UpdatesNov 25, 2022

Bitcoin, Ethereum and other cryptocurrencies are not securities, FSMA report

Belgian officials have commented on the legal status of cryptocurrencies.

The Belgian Financial Services and Markets Authority (FSMA) has just concluded that Bitcoin, Ethereum and other digital currencies that are exclusively issued by computer code are not securities, which makes existing financial laws and regulations do not apply to cryptocurrencies.

Cryptocurrencies are not securities

The Belgian Financial Services and Markets Authority published a report on November 22 stating that digital assets will only be classified as a security if they are issued by a person or entity.

- If there is no issuer, as is the case where financial instruments are created using computer code and this is not done in the performance of an agreement between the issuer and the investor (e.g. BTC or ETH), in principle, the Prospectus Act and the MiFID rules of conduct do not apply, according to the FSMA report.

The Belgian financial market regulator, however, points out that cryptocurrencies that are not categorized as securities may still be subject to other regulations if the company uses digital assets as a medium of exchange.

- Nevertheless, if digital financial assets have a payment or exchange function, different rules may apply to the instruments or persons who provide certain services related to these instruments, it has been pointed out.

At this point, it is worth noting that the FSMA position is not legally binding in Belgium or in European Union law. Importantly, this report does answer frequently asked questions by Belgian financial market participants, which include issuers, bidders and digital asset service providers.

The FSMA said the so-called "gradual plan" will serve as a guideline until the European Parliament's Crypto Asset Markets (MiCA) regulation is adopted, due to enter into force in early 2024.