Bitcoin (BTC), Ethereum’s (ETH), and other cryptocurrencies that are only issued by computer code do not count as securities, according to Belgium’s financial regulatory authorities.
The justification was provided in a report published on November 22 by Belgium’s Financial Services and Markets Authority (FSMA), a version of which was made available for comment in July 2022.
The clarification follows an upsurge in inquiries, according to the FSMA, about how Belgium’s current financial laws and regulations relate to digital assets. The FSMA indicated that under its “stepwise plan,” cryptocurrencies would be classified as securities if they were issued by an individual or company, even if this was not legally binding under Belgian or EU legislation.
“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.”
FSMA also mentioned that its step-by-step approach is neutral to technology, implying that it doesn’t matter if digital assets exist and are enabled on a blockchain or through other conventional means.
The report was first prepared by the FSMA in July 2022 in an effort to respond to frequently asked questions from issuers, offerers, and service providers of digital assets with a base in Belgium.
The Markets in Crypto Assets Regulation (MiCA) of the European Parliament is anticipated to be adopted and go into effect at the beginning of 2024, but FSMA noted that the stepwise plan will act as a guide until then.
The Belgian regulatory agency underlined that even cryptocurrencies that are not classified as securities may nevertheless be governed by other laws if a business utilizes them as a form of payment.
“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.”
Belgium’s straightforward regulations contrast with the “regulation by enforcement” strategy used by the U.S. Securities Exchange Commission (SEC), which is currently competing with the U.S. Commodity Futures Trading Commission for regulatory control over digital assets (CFTC).
Gary Gensler, the head of the Securities and Exchange Commission, has always seen bitcoin as a commodity, but he recently suggested that post-Merge Ethereum and other staked currencies would qualify as securities under the Howey test.