Crypto-Mining schemes are Alternative Investment Funds AIF) in the definition of the alternative investment fund managers (AIFM) directive.
That’s definitely game-changing regulatory news for crypto-mining companies and organizations such as WACHSENDE WERTE, COINTED, or NEXUS GLOBAL. This news shouldn’t come as a surprise to FinTelegram readers (read our analysis). One of our research fellows is closely connected with regulators and lawyers and informed us about this movement a few weeks ago.
Yesterday, the Austrian Financial Market Authority (FMA) informed the market via press release that the business model of the Austrian crypto-mining company INVIA GmbH has been prohibited. Based on comprehensive investigations, the Austrian regulators found that crypto-mining investment schemes are collective investment undertakings under EU law, to be more specific, FMA qualified crypto-mining schemes as so-called Alternative Investment Funds (AIF) and it thus needs a license to operate such a scheme as AIF manager. The FMA has decided to communicate this information because it received a large number of inquiries from consumers.
The decision will for sure have far-reaching consequences for the crypto-mining business within the EU. Although the FMA dealt only with the specific case of the Austrian INVIA GmbH, it made clear that the very same principle will be applied to all crypto-mining schemes in Austria. Other EU regulators may follow suit because it’s a well-thought decision, crypto-mining schemes indeed are collective investment undertakings.
What are the consequences then? Crypto-mining schemes that raise funds from investor to invest in mining equipment need to apply for a license with the FMA and fulfill the respective legal and regulatory criteria regarding equity, people, and organization. In other words, crypto-mining companies applying for a license have to prove that the management has experience in managing funds and the respective personal background, for example. Furthermore, they need to have sufficient equity before the launch of their schemes. Hardly any of the crypto-mining schemes we have seen so far would be able to meet those criteria.
From what we learned from the lawyers we consulted, Austrian companies like Wachsende Werte or COINTED must immediately close their crypto-mining operation or apply for a respective license with the FMA. The FMA order will dramatically change the crypto-investment space and force the miners to completely rethink their business model.
That’s a hard regulator’s hit, we guess. We continue to our reports, stay tuned. In any case, investors should stay away from unlicensed crypto-mining schemes.