On the 25th of November, Bitpanda co-hosted an event with the Digital Asset Association of Austria which saw a book presentation by our own Regulatory expert Christian Steiner, followed up by a panel discussion with industry experts from the FMA, UBS, and DAAA plus our own CLO Carina Wolf. In case you missed it, here’s a summary of the evening.
The five key takeaways from Christian Steiner's book, Crypto-Assets and Regulatory Laws
- Crypto assets and their technology have numerous advantages for the security market
Crypto assets bring many advantages into our economy that could make the traditional stock markets more attractive, especially for millennials and digital natives. For example, you can buy a small fraction of a Bitcoin for just one euro! You can do this on your laptop in your bedroom with no banking hours to worry about! Christian believes that blockchain and distributed ledger technologies have the chance to improve the services on traditional markets and increase consumer welfare. The capital market could benefit greatly if we could have more developments from the crypto-market.
- Security tokens need to be considered as securities and are therefore already regulated.
Legal literature defines three archetypes of token, each of them holds different rights and are therefore treated differently from a legal perspective. Security tokens give the right to participate in profits, interests or similar cash-flows. All other criteria of securities are met and security tokens are comparable to shares and bonds. As a rule of thumb, this classifies them as securities, according to financial market laws. Many legal obligations result from this classification and therefore, security tokens are already regulated.
- Utility tokens should not be considered as securities
There is a strong debate about whether or not utility tokens should be classified as securities. In the author’s opinion, the utility token needs to have a clear connection to a product or a service. A pure utility token should not be treated as securities in the sense of European Financial Law. He believes that arguments against this idea, such as a potential increase in wealth, voting rights or missing products are not sufficient to classify utility-token as securities.
- Payment tokens are mostly not regulated
Not only are securities strictly regulated within the European Union, but the same is also true for payments, for example, E-Money or payment service providers. Payment token, which can be used to buy services and products of third parties, might fall under some of these regulations. Interestingly, Christian states that payment tokens are often not covered in this regulation. The regulation focuses strongly on payments which are considered legal tender (“normal money” like the Euro), while “alternative currencies” are often not covered. Therefore, payment tokens are often unregulated.
- Legal certainty and harmonised rules will be a key success factor for a strong crypto-hub in Europe
An adequate regulation of ICOs and of service providers on a European level would be critical to attracting crypto business from outside the EU. Achieving harmony and gaining legal certainty are important factors in creating a special nature for digital assets. Gaining legal certainty not only boosts innovation but can also minimise risk for investors.
Panel discussion: Regulation without hindering innovation - How can we achieve this?
After the book presentation, we held an informative and lively panel discussion with Carina Wolf, chief legal officer at Bitpanda, Christa Drobesch from FMA, Oliver Stauber from Vorstand DAAA and Phillip Harsdorf from UBS Austria.
The topic of the discussion was: Regulation without hindering innovation: How can we achieve this? And we’ve summarised the most important take-home points.
AML is an important first step towards regulation
Carina started the discussion by talking about the precise interpretation of regulations. At the end of the day, she says, it has to be the best solution for the customers, not the business.
The need to discover new assets is there; banks have to improve
Philipp says cryptocurrencies are currently a main focus point for banks right now but they are subject to regulatory issues. Contrary to the popular argument that cryptocurrencies are used for illegal trading, Phillipp states that money laundering actually plays a minor role in cryptocurrencies.
Oliver Stauber from DAAA says Fintechs are doing a better job than banks
The crypto scene has expanded over the past few years and FinTechs are now fierce competitors to financial institutions. The services of the banking world do not meet the current needs of the users. He concluded FinTechs do much better in this area, however there is a mixture of self-responsibility and regulation that is absolutely necessary for FinTech success.
In conclusion, the outcome of the talk was that of course, banks are aware of the needs to adapt. However, they prefer to work alongside FinTechs than against them. From a regulatory perspective, there is a long way to go and the industry is still in its infancy. We’re still a long way from paying for our coffee with Bitcoin in Austria - but we’re in a great place to get started.
More information with detailed analysis can be found in Christian Steiner’s book (Sorry English speakers, available in German only!).
If you are interested in the book, you can buy it here.