AUSTRIA Law and Practice Contributed by: Oliver Völkel and Philipp Ley, CERHA HEMPEL
In contrast, ARTs under MiCA are not considered financial instruments unless they fall within the MiFID II definition. Therefore, while MiCA governs the issu - ance and trading of crypto-assets, crypto-derivatives are excluded from MiCA and are regulated under tra - ditional EU financial markets law. 10.9 Decentralised Finance (DeFi) DeFi is not yet regulated under EU law. However, activities facilitated by DeFi protocols may fall within existing regulatory frameworks. According to a joint report by the EBA and ESMA, DeFi remains a niche phenomenon, representing a small fraction of the global crypto-asset market. Nonetheless, the report highlights significant risks associated with DeFi, including money laundering, terrorist financing and vulnerabilities due to the lack of intermediaries. The FMA has not issued specific regulations for DeFi. If a DeFi activity involves services that are regulated under existing laws then the entities involved may be subject to those regulations. For example, if a party facilitates the trading of security tokens or crypto- assets, by deploying a protocol, they cannot claim exemption from regulation simply because the service is decentralised. While DeFi itself is not therefore explicitly regulated, the specific activities conducted within DeFi platforms may trigger existing regulatory obligations, depending Funds that invest in blockchain assets are regulated based on the type of fund and the nature of the cryp - to-assets involved. For UCITS funds, investment is limited to eligible assets as defined under the UCITS Directive. Most crypto-assets do not currently qualify as eligible assets, meaning UCITS cannot invest in them directly. In contrast, AIFs regulated under the AIFMD have greater flexibility. A fund investing in crypto-assets, in whole or in part, may be structured and authorised as on their nature and structure. 10.10 Regulation of Funds
an AIF, provided it meets requirements on risk man - agement, custody, valuation and investor disclosures. Whether a crypto-asset qualifies as an eligible asset depends on its legal classification. Security tokens may be eligible if they are financial instruments under MiFID II, while non-MiFID crypto-assets (eg, utility tokens) typically are not. 10.11 Virtual Currencies Virtual currencies and blockchain assets are related but treated differently in regulation. Under MiCA, virtual currencies, such as bitcoin, are classified as a type of crypto-asset which are defined as digital representations of value or rights that can be transferred and stored using DLT. They fall under the general MiCA framework when offered to the public or traded via authorised platforms. Under the previous version of the Austrian FM-GwG, the term virtual currency referred to what is now defined as crypto-assets and these were primarily regulated for AML purposes (eg, under AMLD5 and the FM-GwG) and not as financial instruments. The term blockchain assets is broader and includes virtual currencies, utility tokens, ARTs, EMTs and security tokens. Regulatory treatment depends on classification. For example, security tokens fall under MiFID II, while most other tokens are now regulated NFTs and NFT platforms in Austria are not generally part of the fintech regulatory framework unless spe - cific conditions apply. Under MiCA, NFTs are explicitly excluded from the regulation, provided they are unique and not fungi - ble with other tokens. This reflects the view that NFTs typically serve as digital representations of unique assets (eg, art, collectibles) rather than functioning as financial instruments or means of payment. If NFTs are issued in a large series or are effectively fungible (eg, fractionalised NFTs or collections with identical rights), they may be treated as crypto-assets under MiCA. 10.12 NFTs
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