Best Bitcoin Exchange for Austria
Bitcoin, Ethereum, Litecoin and similar blockchain-based coins have turned things upside down in recent years. Here we are experiencing a real paradigm shift. The FMA is receiving waves of inquiries.
On a national and international level, different terms are used in this context, such as “virtual currency”, “crypto currency”, “coin” or “token”. A legal definition currently exists only for the term “virtual currency” (see Art 3 Z 18 Directive (EU) 2018/843). Regardless of the legal definition, the term “virtual currency” is currently under criticism. In recent times, the term “crypto assets” has therefore been used as an umbrella term for these terms, as is also the case in this article.
The following characteristics are often present:
- They are not issued by any central bank or authority.
- The creation of new value units is generally carried out via a predetermined process within a computer network (so-called “mining”).
- There is no central instance that controls or manages transactions.
- All transcriptions are recorded in a public directory (so-called “blockchain”).
- Once transactions have been made, they are irrevocable.
- Electronic purse in which the crypto assets can be digitally stored and managed (so-called “wallet”)
- Decentralized Network – Peer to Peer Network
More general and consumer information can be found in the FMA Focus.
Current European Developments
In December 2013 and July 2014, the European Banking Authority (EBA) drew the attention of consumers and supervisory authorities to the risks associated with crypto assets (see EBA warns consumers on virtual currencies (Link to external page. Opens in new window.) , EBA proposes potential regulatory regime for virtual currencies (Link to external page. Opens in new window.) ).
In November 2017, the European Securities and Markets Authority (ESMA) issued a warning regarding the high risks of initial coin offerings (ICOs) (see ESMA highlights ICO risks (Link to external page. Opens in new window.) , see separate section in the FinTech Navigator).
In February 2018, a joint alert was issued by EBA, ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) (referred to as “the three European Supervisory Authorities”, “ESAs”). This notification warns consumers of the high risks associated with the purchase and/or possession of crypto assets.
On 19 June 2018, the amending directive to the 4th Money Laundering Directive (so-called “5th GW Directive”) was published in the Official Journal of the European Union. The 5th Money Laundering Directive contains definitions of the terms “virtual currencies”, “exchange bourse” and “provider of electronic purses”. The scope of application of the AML/CFT rules is extended to so-called “wallet providers” and exchange exchanges, which as (new) obligated parties have to comply with the due diligence obligations for the prevention of money laundering and terrorist financing. Furthermore, a mandatory registration of such service providers is planned.
The best-known example is certainly Bitcoin. Due to a lack of issuers, Bitcoin is not subject to supervision by the FMA. However, it should be noted that the operation of various Bitcoin-based business models may require a licence from the FMA (e.g. under the Banking Act, AIFMG or ZaDiG 2018) and/or a prospectus under the CMM)
For example, the receipt of third-party funds for administration or as a deposit (deposit business), provided the activity is carried out commercially, constitutes a banking transaction pursuant to § 1 para. 1 no. 1 Banking Act (BWG). Management may also consist of investing the funds in crypto assets.
Example: Company A collects third-party funds from the public in order to invest them in crypto-assets at its own discretion. The claim for repayment of the donors depends on the success of the investment.
Furthermore, an obligation to obtain a licence pursuant to the Alternative Investment Fund Manager Act (AIFMG) cannot be ruled out. If a number of investors collect capital that is invested in crypto assets according to a defined investment strategy and the benefit (profit) is passed on to the investors, there are good reasons for the existence of an alternative investment fund.
Example: Investors are invested in a GmbH & Co KG. The investment in crypto-assets according to a process developed by the founders has been bindingly agreed. The investors participate in the proceeds of these investments.
There may also be an obligation to publish a prospectus pursuant to the Capital Market Act (KMG). If, for example, investments or securities of a company investing in crypto-assets are offered publicly, a prospectus obligation is to be assumed as a matter of principle; the same applies if funds are invested in a risk community.
Example: The subscription documents for the participation in a GmbH & Co KG are published on the Internet. The business activity of this company is to consist of operating a server farm for the mining of Bitcoin.
Online platforms for the acquisition of crypto assets, which also process payments in euros, may in turn be subject to a licence obligation under the Payment Services Act 2018 (ZaDiG 2018).
Example: Company B operates a platform on which customers can exchange their crypto assets and also handles the payment of purchase prices in euros via its accounts.
Business models must therefore always be examined on a case-by-case basis. For this reason, the FMA recommends that a corresponding request be made via the specialized FinTech contact point before commencing business activities.
Does the purchase and sale of crypto assets require a licence?
There are different ways to buy and sell crypto assets. These can, for example, be bought and sold via online stock exchanges, trading platforms or vending machines.
The pure purchase and sale of Bitcoin-like tokens in one’s own name and for one’s own account does not in principle trigger any licensing obligation. However, the purchase and sale of crypto assets can be part of business models subject to a licence.
Does the operation of a Bitcoin vending machine require a licence?
It is possible to buy Bitcoins via so-called Bitcoin machines (“one-way machines”). With a one-way machine, Bitcoins can be purchased which are transferred directly to the customer’s wallet via the QR code.
Some of these machines also offer the possibility to sell to Bitcoins (“Two-Way Automat”). In this case, Bitcoins can be sold from the customer’s wallet to the operator of the Bitcoin machine via the QR code. In return, the customer receives cash.
In the absence of issuers, Bitcoins are not subject to supervision by the FMA. The pure purchase and sale of Bitcoins via a Bitcoin ATM is therefore not subject to licensing.
However, the operation of a Bitcoin vending machine can – depending on the specific design of the business model – trigger an obligation to obtain a licence.
The emptying of the Bitcoin vending machine (for someone else) and subsequent transfer of the funds held in it to a third party may trigger a licence under the ZaDiG 2018, for example for the financial transfer business (§ 1 para. 2 no. 6 ZaDiG 2018).
Does mining require a licence?
The following explanations also apply to the mining of crypto assets other than Bitcoin, as long as they are designed in the same way as Bitcoin.
In principle, Bitcoin’s pure mining in its own name and for its own account by a natural person is not subject to licensing.
However, the FMA draws attention to the fact that business models which provide for participation in the mining of crypto assets such as Bitcoin may, depending on the specific design of the individual case, constitute a licensed activity. In particular, business models in connection with the mining of crypto currencies may be covered by the scope of application of the AIFMG (FAQ 2018 on the application of the AIFMG), provided that they also meet all the criteria of an AIF.
When are obligations arising from the prevention of money laundering and terrorism to be complied with?
On 19 June 2018, the amending directive to the 4th Money Laundering Directive (so-called “5th GW Directive”) was published in the Official Journal of the European Union. The 5th Money Laundering Directive contains definitions of the terms “virtual currencies”, “exchange bourse” and “provider of electronic purses”. The scope of application of the AML/CFT rules is extended to so-called “wallet providers” and exchange exchanges of virtual currencies. As (new) obligated parties, these must comply with the due diligence obligations for the prevention of money laundering and terrorist financing. In addition, a mandatory registration of such service providers (exchange exchanges) and providers of electronic purses is envisaged.