AUSTRIA Trends and Developments Contributed by: Oliver Völkel, Jara Erhard and Bryan Hollmann, CERHA HEMPEL
In contrast, the Austrian FMA took a different approach. In 2014, it declared itself not competent for business models relating to Bitcoin. This regulatory reluctance was not due to major differences in the legal traditions between both EU member states, but rather owed to the realisation of how fundamentally crypto-assets on public blockchains differed from financial instruments. This relaxed approach allowed the industry to develop unhindered in Austria. For this reason, a number of crypto-entrepreneurs with German roots settled in Austria to test their business models. This, in turn, gave ample opportunity to the Austrian FMA to get exposure to all sorts of business models, enabling it to build up expertise that remains hard to compete with. To date, the Austrian FMA takes on the role of opinion- leader at the EU level. It was, for example, a driving force behind the current ESMA guidelines on reverse solicitation. CASPs Under MiCA: Key Practical Hurdles in the Licensing Process Now that MiCA has been in force in practice for more than a year, the focus for CASPs has shifted from pro- ject planning and licence applications to the realities of day-to-day supervision. The main challenges are no longer limited to understanding MiCA’s require- ments or conducting gap analyses. Instead, they lie in designing, staffing and operating business mod- els that are both commercially viable and sustainably compliant under ongoing regulatory scrutiny. From Gap Analysis to Business Model Engineering In the initial MiCA phase, many firms concentrated on classic transitioning steps: understanding the regula- tion, performing gap analyses, drafting policies and assembling application packages. Today, the more complex task is aligning the business model with a supervisory-proof governance and control framework. This frequently results in a “chicken-and-egg” dilem- ma. A sufficiently concrete business model is required in order to design structures, policies and processes. At the same time, regulatory feedback – for exam- ple, on segregation requirements, additional licens- ing requirements, especially in case of involvement of EMTs (see below under “EMTs and ‘Dual Licensing’: When One Licence Is Not Enough”) – often necessi- tates substantial adaptations of that model during the
licensing process. In practice, the concept discussed in an early sandbox meeting with the FMA can look markedly different from the model ultimately author- ised. Nevertheless, the application package must already cover, in a coherent way at least: • the intended crypto-asset services, target clients and marketing approach; • AML/CFT mechanisms, policies, procedures and risk assessment methodology; • business continuity and ICT security arrangements, including asset segregation; • any mechanisms for detecting market abuse, where relevant; and • commercial policies, pricing methodology and, where applicable, order-execution and suitability concepts. Parallel to this, applicants must implement corre- sponding systems and controls – from secure IT infra- structure and cyber-security to transaction monitor- ing, client-asset protection and incident management. The experience of the past year shows that only close co-operation between product, technology, legal and compliance functions from the outset prevents costly redesigns at an advanced stage. Key personnel as a structural bottleneck Staffing has emerged as a structural bottleneck in many projects. In Austria, established anti-money laundering rules and banking supervision practice require that certain key roles – in particular the manag- ing directors as well as the money laundering report- ing officer (MLRO) and deputy MLRO – meet stringent fit-and-proper standards and demonstrate both suf- ficient expertise and integrity. In addition: • at least two managing directors must be appoint- ed; • at least one managing director is generally expect- ed to be physically present in Austria; and • the MLRO and deputy MLRO are expected to be based in Austria and to be operationally embedded in the business. For smaller or newly established CASPs, securing suitably qualified and locally present candidates has proven particularly challenging. Key staff are needed
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