the electricity grid, the so-called "electricity sharing" could take place without middlemen thanks to the blockchain. In a further step, intelligent power grids (smart grids) shall be used by decentralised providers for a volatile energy feed-in based on the ascertained supply and demand within a grid.

Further fields of application relate to supply chain management. To control and avoid manipulation, all processes within the transport route can be entered into a blockchain. The origin of the goods, the entire payment processes, the respective import and export documentation and all necessary authorisations can be mapped transparently and comprehensibly in a blockchain. Large transport companies such as LKW Walter and DB Schenker have successfully tested an electronic load ticket in a pilot project. They aim to set up a commercial platform and go live with the individual participants in 2021.

Further proofs of concept relate to business law applications, where there have been discussions regarding granting membership and voting rights to shareholders via blockchains. In the future, the shares in companies could also be transferred in this way.

The above examples show that the use cases of blockchain are very diverse and will fundamentally change numerous processes in both the private and public sectors.

“Decentralised finance” (DeFi) describes the use of financial operations that are built on blockchain technology and enable operation without financial institutions as intermediaries. The use of DeFi protocols by residents in Austria is not governed by specific laws or regulations. In general, the FMA takes a technology-neutral approach, which means that providers are treated equally, regardless of whether innovative technology like blockchain or classic technical channels are used. Thus, the FMA assesses every business model involving decentralised finance on a case-by-case basis, which results in some services being prohibited and others permitted.

Automated Market Makers

A market maker is a person who permanently engages on the financial markets in trading for his own account by buying and selling financial instruments using his own capital at prices that are determined by him. Market making is generally permitted and desired as it has market-infrastructural significance. However, automated market makers are not permitted under the current legal regime in Austria. A market maker obligation is assumed for certain securities and requires an agreement with the exchange operating company. A special form of market maker is the so-called specialist, which is determined for each share represented in the prime market within a tender. The market maker must therefore be a natural person and automated market making is currently not possible in Austria.

Wallet Aggregators

Wallet aggregators provide a full-service solution by consolidating and aggregating multiple wallets on a single platform and providing a one-stop shop for digital wallet acceptance. This enables the acceptance of digital wallets at various physical retail locations. Such wallet aggregation services are deemed permissible in Austria. Please note that wallet providers might be qualified as providers in relation to virtual currencies and therefore might need to apply for a registration with the FMA prior to providing their activities in Austria.

Decentralised Synthetic Investment Platforms

Decentralised investment platforms that match borrowers and lenders of digital assets are generally permitted to operate in Austria. However, some regulatory issues need to be considered (see 7.1 Decentralised Finance Platforms for further details).

Decentralised Prediction Markets

Prediction markets are exchange-traded markets created to trade the outcome of events. The market prices can indicate what the crowd thinks the probability of the event is. As long as the relevant legal provisions are complied with (unauthorised gambling in particular is not allowed), the operation of such platforms is permitted in Austria.

Decentralised Stablecoins

Decentralised stablecoins are asset-backed tokens. In Austria, cash-collateralised tokens in particular are widespread. Stablecoins entitle the holder to exchange the token back with the issuer at any time, at a fixed price. If the prices fall below a predefined value, there is an incentive to buy them and assert the claim against the issuer. For this mechanism to work, the issuer must have a good credit rating and the stablecoin must be backed by collateral. Raiffeisen Bank International is experimenting with its own euro-stablecoin, with which some employees can already pay in the canteen.

In Austria, stablecoins are generally classified as a means of payment in the broader sense. They are not currently treated as securities or financial instruments. Within the means of payment, stablecoins are either e-money or remain unregulated. If they are issued as e-money, the exemption for limited networks might be applied in order to avoid regulation (see 3.3 Stablecoins for details).

Decentralised Lending Platforms

The conclusion of money-lending agreements and the extension of monetary loans are qualified as lending business and require a banking licence in Austria. However, crowdlending platforms might be set up as brokerage services based on a respective brokerage licence under Austrian trade laws. A further alternative might be offering crowdfunding services. There are currently 26 crowdfunding providers in Austria, which need to comply with specific requirements determined in the Alternative Financing Act, and in the future in the Regulation on European Crowdfunding Service Providers (ECSP Regulation), which will be applicable from 10 November 2021.

The Austrian legislator has not adopted a specific regulatory regime that is applicable to market participants using blockchain technology or cryptocurrencies. Austria has amended the existing national AML laws in order to transpose the 5th AMLD. Due to the technology-neutral supervisory approach, the FMA applies the same laws and regulations to blockchain-based products or services as it does to traditional products or services.

The FMA points out that business models involving virtual currencies can have numerous points of contact under supervisory law. This applies, among other things, if legal tender is involved or if a financial product is created based on a cryptocurrency. In such cases, an issuer and thus an addressee for the obligations under supervisory law would be present. According to the FMA, the following licensing requirements must be considered:

  • banking businesses under the Banking Act;
  • payment services under the Payment Services Act 2018;
  • e-money transactions under the E-Money Act 2010;
  • investment services under the Securities Supervision Act 2018;
  • insurance services under the Insurance Supervision Act 2016; and
  • services under the Stock Exchange Act.

As already outlined in 1.1 Evolution of the Blockchain Market, the MiCAR is expected to come into force in 2022. It will comprehensively govern the issuance of crypto-assets, from the public offering to the licensing of stablecoin providers and crypto-asset service providers.

Austria has implemented standards applicable to the blockchain sector proposed by international bodies such as the Financial Action Task Force (FATF) by amending the AML laws in accordance with the 5th AMLD. Accordingly, VASPs are qualified as obliged entities under the AML laws and need to apply for registration with the FMA. They are obliged to implement the same preventative measures as financial institutions, including customer due diligence, record keeping and reporting suspicious transactions. Furthermore, they need to obtain, hold and transmit originator and beneficiary information when making transfers.

The most relevant regulatory body to businesses or individuals using blockchain in Austria is the FMA, which is competent for registering VASPs and for supervising the sector in the same way it supervises other financial institutions. The FMA also offers the possibility for fintechs and companies that intend to use new technologies to direct inquiries on supervisory issues via a central point of contact (see 2.6 Enforcement Actions). Another service that the FMA provides is the regulatory sandbox (see 2.7 Regulatory Sandbox).

There are some private initiatives in Austria that promote businesses or individuals using blockchain, including the Digital Asset Association Austria, which is a private entity that is particularly committed to the promotion and sustainable development of the digital asset ecosystem in Austria. It acts as a lobby group for start-ups and companies in the field of digital assets, and aims to build bridges between stakeholders and decision-makers.

Another association is the Blockchain Initiative Austria, which started activities in January 2021. Its purpose is to support the establishment of a secure, trustworthy and durable blockchain infrastructure for private sector use. Another goal is to establish a platform for organising and moderating the further development of technical and legal topics necessary for this purpose, and to support the implementation of use cases related to blockchain technologies.

A major association for the promotion of the fintech sector in Austria is Fintech Austria, members of which include successful Austrian fintechs, VASPs, credit institutions and insurance companies. Fintech Austria aims to foster the development of the fintech sector in Austria and CEE, and is an active contributor to facilitating communication and co-operation between the community and external participants.

Another private association dedicated to supporting the use of virtual currencies is Bitcoin Austria. Its network of experts acts as a point of contact for technical, legal and organisational questions about Bitcoin for traders and end users, and also for media professionals. Bitcoin Austria also organises information events, promotes the exchange of ideas between people interested in Bitcoin, arranges services and supports innovative Bitcoin project ideas.

No relevant judicial decisions yet play a role in interpreting or establishing the legal regime applicable to the use of blockchain in Austria. As far as can be seen, there is also no ongoing litigation in Austria that could be expected to have a considerable impact on the blockchain sector.

There have not been any relevant enforcement actions to date. The FMA offers a point of contact for fintechs and other companies that use new technologies and have specific questions relating to supervisory law. The point of contact is intended for persons and companies that do not hold licences. The FMA strives to handle inquiries about licensing requirements, the requirement to publish a prospectus, compliance or anti-money laundering regulations, how FMA procedures are conducted, and the costs incurred.

The FMA opened a regulatory sandbox programme for fintech models and incumbents in September 2020, based on an amendment of the Financial Market Authority Act. It aims to facilitate the supervision of fintechs or their co-operations with incumbents regarding fintech business models. The regulatory sandbox is open to companies that wish to provide financial services that are likely to be subject to licence, authorisation or registration by the FMA. Blockchain-based projects may fulfil the described criteria and therefore may generally apply for admission to the sandbox.

Companies already licensed can also be included in the sandbox if they want to test a new business model under development. In order to participate in the regulatory sandbox programme, the business model must be of increased innovation value and in the national economic interest of an innovative financial place. Participation in the regulatory sandbox does not lead to any reduction in regulatory or supervisory requirements; this is done through targeted support and close supervision. The company can operate its business model in a test phase with a licence in the sandbox. If the test is successful, the company may leave the sandbox to undertake innovative activities under regular supervision.

The Austrian tax regime has not been updated to consider the use of blockchain or cryptocurrencies. These cases are therefore to be assessed according to the general provisions of tax law. In general, there needs to be a distinguishment between mining and the exchange of cryptocurrencies.


According to the Ministry of Finance, the mining of cryptocurrencies is basically a commercial activity and is therefore subject to income tax. Income from commercial operations is generated if an independent activity is conducted repeatedly with the intention to make a profit. The creation of new data blocks in the blockchain and the income generated thereby are treated no differently from the production of other economic goods, and are therefore seen as income from commercial operations. For income from commercial operations, the profit needs to be determined (business income minus business expenses) and then taxed according to the progressive income tax rate or a corporate income tax rate of 25%, depending on the legal form chosen.

Please note that mining is not subject to VAT because there is no identifiable service recipient. The Ministry of Finance has clarified that the verification of a dedicated transaction against transaction fees is – in principle – subject to VAT, but is to be treated as tax-free. Since mining is either tax-free or not taxable at all, a miner is not entitled to an input tax deduction under VAT law in connection with the acquisition costs of his hardware and software or the electricity costs used.

Exchange of Cryptocurrencies

The exchange of cryptocurrencies for other cryptocurrencies or fiat currencies is treated as an exchange of assets that includes both an acquisition and a sale for income tax purposes. For corporations, the exchange of cryptocurrencies is subject to corporate income tax at a rate of 25%. However, if cryptocurrencies are invested as interest-bearing, they represent income from capital assets and are subject to a special tax rate of 27.5%.

Also, the income tax treatment of cryptocurrencies held for private purposes depends on whether they are interest-bearing or not. If the cryptocurrencies are rented out with interest, any capital gains realised from the exchange are subject to income tax at a rate of 27.5%. If no interest-bearing investment is made, it needs to be further distinguished whether or not individuals hold cryptocurrencies as business assets. For individuals holding cryptocurrencies as business assets, the exchange is subject to the progressive income tax rate of up to 55%. For individuals holding cryptocurrencies as non-business assets, any gains from the exchange are tax-free if they are realised after the one-year speculation period has elapsed. If there is less than one year between acquisition and sale, the gains realised from the speculation transaction are subject to the progressive income tax rate of up to 55%.

From a VAT perspective, the exchange of legal tender for cryptocurrencies and vice versa is tax-free; this also applies to the purchase of cryptocurrencies from a vending machine. Conversely, supplies or services paid for with cryptocurrencies are to be treated like other supplies or services provided against legal tender. The assessment of VAT is based on the value of the cryptocurrency. Likewise, services provided by wallet providers against payment are subject to VAT.       

The Austrian Economic Chamber (Wirtschaftskammer), which represents more than 540,000 member companies, has established a task force called Arbeitskreis Blockchain. It was founded in 2018 and deals with the applications, benefits and risks of blockchain technology in various economic sectors. Potential business cases are tested in a secure environment in especially created blockchain test labs.

The Austrian Economic Chamber also offers an online guide that interested companies can use to evaluate whether the use of blockchain makes sense for their project, regardless of whether it relates to a new application or an addition to/replacement of an existing system. In addition, the Austrian Economic Chamber has set up a blockchain data certification service, which allows data to be digitally certified free of charge. Regardless of the file format, data is given a time record of when it was created, when it existed or when it was changed. This protects company data and proves the authenticity thereof.

There have been numerous discussions about the property law classification of digital assets in Austria. It is now recognised that the civil law provisions on possession and ownership are also applicable to digital assets. Ownership of virtual currencies and comparable virtual assets can be transferred due to their controllability and quasi-physical character. Only small blockchains whose transaction histories can be manipulated may not be suitable for conveying ownership positions.

The transfer of ownership of digital assets requires a title (eg, a contract of sale, exchange contract, etc) and a mode. A physical handover (hand-to-hand) is possible as a mode, as is otherwise the case with the handover of movable goods. A physical handover or hand-to-hand is not to be taken literally. A transfer on a blockchain already leads to a required handover. Furthermore, the transfer must be made to an address whose associated private cryptographic key is known to the acquirer. From this point on, transfers of digital assets via a blockchain network are already considered final.

Another mode for the transfer of digital assets is the so-called transfer by sign. This is only permitted if a physical transfer is not possible, which is particularly the case when digital assets are held in a physical wallet. A transfer by sign takes place by submitting the private key to the acquirer, which can be done by handing over the physical wallet. It is suggested that the acquirer transfers the digital assets to his own address to ensure that he gains sole ownership.

Currently, there is no legally recognised classification of tokens in Austria. The FMA and literature differentiate between the following three types.

Security/Investment Tokens

Security tokens grant their owner a claim for a payout towards the issuer. The payout may be in the form of participation in the profits of a company or in the form of interest payments and repayments. According to the FMA, security tokens are similar to usual securities like bonds or shares, and therefore are frequently considered as transferable securities within the meaning of Regulation (EU) 2017/1129 (Prospectus Regulation) and the Securities Supervision Act 2019. For a transferable security to exist, the following criteria must be met simultaneously:

  • embodiment of rights;
  • tradability on the capital market, whereby a specific listing or inclusion in trading is not necessary;
  • comparability with shares, bonds or similar transferable securities; and
  • no exceptions.

The FMA points out that security tokens usually meet these criteria and regularly qualify as transferable securities.

Payment/Currency Tokens

The primary purpose of a payment token is the payment function. Payment tokens can be used to purchase goods or services from persons other than the issuer. The FMA points out that issuing a payment token may be qualified as:

  • the issuance and administration of payment instruments within the meaning of the Banking Act;
  • the issuance of e-money as defined in the E-Money Act; or
  • the issuance of payment instruments in accordance with the Payment Services Act.

However, there is no licensing requirement for any of these activities if the criteria for the limited network exemption are met.

Utility Tokens

Utility tokens provide their holder with a benefit in relation to a specific product or a service. They are often associated with the right to co-create or use a product or service, or to redeem the token for a product or service. The regulatory classification is difficult because utility tokens appear in different forms and often fulfil the function of payment or security tokens. If the token only grants access to a product or service without serving the purpose of payment, there is usually no licence requirement. If, on the other hand, the token can be redeemed with the issuer or with other users of the platform for the use of a product or service, it fulfils a payment function and is therefore comparable to a payment token. Utility tokens can also have an investment component, especially if there are claims to the payment of capital, interest or similar (see Security/Investment Tokens above).

The FMA points out that this classification is not conclusive since there are hybrid forms and further types of tokens. The classification under supervisory law must in any case be conducted on a case-by-case basis.

The Austrian regulator has not yet dealt with stablecoins in detail. In the literature, it is assumed that stablecoins – apart from special cases – are to be classified as a means of payment and therefore do not qualify as a security or financial instrument. Within the category of means of payment, the stablecoin either represents e-money or is unregulated; an extension of the definition of payment instruments from the Banking Act does not appear justifiable. However, it should be noted that, in the case of e-money, the exception for limited networks should also be examined.

In Austria, there are no notable limitations on the use of cryptocurrencies for payments. Although cryptocurrencies have not been recognised by the government as a lawful means of payment, they may be used to make payments if the other party expressly agrees to accept them as such. It needs to be noted that cryptocurrencies have only been accepted very sporadically so far in Austria. However, this could soon change due to the entry into force of the MiCAR.

In Austria there are no regulations that apply to the sale of non-fungible tokens – ie, unique tokens that are not changeable. Thus, the general categorisation criteria and rules apply to non-fungible tokens (see 3.2 Categorisation).

Austria has a very lively market for digital assets. VASPs are active in all the various subsectors, such as providing custodian wallets, exchanging virtual currencies between one another and into fiat currencies, cryptocurrency ATMs, (crowd) investing platforms, etc. Currently, as far as can be seen, only one provider works as a decentralised exchange that allows its users to buy and sell Bitcoins on a peer-to-peer basis.

In Austria, numerous VASPs offer the exchange of fiat currencies in cryptocurrencies and vice versa. Such exchange services may trigger money remittance transactions, which require a respective licence under the Payment Services Act. In general, money remittance transactions describe the provision of services, in which the funds of a payer or a payee are accepted only for transferring the corresponding amount to the payee or to another payment service acting on behalf of the payee without setting up a payment account in the name of the payer or the payee, or in which the funds are accepted on the payee's behalf and made available to the payee. The provision of money remittance transactions may take place when tokens are issued against fiat currencies (cash or book money) or e-money, and the funds are collected by an intermediary and forwarded to the token issuer.

The FMA currently assumes that the mere buying and selling of cryptocurrencies via vending machines, which do not have a central issuer, is in principle not subject to licensing. However, it points out that the emptying of the vending machine (for someone else) and the subsequent transfer of the funds contained therein to a third party may trigger the licence requirement for money remittance transactions.

The 5th AMLD has been transposed into Austrian law and expanded the circle of obligated parties to include VASPs. The obligations under the Austrian AML law are therefore addressed to 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 wallet providers);
  • the exchanging of virtual currencies into fiat currencies and vice versa;
  • the exchanging of one or more virtual currencies between one another;
  • the transferring of virtual currencies; and
  • financial services for the issuance and selling of virtual currencies.

The scope of Austria’s AML obligations is broader than under the 5th AMLD. This is because the Austrian AML law does not only implement the 5th AMLD but also adopts the recommendations and interpretations of the FATF. Consequently, VASPs that intend to provide activities in or from Austria need to apply to the FMA for registration, and must notify the FMA of any changes to the information and documents submitted.

Since VASPs are obliged entities under the AML laws, they have to (inter alia) carry out a risk analysis and comply with customer due diligence obligations (KYC) when establishing a business relationship or carrying out occasional transactions (ie, transaction that do not fall within the scope of a business relationship and amount to at least EUR15,000). This means that, for example, the customer and its beneficial owner must be identified and verified based on documents, data or information from a reliable and independent source. Also, suspicious cases must be reported to the Financial Intelligence Unit.

The markets for digital assets are not regulated by laws specifically designed for this purpose. Instead, the general supervisory law framework is applicable to markets for digital assets. The only exception are the rules on combatting money laundering and terrorist financing, which determine specific rules for VASPs. The FMA is the only regulator designated the supervision of business models using blockchain technology; it is also competent for the registration of VASPs. So far, the FMA has rejected two applications for registration because the required reliability of the managers could not be proven. Apart from this, there have been no notable enforcement actions in the context of blockchain business models.

Re-hypothecation is a practice by which, inter alia, digital asset exchanges may use, for their own purposes, assets that have been posted as collateral by their clients. Under Austrian law, the hypothecation or pledging of goods requires a physical transfer of the object serving as collateral. When transferring digital assets on a blockchain, a hand-to-hand transfer is possible in principle (see 3.1 Ownership). Following from that, the literature argues that a pledge on digital assets can be established. If a third party has custody over the goods to be pledged, the mere instruction of possession is considered an appropriate act of publicity. This instruction is an order from the owner to the possessor to now hold the good for another, namely the pledgee. In both forms, the owner loses the power of disposal completely.

It needs to be noted that, so far, there have been no statements in the literature on the admissibility of the re-hypothecation (on-transfer) of digital goods to third parties. However, in our opinion, a transfer of the pledged assets to third parties is possible. Such a re-hypothecation again requires a physical transfer of the digital goods to the third party. The prevailing opinion also considers a transfer of possession by declaration to be sufficient here since the object is no longer in the custody of the pledging owner and thus the publicity of the pledge is given.

Wallet providers need to comply with the AML obligations because they qualify as VASP. Further regulatory implications may arise if a token is classified as a transferable security (security token). In this case, not only may the issuer be obliged to publish a prospectus, but the custodial or wallet provider will also need to be authorised for safekeeping and administration services under the Capital Markets and Securities Supervision Act.

ICOs can be described as fundraising activities by which capital is usually collected in the form of digital assets. In return, the capital providers receive a coin or token from the issuer, which may represent a share in a company or a claim to profits to be realised in the future. According to the FMA, whether financial services are triggered that require a licence depends on the design of ICOs. The FMA points out that ICOs may fall within the scope of another law regarding investor protection.

According to the literature, ICOs are governed by general securities and commodities law. When a token’s features lead to its classification as a security token (see 3.2 Categorisation), offerings or sales of such token may be subject to prospectus requirements under Austrian securities law – ie, the Capital Markets Act and the Securities Supervision Act. Even if a security token does not qualify as a transferable security (because its transfer is restricted), it may classify as an investment under the Capital Markets Act. This would be the case when the token or coin would provide access to capital or returns for a risk-sharing group of investors. Such investments would also trigger prospectus requirements. Thus, each offer must be assessed on a case-by-case basis and its classification depends on the specific token’s terms and conditions or features.

Fundraising through the sale of tokens using a digital asset exchange as an intermediary does not lead to a deviating assessment compared to the statements made under 5.2 Initial Exchange Offerings. The specific design of the instruments offered determines which regulatory regime is applicable to such offerings.

Currently, there are no specific regulations in place applicable to investment funds or collective investment schemes that invest in digital assets; these are governed by general securities and commodities laws. The FMA states that the Alternative Investment Funds Managers Act may be applicable if funds are raised for investment digital assets according to a pre-defined investment strategy. Such activity can be considered as management of an alternative investment fundand require being licensed as an Alternative Investment Fund Manager by the FMA.

The regulations applicable to broker-dealers or other financial intermediaries that deal in digital assets depend on the regulatory classification of the specific asset. If the digital asset qualifies as a transferable security, broker-dealers are subject to the rules of the Banking Act and the Securities Supervision Act and therefore have to apply for a banking or investment services licence. If the digital asset qualifies as a commodity, broker-dealers only have to comply with the Austrian trade laws and apply for a respective trade licence with the competent trade authority.

There are currently no laws, regulations or binding judicial decisions addressing the legal enforceability of smart contracts. Such private contractual arrangements based on blockchain technology are, in principle, legally enforceable in the same way as any civil law contract if the conditions of a civil law contract are fulfilled. For this purpose, the parties must agree on the essential contents of the respective transaction. However, since the counterparty will usually not disclose its identity, difficulties may arise in practice when enforcing smart contracts.

Furthermore, it needs to be considered that some transactions require certain formal requirements under Austrian law. For example, some surety contracts need to be documented in writing and a purchase of shares from an Austrian limited liability company must be concluded as a notarial deed. These contracts would not be enforceable if concluded as smart contracts. Also, the information obligations arising from consumer protection provisions must be complied with if the smart contract will be concluded in a B2C context. However, if these contracts are duly concluded, they may be implemented based on smart contracts.

The developer liability of blockchain-based networks needs to be assessed on the basis of general tort law. In principle, liability requires a damage that has been caused unlawfully and culpably. Unlawfulness is indicated by the infringement of absolutely protected legal rights such as property. Since property rights to virtual assets are possible, this requirement will likely be fulfilled. However, proving fault will be difficult, as there have not yet been any statements in case law on the standard of care for developers of blockchain solutions. However, liability should be possible in the case of gross negligence when developing the blockchain-based network.

Decentralised financial platforms that match borrowers and lenders of digital assets are permitted to operate in Austria, and would likely qualify as VASPs since their services include the exchange or transfer of virtual currencies into other virtual currencies, as well as financial services concerning the issuance and sale of virtual currencies. If so, a registration with the FMA would be required. However, lending cryptocurrencies would not trigger a banking licence requirement, since the lending business only refers to crediting fiat currencies.

A lender may take an effective security interest in digital assets for a loan by pledging them as collateral. See 4.5 Re-hypothecation of Assets regarding the prerequisites for pledging digital assets.

There are no requirements for professional investors to transfer digital assets in which they have invested to a custodian. The custodian of digital assets needs to consider some regulatory requirements, which depend on the regulatory classification of the specific asset. If the relevant digital asset is classified as virtual currency, custodians need to apply for registration with the FMA and comply with the AML requirements. If the digital asset is classified as a transferable security, the safekeeping and administration of this instrument are subject to the rules of the Securities Custody Act and would require a banking licence. When none of the mentioned conditions are met, the digital asset may qualify as a commodity, in which case the safekeeping and administration thereof would be subject to Austrian trade laws and require a trade licence from the competent trade authority.

The General Data Protection Regulation (GDPR) and the Austrian Data Protection Act may generally apply to the use of blockchain-based products or services, provided that they lead to an automated processing of personal data. In this vein, Recital 27 of the GDPR states that the principles of data protection should apply to any information concerning an identified or identifiable natural person. Personal data that has undergone pseudonymisation and could be attributed to a natural person using additional information should be considered as information on an identifiable natural person.

While the GDPR and the Austrian Data Protection Act aim to protect personal data, blockchain is based on the principle of transparency. This results in a tension between the individual data protection rights (in particular, the right to be forgotten pursuant to Article 17 of the GDPR) and the general disclosure of information in a blockchain.

In the literature, it is argued that data protection rights also apply to personal data stored in a blockchain. Due to the immutability of the information in the blockchain, claims for the deletion of personal data in particular are difficult to enforce. It is unclear whether the right to deletion can be fulfilled by the owner of a private key deleting it to lose further access to stored data.

As outlined in 8.1 Data Privacy, the GDPR and the Austrian Data Protection Act apply to the use of blockchain-based products or services, provided that personal data is being processing automatically. Data protection implications must therefore be considered in any case when providing blockchain-based products or services.

Since most data protection obligations are directed towards the controller, it is important to identify the controller in the case of blockchain-based products. Austrian literature thereby distinguishes between permissioned and permissionless blockchains. In the former, the initiator of the blockchain is deemed to be the controller, while in the latter, all miners are qualified as joint controllers.

In Austria, the “mining” of cryptocurrencies by running computers that iteratively run calculations in order to validate transactions on a blockchain network in exchange for tokens is allowed. The FMA has stated that business models involving the participation in the mining of digital assets could be classified as alternative investment funds under the Alternative Investment Fund Manager Act. For this to be the case, the criteria of an alternative investment fund must be met – namely, the collection of capital from a number of investors to be invested according to a defined investment strategy for the benefit of the investors. However, the mere mining of virtual currencies in one’s own name and on one’s own account does not require a licence.

Staking as a service business exists in Austria and is becoming increasingly popular as a passive source of income. Users can generate rewards without the need to generate new blocks on a blockchain. One Austrian provider offers users the chance to buy tickets with digital assets. After a draw (similar to a lottery), the winner gets the possibility to create a block. This task can be delegated to a staking pool, which pays out the rewards to the user and keeps a share for operation costs and maintenance. Since this business model is relatively new, there are no statements on its regulatory classification or applicable regulations.

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Law and Practice in Austria


PFR Attorneys-at-law is an independent law firm specialising in financial markets law. The firm is seated in the heart of Vienna and works with clients at the forefront of the latest fintech developments in Austria, advising on cutting-edge products in the banking, payments and blockchain sectors. PFR advises credit institutions, payment and e-money institutions, fintechs, IT companies, investment firms, alternative investment fund managers, insurers and service providers in connection with virtual currencies. Clients rely on PFR’s profound legal expertise and its pragmatic, goal-oriented approach.