Markets in Crypto Assets Regulation

Belgium's take on what conditions must be met in order for a crypto asset to be classed as a security are in contrast to the views of U.S. Securities Exchange Commission Chairman Gary Gensler.

Belgium’s financial regulatory body has confirmed its position that Bitcoin (BTC), Ether (ETH) and other cryptocurrencies that are issued solely by computer code do not constitute securities.

The explanation came from Belgium's Financial Services and Markets Authority (FSMA) in a Nov. 22 report, a draft of which was opened for comment in Jul. 2022.

The clarification comes following an increase in demands for answers as to how Belgium’s existing financial laws and regulations apply to digital assets, according to the FSMA.

While not legally binding under Belgium or European Union law, the FSMA stated that under its “stepwise plan,” cryptocurrencies would be classed as a security if it was issued by an individual or entity”:

“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.”

The Belgian regulatory body noted that cryptocurrencies which are not categorized as securities may still be subject to other regulations if a company uses the digital asset as a medium of exchange:

“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.”

FSMA also noted that its stepwise plan is neutral to the technology — suggesting that it’s irrelevant whether digital assets exist and are facilitated on a blockchain or through other traditional means.

The FSMA first drafted the report in Jul. 2022 as a means to address frequently asked questions by Belgian-based issuers, offerers and service providers of digital assets.

FSMA stated that the stepwise plan would serve as a guideline until the European Parliament’s Markets in Crypto Assets Regulation (MiCA) is adopted, which is expected to take effect at the start of 2024..

Related: Not taking the time to learn about BTC is ‘Europe’s biggest risk,’ says Belgian MP

Belgium’s clear guidelines are in contrast to the “regulation by enforcement” approach taken by the U.S. Securities Exchange Commission’s (SEC) which is currently vying for digital asset regulatory control with the U.S. Commodity Futures Trading Commission (CFTC).

While SEC chairman Gary Gensler has long considered BTC to constitute a commodity, he’s recently argued that post-Merge ETH and other staked coins may constitute a security under the Howey test.

Belgium hasn’t been a huge adopter of digital assets to date, with a recent study from blockchain data platform Chainalysis ranking Belgium 94th in its Global Crypto Adoption Index.

Residents in the European country have access to 10 crypto exchanges, according to data from crypto data resource Bitrawr.