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03 February 2021
Academic publication
austria

Lexology Getting the Deal Through: Cryptoassets & Blockchain 2021 - Austria

Find the full comparative guide on Cryptoassets & Blockchain on the LexGTDT tool. Here you can find the answers for Austria.

General legal and regulatory framework

Legal framework

What legal framework governs cryptoassets? Is there specific legislation governing cryptoassets and businesses transacting with cryptoassets?

No specific Austrian legal framework or legislation governs cryptoassets or business transactions involving cryptocurrencies. Instead, the general financial services and securities law framework also apply to cryptoassets and new technologies. The Austrian Financial Market Authority (FMA) applies a ‘technology-neutral’ supervisory approach, meaning that products and services are subject to the same laws and regulations as traditional products and services.

In determining which rules and regulations apply to a business model involving cryptoassets, a case-by-case assessment of the specific features of the product or service in question is needed to determine its regulatory status. Business models involving payment, utility or security tokens, including trading platforms, custodian wallet services or e-money, may be subject to financial services licence requirements, prospectus requirements, anti-money laundering (AML) and know-your-customer (KYC) obligations, specific information requirements towards customers or local trade registration.

However, the Fifth EU Anti-Money Laundering Directive was recently transposed into Austrian law, extending AML and KYC diligence requirements to:

  • providers engaged in exchange services between virtual currencies and fiat currencies (ie, cryptocurrency exchanges); and
  • electronic wallet providers (ie, entities providing services to safeguard private cryptographic keys to hold, store and transfer virtual currencies on behalf of their customers).

Bitcoin, dash, ethereum, litecoin, tether and many other cryptocurrencies that are accepted as a means of payment fall within the definition of ‘virtual currency’. Security tokens typically do not qualify as such means of payment but can be subject to a case-by-case assessment taking into consideration the specific aspects of each token.

Separately from the directive, the Austrian AML law (the Financial Markets Anti-Money Laundering Act) also provides for a definition of service providers concerning virtual currencies. This definition includes all service providers offering one or more of the following services:

  • services to save private cryptographic keys for holding, storing or transferring virtual currencies on behalf of a customer (electronic wallet providers);
  • the exchange of virtual currencies into fiat money and vice versa;
  • the exchange of one or more virtual currencies into other virtual currencies;
  • the transfer of virtual currencies; or
  • the provision of financial services concerning the issuance and sale of virtual currencies.

In addition to being obliged to apply the AML and KYC requirements, the service providers will be under the obligation to register with the FMA. The FMA may reject the registration if it has:

  • specific indications that obligations under the AML laws may not be fulfilled; or
  • concerns regarding the personal reliability of the provider’s managing directors, certain shareholders of the service provider or the service provider itself (if a natural person).

Government policy

How would you describe the government’s general approach to the regulation of cryptoassets in your jurisdiction?

Austrian financial regulators and policymakers are generally receptive to cryptoassets, new technologies and fintech.

The FMA has established a dedicated fintech contact point to assist with new business models requiring authorisation under Austrian financial services regulation.

True to the government’s motto ‘advice instead of punishment’, the Ministry of Finance has finally implemented a dedicated regulatory sandbox programme in line with international best practice. The programme allows companies requiring a financial services licence to swiftly and comprehensively clarify regulatory requirements for innovative business models in a constant dialogue with the regulator and, if necessary, test the business model based on a scaled-down licence. The selection criteria for sandbox admission and further details are based on international best practice. Despite the covid-19 pandemic, the Austrian government will hopefully continue to foster new technologies such as blockchain and distributed ledger technology. However, while national initiatives in this field are welcome, we expect that the issuance of, and services around, cryptoassets will, in the mid-term, be regulated on an EU-wide level. On 24 September 2020, the European Commission adopted an expansive new Digital Finance Package that will transform the European Economy in the following years to come. Importantly, the new regulatory framework also includes a comprehensive legislative proposal on cryptoassets not covered by existing EU financial services legislation (eg, the Markets in Financial Instruments Directive (MiFID) II (2014/65/EU), E-Money Directive and PSD II), called Markets in Cryptoassets (MiCA). MiCA’s main aim is to help streamline distributed ledger technology and virtual asset regulation on an EU-wide level while simultaneously protecting its users and investors.

Regulatory authorities

Which government authorities regulate cryptoassets and businesses transacting with cryptoassets?

The FMA will supervise businesses activities involving cryptoassets that fall within the scope of banking, payment services, investment services, insurance, funds or securities regulation. Also, the European Central Bank will be involved in the award of certain licences (eg, licences for core banking services).

However, the FMA does not regulate cryptoassets that constitute commodities under Austrian law, because they are overseen by the Austrian trade authorities.

Regulatory penalties

What penalties can regulators impose for violations relating to cryptoassets?

For breach of the applicable financial services and securities laws, the FMA can impose a wide variety of sanctions, including injunctions and fines against directors and legal entities, and the reputational damage of public naming and shaming.

Court jurisdiction

Which courts have jurisdiction over disputes involving cryptoassets?

No court has exclusive jurisdiction over disputes involving cryptoassets in Austria. Thus, assuming the jurisdiction of Austrian courts in general, civil law disputes involving cryptoassets will be subject to civil or commercial court jurisdiction, depending on the type of dispute. Generally, a dispute on commercial matters (eg, a dispute between entrepreneurs) must be brought before commercial courts and a dispute on a civil-law matter must be brought before civil courts.

Legal status of cryptocurrency

Is it legal to own or possess cryptocurrency, use cryptocurrency in commercial transactions and exchange cryptocurrency for local fiat currency in your jurisdiction?

There are no general restrictions on owning or possessing cryptocurrency in Austria.

However, using cryptocurrency in commercial transactions and the exchange of cryptocurrency for local fiat currency may require a banking or payment services licence. Also, since January 2020, providers engaging in exchange services between virtual currencies and fiat currencies are subject to AML and KYC obligations.

Fiat currencies

What fiat currencies are commonly used in your jurisdiction?

Austria is a member of the EU’s Economic and Monetary Union and the euro is its official fiat currency.

Industry associations

What are the leading industry associations addressing legal and policy issues relating to cryptoassets?

The leading industry associations addressing legal and policy issues relating to cryptoassets are Digital Asset Association Austria, Bitcoin Austria and Fintech Austria.


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 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 Banking Act – for example, if funds are raised for investment into cryptoassets or in the case of dealing as principal or agent in cryptoassets that qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID) II (2014/65/EU);
  • the 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 Securities Supervision Act 2018 – for example, if investment advice or portfolio management provided or trading platforms are operated concerning cryptoassets which qualify as MiFID II financial instrument.
  • the Alternative Investment Fund Managers Act – for example, if funds are raised for investment into cryptocurrencies or cryptoassets according to a pre-defined investment strategy; and
  • the 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 the 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 handle all fintech-related queries and published guidance on the regulatory treatment of certain activities on the FMA 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 offer 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 this classification is subject to any further national and international legal developments:

  • Security and 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 these tokens is often similar to that of classic securities in particular bonds or shares. Security tokens are therefore frequently considered as transferable securities under the Capital Markets Act 2019 and the Securities Supervision Act 2018. If a token is classified as 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 (because they will need to be authorised as stock exchanges or regulated trading venues) or custodial or wallet providers (because they will need to be authorised for safekeeping and administration). Even if a security token does not classify as transferable security (particularly 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 they 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 and 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 transferable securities as defined in the Capital Markets Act 2019 and the Securities Supervision Act 2018. They could also be considered an investment as defined in the Capital Markets Act 2019, particularly if a token is not transferrable or its transfer is restricted but it represents claims to capital or investment returns investors, as a group, are exposed to joint risk and reward.

Security tokens, and other types of investment tokens, 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 less 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 be obliged to publish a prospectus because they may be considered to be offerors of these instruments under the Capital Markets Act 2019.

Stablecoins

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

Currently, there are no specific rules 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 they 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 that 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. Also, 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 Alternative Financing Act, which is the main regulation for public offerings of securities and investments with emission volumes below the thresholds of the 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 Alternative Financing Act, unless the 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 securities 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 and EU AML requirements if they require a licence under financial services regulation (eg, as the 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).

Moreover, certain providers of services concerning cryptocurrencies are become subject to the AML and 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 other;
  • 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 Financial Markets Anti-Money Laundering Act and the Austrian Trade Act. Where applicable, EU sanctions’ legislation may also apply.


Cryptoasset trading

Fiat currency transactions

What rules and restrictions govern the exchange of fiat currency and cryptoassets?

The Fifth EU Anti-Money Laundering Directive was recently transposed into Austrian law. The directive newly extends anti-money laundering (AML) and know-your-customer (KYC) diligence requirements to:

  • providers engaged in exchange services between virtual currencies and fiat currencies (ie, cryptocurrency exchanges); and
  • electronic wallet providers (ie, entities providing services to safeguard private cryptographic keys to hold, store and transfer virtual currencies on behalf of their customers).

Also, since January 2020, certain providers of services concerning cryptocurrencies are subject to the AML and KYC and customer due diligence requirements, reporting obligations and registration requirements with the Financial Market Authority (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 other;
  • transferring virtual currencies; and
  • the provision of financial services for the issuing and selling of virtual currencies.

Depending on the specific business model related to the exchange of fiat currency and cryptoassets, as well as functionalities and payment flows involved in the exchange, a licence from the FMA under applicable banking, payment services or securities brokerage laws may be required for the relevant service provider or platform operator.

Also, profits received from the exchange could be subject to tax laws. The exchange of cryptoassets for cryptoassets or fiat currencies is treated as a sale for income tax purposes. For corporations, the exchange of cryptoassets will be subject to a 25 per cent corporate income tax rate.

For individuals holding cryptoassets as business assets, the exchange of cryptoassets will be subject to the progressive income tax rate of up to 55 per cent. For individuals holding cryptoassets as non-business assets, any gains from the exchange of cryptoasset are tax-free if realised on the expiry of the one-year speculation period. Any gains that are realised before the expiry of the one-year speculation period will be subject to the progressive income tax rate of up to 55 per cent. The aforementioned tax treatment does not apply if the cryptoassets are rented out with interest. In this case, any capital gains realised from the exchange would be subject to a 27.5 per cent income tax rate.

The exchange of cryptoassets should not be subject to value added tax.

Exchanges and secondary markets

Where are investors allowed to trade cryptoassets? How are exchanges, alternative trading systems and secondary markets for cryptoassets regulated?

There are generally no specific statutory requirements in Austria prescribing where investors are allowed to trade cryptoassets. However, restrictions may result from internal policies or investment guidelines of institutional investors (eg, asset managers).

Owing to differences in the technical, functional and economic design of cryptoassets exchanges and trading platforms, the individual business model of the relevant trading venue, as well as the particular features of the respective cryptoasset, will need to be assessed to determine which rules and regulations apply to such trading venue.

Custody

How are cryptoasset custodians regulated?

This depends on the regulatory classification of the specific cryptoasset (ie, whether it is a virtual currency, transferable security or a commodity). If the relevant cryptoasset is:

  • a virtual currency: custodians are subject to a registration requirement and need to observe the Austrian and EU AML and KYC requirements;
  • transferable security: safekeeping and administration of this instrument is subject to the rules of the Securities Custody Act and such activity requires a banking licence; or
  • a commodity: safekeeping and administration of this instrument is subject to Austrian trade laws and requires a trade licence.

Broker-dealers

How are cryptoasset broker-dealers regulated?

This depends on the regulatory classification of the specific cryptoasset (ie, whether it is a virtual currency, transferable security or a commodity). If the relevant cryptoasset is:

  • transferable security: broker-dealers are subject to the rules of the Banking Act and the Securities Supervision Act and will require a banking or investment services licence; or
  • a commodity: broker-dealers are subject to Austrian trade laws and will require a trade licence.

Also, connecting fiat money lenders with potential borrowers requires either a banking licence or a trade licence under Austrian trade laws for the brokerage of loans. Brokers of new or alternative payment methods may need to become licensed if they are intermediating deposits or loans or insurance.

Decentralised exchanges

What is the legal status of decentralised cryptoasset exchanges?

Currently, there is no specific regulation in Austria governing decentralised cryptoasset exchanges. Owing to differences in the technical, functional and economic design of cryptoassets exchanges and trading platforms, the individual business model of the relevant exchanges, and the particular features of the respective cryptoasset, must be assessed to determine which rules and regulations apply to a decentralised cryptoasset exchange.

Peer-to-peer exchanges

What is the legal status of peer-to-peer (person-to-person) transfers of cryptoassets?

There are no specific statutory rules regulating peer-to-peer transfers of cryptoassets. Depending on whether the cryptoasset is classified as transferable security, a means of payment or a commodity, peerto-peer trading on a commercial basis may require an authorisation from the FMA under applicable banking, payment services or securities brokerage laws or a trade law licence.

Trading with anonymous parties

Does the law permit trading cryptoassets with anonymous parties?

Yes, to the extent that the AML and KYC requirements do not apply.

Foreign exchanges

Are foreign cryptocurrency exchanges subject to your jurisdiction’s laws and regulations governing cryptoasset exchanges?

Yes, foreign cryptocurrency exchanges may become subject to Austrian laws and regulations (including authorisation and prospectus requirements) if they actively address the Austrian market. Whether the Austrian market is actively targeted will, according to the FMA, be indicated by various factors such as an Austrian website, Austrian contact details, marketing activities in Austria or the establishment of an Austrian distribution network. According to case-law rulings, appropriate technical provisions to ensure that offerings in Austria are excluded and clear and factually correct disclaimers are reasonable grounds to argue that an offering avoids addressing the Austrian market.

Under what circumstances may a citizen of your jurisdiction lawfully exchange cryptoassets on a foreign exchange?

There are generally no specific statutory requirements prescribing the circumstances under which Austrian citizens may lawfully exchange cryptoassets on a foreign exchange. However, foreign cryptoasset exchanges offering their services to Austrian citizens may become subject to Austrian laws and regulations.

Presently, there are, however, no exchange controls, border restrictions or obligations to declare holdings in cryptoassets.

Taxes

Do any tax liabilities arise in the exchange of cryptoassets (for both other cryptoassets and fiat currencies)?

The exchange of cryptoassets for other cryptoassets or fiat currencies is treated as a sale for income tax purposes. For corporations, the exchange of cryptoassets will be subject to a 25 per cent corporate income tax rate.

For individuals holding cryptoassets as business assets, the exchange of cryptoassets will be subject to the progressive income tax rate of up to 55 per cent. For individuals holding cryptoassets as non-business assets, any gains from the exchange of cryptoasset are tax-free if realised on the expiry of the one-year speculation period. Any gains that are realised before the expiry of the one-year speculation period will be subject to the progressive income tax rate of up to 55 per cent. The aforementioned tax treatment does not apply if the cryptoassets are rented out with interest. In such case any capital gains realised from the exchange would be subject to a 27.5 per cent income tax rate.
The exchange of cryptoassets should not be subject to value added tax.


Cryptoassets used for payments

Government-recognised assets

Has the government recognised any cryptoassets as a lawful form of payment or issued its own cryptoassets?

No.

Bitcoin

Does Bitcoin have any special status among cryptoassets?

Bitcoin has no special legal status among cryptoassets.

Banks and other financial institutions

Do any banks or other financial institutions allow cryptocurrency accounts?

This largely depends on the individual bank or other financial institution. However, so far, some reluctance has been observed in this respect.


Cryptocurrency mining

Legal status

What is the legal status of cryptocurrency mining activities?

The Financial Market Authority (FMA) has announced that businesses mining cryptocurrencies could be classified as alternative investment funds under the Alternative Investment Fund Manager Act.

Government views

What views have been expressed by government officials regarding cryptocurrency mining?

The FMA and the Ministry of Finance have posted frequently asked questions concerning regulation and taxation of mining activities. Other than that, government officials have not expressed any official views regarding cryptocurrency mining.

Cryptocurrency mining licences

Are any licences required to engage in cryptocurrency mining?

There is currently no specific regulation in place in Austria governing cryptocurrency mining. Mining cryptocurrencies in one’s own name and on one’s own account does not require a licence. However, business models that include participation in the mining process of cryptoassets such as bitcoin, depending on the specific design in the case in question, could constitute an activity that requires a licence. Particularly, business models that involve the mining of cryptocurrencies, where they otherwise fulfil the criteria of an alternative investment fund, may fall within the scope of application of the Alternative Investment Fund Manager Act.

Taxes

How is the acquisition of cryptocurrency by cryptocurrency mining taxed?

Income from cryptocurrency mining is considered to be income from an active trade or business and is subject to the progressive income tax rate of up to 55 per cent for individuals or 25 per cent corporate income tax rate for corporations. Mining should not be subject to value added tax.


Blockchain and other distributed ledger technologies

Node licensing

Are any licences required to operate a blockchain/DLT node?

The operation of a full or lightweight node should not require a licence. Legal writing suggests that (full) nodes can qualify as a data processor (article 28 of the EU General Data Protection Regulation (GDPR)) and thus must comply with the related obligations under the GDPR.

Restrictions on node operations

Is the operation of a blockchain/DLT node subject to any restrictions?

The operation of a full or lightweight node should not be subject to any restrictions. Legal writing suggests that (full) nodes can qualify as a data processor (according to article 28 of the GDPR) and thus must comply with the related obligations under the GDPR.

DAO liabilities

What legal liabilities do the participants in a decentralised autonomous organisation (DAO) have?

The legal status of a DAO must be assessed on a case-by-case basis as its legal status (and thus any liabilities of its participants) depends on how the DAO is organised. Legal writing suggests that a DAO could qualify as a civil law partnership, in which case its members are jointly and severally liable for the liabilities of the partnership.

DAO assets

Who owns the assets of a DAO?

A DAO qualified as a civil law partnership has no legal existence and thus cannot own any assets. Unless otherwise agreed, the assets of the partnership are owned by all its members (in the case of tangible assets, on a pro-rata basis; and in the case of intangible assets, jointly). In the case of cryptoassets, which are typically qualified as intangible assets under Austrian law, this means that all members may dispose of the assets only jointly unless otherwise agreed.

Open source

Is DLT based on open-source protocols or software treated differently under the law than private DLT?

No. Austrian law does not differentiate between different licensing models (open source versus proprietary).

Smart contracts

Are smart contracts legally enforceable?

Although there is no court practice yet, smart contracts should theoretically be legally enforceable in the same way as any civil-law contract, if the qualifications of a civil-law contract are met (ie, if the parties involved in the transaction have consensus over the essential elements of the transaction). From a practical perspective, smart contracts may be difficult to enforce (eg, because the counterparty may not be identifiable).

However, some transactions require the fulfilment of certain formalities (eg, the contract must be documented in writing (eg, a suretyship)) or as a notarial deed (eg, share purchase and transfer agreements relating to an Austrian limited liability company), and thus would not be enforceable if concluded by way of a smart contract. However, even these contracts, if duly concluded, could be implemented based on smart contracts.

When structuring smart contracts, consumer protection provisions must be complied with if the smart contract will carry out business-to-consumer transactions. This, particularly, means that the smart contract must implement the information and withdrawal rights of the consumers.

Patents

Can blockchain/DLT technology be patented?

Generally, software can be patented only if it has a certain technical character. ‘Mere’ software cannot be patented in Austria. The same applies to blockchain/DLT technology as software. The differentiation between ‘mere’ software and software with a technical character is unclear; thus, it is unclear whether blockchain/DLT technology can be patented.

However, the software running the blockchain/DLT technology can be protected under the Copyright Act, which provides for protection without the requirement of registration or disclosure.


Update and trends

Recent developments

Are there any emerging trends, notable rulings or hot topics related to cryptoassets or blockchain in your jurisdiction?

In 2019, the first regulator-approved security token offerings (Blockpit and Hydrominer), and the first regulator-approved initial exchange offering (IEO) (by crypto exchange Bitpanda) took place.
The Bitpanda IEO was particularly considered successful, with approximately €44 million being raised by August 2019. Since then, no larger blockchain or distributed ledger technology (DLT)-based transactions have been made public. The trend appears to have moved away from using blockchain/DLT as a financing instrument for start-ups to being used for more mature applications. Particularly, financial institutions are increasingly interested in cryptoassets and blockchain/DLT applications in Austria. For instance, in 2020, Raiffeisen Bank International, a major Austrian bank, started work on a new form of national currency tokenisation to speed up cross-border interbank or intercompany transactions and improve liquidity management. Also, the Vienna Stock Exchange became the world’s third ‘officially regulated market’ to list a bitcoin product by listing 21 Shares AG’s bitcoin and ethereum ABTC and AETH exchange-traded products, in September 2020.

Coronavirus

What emergency legislation, relief programmes and other initiatives specific to your practice area has been implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

No noteworthy emergency legislation, relief programmes or other initiatives specific to blockchain/DLT applications or cryptoasset services providers have been implemented. Various relief measures such as corona short-term work, delayed tax advance payments, fixed cost subsidies and other forms of governmental grants are, however, available. In addition to the generally available relief measures, a specially designated €50 million covid-19 assistance fund was established for innovative start-ups.

authors: Ursula Rath and Thomas Kulnigg

publishing house: Lexology

 

Ursula
Rath

Partner

austria vienna

co-authors