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Fintech Market Overview

This article does not constitute legal advice.

Crowdfunding in Austria

Fintech Software

Under the Alternative Financing Act (AFA), initially introduced to help small and medium-sized enterprises (SMEs) conduct crowdfunding by a set of rules allowing easier access to funding, simplified requirements to obtaining funding apply. While donation or rewards-based crowdfunding was not subject to any substantial restrictions, typical crowdfunding campaigns involving the collection of money from the public for investment purposes was usually subject to prospectus requirements under the CMA.1

Since the end of 2021, the rules of the AFA have stood as an alternative to crowdfunding under the rules of Regulation (EU) 2020/1503 (the EU Crowdfunding Regulation).1

The AFA is aligned with the CMA. The AFA applies to the issuance of securities and investments under reliance on an exemption from prospectus requirements under the CMA. The simplified framework does not solely apply to SMEs. Rather, all sorts of issuers (including licensed entities) are able to make use of the simplified rules.1

Under the AFA, securities may be issued without the need to prepare a prospectus if the total amount of each issuance does not reach €2 million. This, however, does not mean that such issuances are not regulated. Issuers will need to prepare a key information document that will disclose essential information about the issuer and the relevant project to investors. Still, the burden to prepare a (simplified) prospectus and (with respect to securities) get the prospectus approved by the regulator (FMA) has been lifted – which should help reduce costs for issuers.1

Regard must be had to the following restrictions: (1) the aggregate outstanding amount of all investments raised via the AFA may not exceed €5 million over a period of seven years; (2) the aggregate amount of all securities and investments issued pursuant to the AFA may not exceed €2 million over a 12-month period; and (3) the aggregate outstanding amount of all securities and investments in the European Union may not exceed €5 million over a period of 12 months (including crowdfunding offers under the EU Crowdfunding Regulation). If by new issuances these thresholds would be exceeded, any such new issuance will require a prospectus under the CMA. There are limits to the amounts that retail investors may invest in alternative financing instruments (generally €5,000 in a 12-month period), which will need to be taken into account when determining the target market for such an instrument.1

Issuers of securities are not bound to rely on the simplified rules. They may continue to prepare a full EU securities prospectus (e.g., when this is beneficial for placement of the securities or the like or passporting of the prospectus is intended); in this case, the rules of the AFA will not apply to such issuances.1

Cryptocurrencies without an issuer that are generated via a blockchain protocol using mining and distributed ledger technology – such as Bitcoin and Ether – are not considered currencies or financial instruments or tradeable securities in Austria.1

This means that trading in such cryptocurrencies is not a regulated activity, but depending on the business model, a trade licence may be required. Nevertheless, if the underlying asset of a derivative instrument consists of cryptocurrencies, this derivative instrument may qualify as a financial instrument under MiFID II. It may be assumed that the same should apply if the value of a token is linked to cryptocurrencies such as Bitcoin or Ether. However, it is not clear that stablecoins linking a token to a fiat currency are treated the same by the FMA. Rather, it appears that the FMA treats such stablecoins as e-money.1

The applicable anti-money laundering (AML) rules extend to custodian wallet providers and platforms for exchanging cryptocurrencies. These providers now need to file a registration with the FMA and must evidence a compliance programme ensuring full adherence to AML rules.1

Fundraising via tokens is generally subject to the same rules as any other form of fundraising. These rules apply when funds are raised in Austria irrespective of whether the issuer or offeror is domiciled in Austria or acting from abroad.1

Banking in Austria

Fintech in Austria

Fintech in other countries

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Austrian Fintech Lawyers

Silvia Calls

Silvia Calls

We work for international SMEs, startups and Telco's

Kristina Berkes

Kristina Berkes

Participation as a lawyer at investment venture funds, leading venture M&A deals in IT, supporting iGaming and business assets

Viacheslav Losev

Viacheslav Losev

Legal support for FinTech and Blockchain projects

Notes
  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/austria
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