Cryptocurrency Regulation in Austria Prior to 2024

In Austria, the approach towards cryptocurrency regulation before 2024 was marked by a cautious yet progressive attitude. Austrian financial regulators and policymakers, particularly the Financial Market Authority (FMA), showed a general receptiveness towards digital assets, new technologies, and fintech innovations. This attitude was evident in the encouragement of blockchain, distributed ledger technology, and digital assets, alongside a focus on maintaining the integrity, security, and investor protection in these domains​​.

Definition and Classification

Austria did not have a dedicated statutory definition of cryptocurrencies initially, leading to some regulatory challenges. However, cryptocurrencies were generally treated as commodities rather than financial instruments or currencies. This classification meant that, while cryptocurrencies as commodities were not directly under the supervision of the FMA, activities involving them were not entirely outside the regulatory scope. Derivatives referencing cryptocurrencies or tokens with certain characteristics, for instance, security or investment tokens, were subject to financial services regulation under MiFID II and the Markets in Financial Instruments Regulation​​.

Licensing and Business Models

The operation of business models based on cryptocurrencies could trigger licensing requirements under general financial services legislation. This included various acts such as the Austrian Banking Act, the Payment Services Act 2018, the Securities Supervision Act 2018, and others, depending on the specific features and content of the business model. The FMA applied a “technology-neutral” supervisory approach, ensuring that similar risks were governed by the same rules irrespective of the technology used​​.

For handling the diversity and complexity of cryptocurrency-based business models, the FMA set up a dedicated specialist team and a fintech contact portal. This initiative aimed to facilitate discussions and guidance on the regulatory treatment of such activities​​.

Sales Regulation and MiCA Impact

There was no specific regulation dedicated to the sale of cryptocurrencies or tokens in Austria before 2024. Sales were thus governed by general securities and commodities laws. Token classifications, including security/investment tokens, utility tokens, and payment/currency tokens, determined the applicability of prospectus requirements under Austrian securities laws. The implementation of the EU-wide Markets in Crypto-assets (MiCA) regulation from mid-2024 onwards was set to introduce a comprehensive regulatory framework, affecting the classification and regulation of crypto-assets​​.

Taxation and Anti-Money Laundering

Income from cryptocurrency holdings, including profits from disposals, was subject to a special tax rate of 27.5% in Austria. This rate applied irrespective of the source of income, with specific provisions for commercial income from cryptocurrencies, which were taxed according to the progressive income tax thresholds or corporate income tax rates. Austrian taxable persons and service providers were required to deduct Austrian withholding tax from capital income accrued after 31 December 2023. Cryptocurrency exchanges and mining activities had specific VAT treatments as well​​.

Additionally, business activities involving cryptocurrencies were subject to AML requirements, including KYC checks and AML prevention systems. Certain providers of services related to cryptocurrencies needed to register as virtual asset service providers (VASPs) with the FMA​​.

In conclusion, Austria’s approach to cryptocurrency regulation before 2024 was characterized by a balance between fostering innovation and ensuring financial stability and consumer protection. The regulatory landscape was dynamic, evolving to address the complexities and novel characteristics of digital assets and related technologies.