In a recent statement, Belgium’s financial regulators said that they do not consider cryptocurrencies like Bitcoin and Ethereum to be securities. This is a departure from the stance of many other countries, which have classified such assets as financial securities.
The Belgian government’s position is that cryptocurrencies are more similar to commodities, and thus should not be subject to the same regulations as securities.
This is a significant statement, as it means that Belgium does not classify these digital assets as financial instruments that require regulation by the FSMA. This could pave the way for more widespread adoption of cryptocurrencies in the country.
The Report on Cryptocurrency by FSMA
In recent months, there has been an increased demand for answers as to how Belgium’s existing financial laws and regulations apply to digital assets.
The Financial Services and Markets Authority (FSMA) of Belgium provided the rationale in a report released on November 22; a period of public comment for the report’s draft was held in July 2022.
The ruling provides much-needed guidance on how digital assets will be treated under Belgian law. It is hoped that this ruling will paved the way for greater clarity and certainty in other jurisdictions when it comes to the regulatory treatment of digital assets.
The clarification from the FSMA is welcome news for those who have been seeking clarity on the matter. The Financial Services and Markets Authority (FSMA) announced that it will classify cryptocurrencies as securities if they are issued by individuals or entities.
While the agency states that: “If there is no issuer, as in cases where instruments are created by a computer code and this is not done in execution of an agreement between issuer and investor (for example, Bitcoin or Ether), then in principle the Prospectus Regulation, the Prospectus Law and the MiFID rules of conduct do not apply.”
Furthermore, the Authority also stated that: “Nevertheless, if the instruments have a payment or exchange function, other regulations may apply to the instruments or the persons who provide certain services relating to those instruments.”
In addition, FSMA stressed that their stepwise plan is technology-agnostic, implying that it makes no difference whether digital assets exist and are supported via a blockchain or by more conventional ways.
The FSMA originally developed the report in July 2022 in order to respond to commonly asked questions from Belgian digital asset issuers and service providers.
The European Parliament’s Markets in Crypto Assets Regulation (MiCA) is anticipated to go into force at the beginning of 2024, and FSMA claimed that the stepwise plan will serve as a guide until then.
Belgium’s FSMA and SEC’s chairman on crypto assets
When it comes to classifying crypto assets, there appears to be a gulf between the views of Belgian and U.S. regulators.
The SEC is currently engaged in a battle for regulatory control over digital assets with the U.S. Commodity Futures Trading Commission (CFTC). However, instead of taking a clear and proactive approach like Belgium, the SEC has been content to sit back and let the industry self-regulate itself.
This has led to a patchwork of inconsistent and often conflicting regulations that have stifled innovation and left investors uncertain about the legal landscape. Hopefully, the SEC will take a cue from Belgium and develop clear and concise guidelines that will provide much-needed clarity for the industry.
Belgium’s Federal Service for the Financial Markets has set out six conditions that must be met for an asset to be classed as a security, including the presence of a counterparty, the intention to make a profit, and the existence of an investment agreement between the parties.
In contrast, U.S. Securities Exchange Commission Chairman Gary Gensler has said that bitcoin and ether are not securities, but that post-Merge ETH and other staked coins may fall under securities law (Howey test). It’s clear that there is still some confusion over how to regulate crypto assets, but it seems that Belgium is taking a more cautious approach than the U.S. at this stage.
Chainalysis ranked Belgium out of the top 20 most crypto-adoption-friendly country in the world. However, people think the ranking should be higher as Belgium’s clear and concise guidelines are a refreshing contrast to the “regulation by enforcement” approach currently being taken by the U.S. Securities and Exchange Commission (SEC).
Cryptocurrency regulations needs more clarity
Belgium’s financial regulators said that they do not consider cryptocurrencies like Bitcoin and Ethereum to be securities. This is a departure from the stance of many other countries, which have classified such assets as financial securities.
Cryptocurrencies have been in a bit of a legal limbo in recent years, with many countries still wrestling with how to classify them. This has made it difficult for crypto businesses to operate in many jurisdictions. However, Belgium’s decision provides much needed clarity on the matter.
It remains to be seen how other countries will react to this news, but it could very well set a precedent that other jurisdictions may follow. This could open the door for more widespread adoption of cryptocurrencies around the world.