Blockchain technology, and the digital assets it enables, is transforming capital markets worldwide. In the United States, Bakkt launched the first regulated futures product that is physically settled in bitcoin. In the German-speaking world, Vontobel recently issued an open-end tracker certificate linked to bitcoin (DE000VL3TBC7). More importantly, however, developments in blockchain technology itself are laying the foundation for ensuring lasting change in the financial market. The reason for this is the characteristics of the technology, which can replace functions that could previously only be performed by trustworthy central intermediaries such as paying agents, custodians and trustees. The keyword is 'disintermediation'.
Security Token Offerings (STOs) illustrate how blockchain technology can disintermediate the capital markets. Blockchains can be used to facilitate the subscription, transfer, settlement and storage of fully-fledged securities between the issuer and the subscribers or among the securities holders themselves. Even disbursements such as dividend or interest payments can be handled without intermediaries.
There is growing acceptance of blockchain technology in Austria among the relevant players in the capital market. For example, the Austrian Control Bank (Österreichische Kontrollbank - OeKB) has already successfully relied on blockchain technology in the issue of federal bonds. In the private sector, Erste Group Bank has developed a new digital issuance platform, which it used to successfully issue a EUR 20 million bonded loan of ASFiNAG, the Austrian financier of motorways and expressways.
The Austrian Financial Market Authority (FMA) has also dealt intensively with the issue of tokenised securities on several occasions. For example, the FMA approved the first EU-wide capital market prospectus for the public offering of tokenised securities – a project that our law firm legally supported. This was a milestone for the technology on its way to the traditional capital market due to its EU-wide application.
In the meantime, security token offerings have become an established instrument of corporate financing in Austria. The Austrian crowd investment platform CONDA – which has already tokenised its own shares – offers white label solutions for the technical implementation of security tokens. Black Manta Capital, also based in Austria, received – for the first time – a MiFID II license from the German BaFin for the operation of a multi-STO platform.
The issue of securities via blockchain technology is only one part of the equation. A functioning capital market also requires a developed, liquid secondary market, which is still largely lacking in the new ecosystem. In the race for the first marketplace for tokenised securities in Europe, Germany is currently ahead of the pack. The Stuttgart Digital Exchange wants to offer the trading of tokenised securities starting in 2020. Austrian companies are already planning to do the same.
To address the myriad legal and economic questions raised by blockchain technology, several universities and institutes in Austria have established research centers dedicated to these issues. These include the Austrian Blockchain Center (ABC), which is established at the Vienna University of Economics and Business, and the University of Vienna, which offers seminars on blockchain law and whose faculties of computer science, law and economics conduct a joint research group on crypto currencies and virtual forms of financing.
Blockchain technology has arrived on the capital market in Austria and is here to stay. Currently, the secondary market for tokenised securities is weak; however, we expect that, over time, a functioning secondary market will flourish in the German-speaking world.
Oliver Völkel / Bryan Hollmann