CMS Expert Guide to Crypto Regulation in Austria

The main sources for the regulation of financial services are:

• Austrian Banking Act (BWG)
• Austrian Securities Supervision Act (WAG 2018)
• Austrian Payment Services Act (ZaDiG 2018)
• Austrian E-Money Act (E-Geld Gesetz)

Virtual asset service providers are defined in Article 2 no. 22 FM-GwG as all providers (i.e. both natural persons and legal entities) that offer one or more of the following services:

• safeguarding private cryptographic keys, to hold, store and transfer virtual currencies on behalf of a customer (custodian wallet providers);
• the exchange of virtual currencies into fiat currencies and vice versa;
• the exchange of one or more virtual currencies between one another;
  • the transfer of virtual currencies; or

The provision of financial services for the issuance and selling of virtual currencies. The following activities correspond with one or more of the above-mentioned services and are therefore regulated in Austrian jurisdiction:

Exchange is considered:

• exchanging of virtual currencies into fiat currencies and vice versa;
• exchanging one or more virtual currencies between one another;

Custody is considered:

• services to safeguard private cryptographic keys, to hold, store and transfer virtual currencies on behalf of a customer (custodian wallet providers)

Borrowing/lending is considered (depending on the specific setup):

• transferring of virtual currencies

Yield/staking is considered (depending on the specific setup ):

• exchanging or one or more virtual currencies between one another
• transferring of virtual currencies

Pursuant to Article 32a FM-GwG, virtual asset service providers that intend to provide their services pursuant to Article 2 no. 22 FM-GwG in connection with virtual currencies and pursuant to Article 2 no. 21 FM-GwG on a commercial basis domestically, or offer the service from Austria, are required to apply for a registration from the Financial Market Authority (FMA) prior to commencing their business activities.

However, it must be checked in each individual case, e.g. which cryptocurrency is used by the business (for example: security token, e-money token, etc.).

In principle, none of the above activities are regulated per se. However, it may be that due to the design of the cryptocurrency itself, the scope of application of one or more of the above laws is fulfilled.

For example:

If a stablecoin is considered e-money, consequently, the e-money Act, the ZaDiG 2018 or the Austrian Banking Act (Bankwesengesetz, BWG) may be applicable.

According to the ZaDiG 2018, only payment service providers are permitted to provide payment services on a commercial basis in Austria. Against this background, the transfer of funds may require a license under the ZaDiG 2018 to act as a payment service provider.

Additionally, the BWG covers abstract means of payment, especially the provision of credit cards or e-money. These are qualified as means of payment or payment instruments (Section 1 (1) (6) BWG, Section 1 (2) (4) ZaDiG) or as e-money. Therefore, an exchange might also be obliged to acquire a license under the BWG if it performs these banking activities on a commercial basis.

Offering security tokens to the public might trigger the issuers obligations to publish a prospectus under the EU Prospectus Regulation of the Austrian KMG 2019.

Operating a marketplace for the trade of security tokens likely triggers licensing obligations within the meaning of the WAG 2018.

The application fee for the granting of the license:

• to operate a banking business (BWG) is a minimum of EUR 10,000.
• for the provision of payment services (ZaDiG 2018) is a minimum of EUR 8,000.
• to provide investment services (WAG 2018) is a minimum of EUR 3,000.
• to issue electronic money (E-Geldgesetz) is a minimum of EUR 8,000.

The possibility of obtaining a licence is difficult to estimate, but the following factors are likely to be influential:

• if there have already been activities in Austria;
• if all the required documents been submitted correctly,
• if and how the applicant has previously operated in Austria;
• the strength of the applicant’s business plan and model; and
• the applicant’s adherence to Austrian AML/CTF laws, thorough policies, and fit-and-proper management and MLRO.

The following information and documents are to be submitted with the registration:

For natural persons as service providers:

• Forename and surname, date and place of birth of the service provider including a copy of an official photo identification document;
• Registration numbers from identification registers (e.g., Commercial Register (Firmenbuch) no.); place of incorporation (residence) of the provider as well as an e-mail address and telephone number;
• A current extract of a judicial record (not older than six weeks) of the provider or an equivalent foreign document;
• Description of the business model including the precise details about which services listed in Article 2 no. 22 FM-GwG are being applied for;
• A description of the internal control system and the planned strategies and procedures in order to meet the requirements set out in the and Regulation (EU) 2015/847 (Transfer of Funds Regulation) as well as the requirements in FATF Recommendation 16 (travel rule), including details about the person that will take over the role of the Anti-Money-Laundering Officer and
• Proof of having successfully passed an intern “Fit & Proper test”

For legal entities as providers:

• Information about the undertaking (especially the company name, registered office, business address, e-mail address and telephone number, Commercial Register number);
• Up-to-date excerpt from the Commercial Register or an equivalent excerpt from a public register/database excerpt (no older than six weeks) for the provider;
• Forename and surname, date and place of birth of the director including a copy of an official photo identification document;
• Forename and surname, date and place of birth of the beneficial owner(s) pursuant to Article 4 (1) point 36 of Regulation (EU) No 575/2013 (CRR) (holder of a qualifying holding) including copies of an official photo identification document of the beneficial owner(s);
• An up-to-date (no older than six weeks) extract of a judicial record of the director(s) as well as the beneficial owner(s) pursuant to Article 4 (1) point 36 of Regulation (EU) No 575/2013 (holder of a qualifying holding);
• A depiction of the ownership and control structure of the service provider in the form of an organisation chart including information about the amount of the participation held by the beneficial owner(s) pursuant to Article 4 (1) point 36 of Regulation (EU) No 575/2013 (CRR);
• Description of the business model including the precise details about which services listed in Article 2 no. 22 FM-GwG are being applied for;
• description of the internal control system and the planned strategies and procedures in order to meet the requirements set out in Regulation (EU) 2015/847 (Transfer of Funds Regulation) as well as the requirements in FATF Recommendation 16 (travel rule), including details about the person that will take over the role of the Anti-Money-Laundering Officer; and
• Proof of having successfully passed an internal “Fit & Proper test”.

Physical presence in Austria is not required.