LEXOLOGY Getting the Deal Through: Cryptoassets & Blockchain

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. Rather, the general financial services and securities law framework also applies 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, it should be noted that the Fifth EU Anti-money Laundering Directive was recently transposed into Austrian law. The directive newly extends 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 which are accepted as a means of exchange fall within the definition of ‘virtual currency’. Security tokens typically do not qualify as such means of exchange 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 with respect to 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 of virtual currencies on behalf of a customer (electronic wallet providers);
• exchange of virtual currencies into fiat money and vice versa;
• exchange of one or more virtual currencies into other virtual currencies;
• transfer of virtual currencies; or
• provision of financial services in relation to the issuance and sale of virtual currencies.

In addition to being obliged to apply the AML/KYC requirements, such service providers will be under the obligation to register with the FMA. The FMA may reject 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.

Further, in Spring 2019 a legislative initiative was launched to set up a dedicated regulatory sandbox programme in line with international best practice. The programme would have allowed companies that require 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 such a business model based on a scaled-down licence. Following the election of a new government in Autumn 2019, it is difficult to predict the new government's approach to cryptoassets in Austria. However, the new government will likely continue to foster new technologies such as blockchain and distributed ledger technology.

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. In addition, the European Central Bank will be involved in award of certain licences (eg, licences for core banking services).

However, the FMA does not regulate cryptoassets that constitute commodities under Austrian law, as these 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 array of sanctions, including injunctions and fines against directors and legal entities, as well as the reputational damage of public naming and shaming.

Court jurisdiction

Which courts have jurisdiction over disputes involving cryptoassets?

No court has specific jurisdiction over disputes involving cryptoassets. 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. As a general rule, 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. In addition, from January 2020 onwards, providers engaging in exchange services between virtual currencies and fiat currencies will be subject to AML and KYC obligations.

Fiat currencies

What fiat currencies are commonly used in your jurisdiction?

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

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

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

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

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

Investor classification

How are investors in cryptoassets classified and treated differently?

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

Initial coin offerings

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

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

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

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

Security/investment tokens – tokens that represent assets, in particular payment claims against a specific issuer (eg, to participate in future earnings or cash-flows or tokens that represent membership rights within the meaning of corporate law). The design of such tokens are often similar to that of classic securities in particular bonds or shares. Security tokens are therefore frequently considered as transferable securities pursuant to the Austrian Capital Markets Act 2019 and the Austrian Securities Supervision Act 2018. If a token is classified as a transferable security, this has far-reaching regulatory implications not only for the token issuer (as this may trigger prospectus requirements under Austrian securities laws), but also for the trading platforms on which such a token is traded (as they will need to become authorised as stock exchanges or regulated trading venues) or custodial or wallet providers (as they will need to become authorised for safekeeping and administration). Even if a security token does not classify as a transferable security (in particular because that token or coin is not transferable or its transfer is restricted), but provides access to capital or returns for a risk-sharing group of investors, it may classify as a Capital Markets Act investment and its offering may trigger prospectus requirements under the act unless a prospectus exemption applies.

Utility tokens – there are many designs of utility tokens. While these are often comparable to vouchers, utility tokens occur in many different forms and also fulfil the function of payment tokens or security tokens (hybrid design), making their classification for supervisory law purposes rather difficult. If the token can be used only for designating a product or a service and is not otherwise associated with any claims or if the token only grants access to a product or a service without simultaneously serving a payment purpose, then such tokens will not be covered by supervisory laws. If, on the other hand, the token may be redeemed with the issuer or other users of the platform for the use of a product or a service, then it fulfils a payment function similar to a payment token.

Payment/currency tokens – tokens that are accepted as means of payment for the purchase of goods or services, or tokens that serve the purpose of transferring money and value but do not confer any claims against a specific issuer (eg, bitcoin or ripple).

Security token offerings

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

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

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

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

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

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

Stablecoins

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

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

Airdrops

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

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

Advertising and marketing

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

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

Trading restrictions

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

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

Crowdfunding

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

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

Transfer agents and share registrars

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

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

Anti-money laundering and know-your-customer compliance

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

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

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

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

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

Sanctions and Financial Action Task Force compliance

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

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

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).

In addition, from January 2020 onwards, certain providers of services in relation to cryptocurrencies will become subject to the AML/KYC and customer due diligence requirements, reporting obligations and registration requirements with the Austrian 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 another;
• 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 pursuant to 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% 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%. 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%. 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% 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 in order 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, a transferable security or a commodity). If the relevant cryptoasset is:

• a virtual currency, custodians will, as of January 2020, become subject to a registration requirement and will need to observe the Austrian/European AML/KYC requirements (see “What rules and restrictions govern the exchange of fiat currency and cryptoassets?”);
• a transferable security, safekeeping and administration of such an instrument is subject to the rules of the Austrian Securities Custody Act and such activity requires a banking licence; or
• a commodity, safekeeping and administration of such an 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:

a transferable security, broker-dealers are subject to the rules of the Austrian Banking Act and the Austrian 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.

In addition, 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, as well as 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 a transferable security, a means of payment or a commodity, peer-to-peer trading on a commercial basis may require an authorisation from the FMA pursuant to 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/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 are actively addressing 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 as well as 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 (see “Are foreign cryptocurrency exchanges subject to your jurisdiction’s laws and regulations governing cryptoasset exchanges?”).

However, at present there are 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% 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%. 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%. 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% 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 depends very much 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 Austrian Financial Market Authority (FMA) has announced that businesses mining cryptocurrencies could be classified as alternative investment funds pursuant to the Austrian Alternative Investment Fund Manager Act.

Government views

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

The FMA and the Austrian Ministry of Finance have posted frequently asked questions in relation to 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. In particular, 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 Austrian Alternative Investment Fund Manager Act.

Taxes

How is the acquisition of cryptocurrency by cryptocurrency mining taxed?

Income from the mining of a cryptocurrency is considered to be income from active trade or business and is subject to the progressive income tax rate of up to 55% for individuals or 25% 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 that is 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 case of tangible assets, on a pro rata-basis; and in case of intangible assets, jointly). In case of cryptoassets, which are typically qualified as intangible assets under Austrian law, this means that all members may dispose of such 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 such contracts, if duly concluded, could be implemented on the basis of 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, in particular, means that the smart contract must implement the information and withdrawal rights of the consumers.

Patents

Can blockchain/DLT technology be patented?

In general, 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 a software. The differentiation between ‘mere’ software and software with a technical character is unclear; thus, it is not clear whether blockchain/DLT technology can be patented.

However, the software running the blockchain/DLT technology can be protected under the Austrian 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), as well as the first regulator approved-initial exchange offering (IEO) (by crypto exchange Bitpanda) took place. In particular, the Bitpanda IEO was considered as 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. In particular, financial institutions are increasingly interested in cryptoassets and blockchain/DLT applications in Austria. However, major players still appear to hesitate to heavily invest in the technology.

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