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Belgium says BTC, ETH and other decentralized coins are not securities

Belgium’s view of what conditions must be met for a crypto asset to be classified as a security contrasts with the views of US Securities and Exchange Commission Chairman Gary Gensler.

The Belgian financial regulator has confirmed its position that bitcoin (BTC), ether (ETH) and other cryptocurrencies issued solely by computer code are not securities.

The statement came from Belgium’s Financial Services and Markets Authority (FSMA) in a Nov. 22 report, a draft of which was released for comment in July 2022.

The clarification comes after an increase in demand for answers on how existing Belgian finance laws and regulations apply to digital assets according to FSMA.

While not legally binding under Belgian or EU law, the FSMA stated that according to its “phased plan” cryptocurrencies would be classified as a security if issued by an individual or entity”:

If there is no issuer, as in cases where instruments are created by computer code and this is not done in execution of an agreement between issuer and investor (e.g. bitcoin or ether), then in principle the Prospectus Regulation, the Prospectus Act and the MiFID rules of conduct do not apply.

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

However, where the Instruments have a payment or exchange function, different rules may apply to the Instruments or to the persons providing certain services related to those Instruments.

The FSMA also noted that its phased plan is technology neutral – suggesting that it is irrelevant whether digital assets exist and are enabled on a blockchain or other traditional means.

The FSMA first produced the report in July 2022 to answer frequently asked questions from Belgium-based issuers, providers and service providers of digital assets.

The FSMA stated that the phased plan would serve as a guide pending the passage of the European Parliament’s Markets in Crypto Assets Regulation (MiCA), which is expected to come into force in early 2024.

Belgium’s clear guidelines contrast with the “regulation by enforcement” approach of the US Securities Exchange Commission (SEC), which is currently vying with the US Commodity Futures Trading Commission (CFTC) for regulation of digital assets.

While SEC Chairman Gary Gensler has long viewed BTC as a commodity, he has recently argued that post-merge ETH and other staked coins could represent a security in the Howey test.

Belgium has not been a big adopter of digital assets, with a recent study by blockchain data platform Chainalysis ranking Belgium 94th in its Global Crypto Adoption Index.

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

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