While the topics of: (a) how crypto assets are qualified; and (b) their issuance under applicable capital markets and financial regulatory aspects have been discussed both by regulators and legal scholars, the legal assessment and regulatory classification of trading platforms for crypto assets is rather limited.
In principle, the question whether trading platforms for crypto assets are regulated has to be assessed on a case-by-case basis. It primarily depends on which services are offered by the trading platform as well as the types of crypto assets which can be traded on such a platform.
Security tokens are likely to qualify as "transferrable securities"
While a legal definition of crypto currencies exists, there is still no legal definition of crypto assets, thus preventing a general legal assessment at this time. In line with the current market and the approach of the Austrian Financial Market Authority (Finanzmarktaufsichtsbehörde), for purposes of this article, the term "crypto assets" is used for both crypto currencies (also named coins, virtual currencies) and different types of tokens (i.e. utility, payment and in particular security tokens).
Security tokens are quite likely to be qualified as "transferrable securities" (übertragbare Wertpapiere) within the meaning of the Austrian Securities Supervision Act 2018 (Wertpapieraufsichtsgesetz 2018 – "WAG 2018") which implements Directive 2015/65/EU (Markets in Financial Instruments Directive II – "MiFID II") in Austria and as such, as financial instruments (Finanzinstrumente) as defined by Article 4(1)(15) of the MiFID II / § 1(6) WAG 2018.
Therefore, trading platforms which offer the trading of security tokens quite likely have to comply with the rules and provisions of MiFID II/WAG 2018 and thus, might require an authorization for the provision of the investment services. Depending on the exact scope of services provided, such investment services (all in relation to one or more financial instruments), for instance, could be:
- reception and transmission of orders;
- execution of orders on behalf of clients;
- portfolio management;
- investment advice;
- operation of a multilateral trading facility ("MTF"); and
- operation of an organised trading facility ("OTF").
Furthermore, such platforms could qualify as stock exchanges for securities pursuant to the Austrian Stock Exchange Act 2018 (Börsegesetz 2018 – "BörseG 2018") and thus, would require a respective license.
The same applies to platforms for trading in derivatives with security tokens, which qualify as financial instruments as underlying and as such are considered to be "financial derivatives" (because they are financial instruments) under MiFID II / WAG 2018.
For other crypto assets, an important distinction is whether they qualify as "commodities"
In the case of other crypto assets (i.e. "non-financial instruments"), the main question is whether such crypto assets are considered to be commodities (Waren) under applicable regulatory laws. That such assets (at least crypto currencies) are considered to be intangible things (unkörperliche Sachen) within the meaning of the Austrian General Civil Code (Allgemeines Bürgerliches Gesetzbuch – "ABGB") seems to be rather undisputed. In this regard, two issues must be addressed.
On the one hand, crypto assets which do not qualify as financial instruments could be considered to be commodities within the meaning of the BörseG 2018. In such a case, the rules on commodity exchanges might be applicable to respective trading platforms. Currently, this issue is controversial in Austrian literature on the topic, and there is no published guidance from the competent Austrian Federal Minister, who is responsible for issuing licenses for commodity exchanges in Austria.
On the other hand, certain derivatives with commodities as underlying also qualify as "commodity derivatives" and therefore, as financial instruments under the MiFID II / the WAG 2018 subject to the relevant rules. Apart from the question of whether crypto assets are commodities for said purposes, such a qualification further depends on whether commodity derivatives are settled in cash or by physical settlement.