We do live in the virtual age now: there is no way around the Internet. Almost all legal transactions we enter into in our everyday lives can be concluded in the digital world.

A logical consequence of such technological progress have been virtual ‘currencies’, such as bitcoins (i.e. digital coins), which first appeared in January 2009. Bitcoins are based on the idea of having a non-governmental substitute currency where the money supply is limited; they are managed in a decentralised network that can be used all over the world and are characterised by the fact that any user may participate in the creation of money (whereas with ‘real’, non-virtual currencies, money creation is generally the responsibility of a central bank). Bitcoins can be traded on online exchange platforms and exchanged for ‘real’ currency.

In Austria, bitcoins are not regulated by supervisory law. In Germany, the legal situation is different: BaFin, the Federal Financial Supervisory Authority, qualifies bitcoins (for reasons we are unable to understand) as financial instruments, with all the consequences this entails under supervisory law.

In the course of assessing the legal classification of the issuance / generation of bitcoins, one of the first things that come to mind is the issuance of electronic money as defined in the Austrian E-Money Act. Thus ‘electronic money’ means electronically, including magnetically, stored monetary value as represented by a claim on the electronic money issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in the Austrian Payment Services Act, and which is accepted by a natural or legal person other than the electronic money issuer. BaFin said the reason why this definition was inapplicable is the non-existence of an issuer. We do not agree with this rationale; an issuer exists (initially, it is the original developer, and subsequently each further developer of the block chain is an issuer), the issuer is just ‘out of the grasp’ of the supervisory authorities, and this is irrelevant as regards the legal qualification. Rather, the missing element is that of ‘claim’ on the issuer to ‘make payment transactions’ because, under civil law, the issuance of electronic money is usually based on the law governing instructions and bitcoin transfers are made without involving a third party, on a peer-to-peer basis (from computer to computer).

Exactly the same must thus also be considered when dealing with the question of whether issuance of means of payment (Austrian Banking Act) and issuance of payment instruments (Austrian Payment Services Act) are applicable definitional elements.

In practice, and particularly in respect of online exchange platforms – which have been acting in a legal vacuum up to now – the determination of bitcoins in a supervisory-law context will therefore become relevant in so far as, in future, supervisory law is going to stipulate requirements entailing corresponding regulatory sanctions. This makes correctness in drawing up / drafting (contracts and/or agreements for) the exchange system all the more important.