Belgium Declares Bitcoin, Ethereum Not Securities

The FSMA’s position, published on Thursday, establishes that decentralized cryptocurrencies like Bitcoin and Ethereum fall outside the nation’s securities laws because they lack a specific issuer and are produced by computer code rather than through contractual agreements between issuers and investors. This distinction forms the cornerstone of Belgium’s regulatory approach, creating a clear separation between truly decentralized assets and those created by identifiable entities. The regulator emphasized that this determination is based on the fundamental nature of these assets rather than the underlying technology.

According to the FSMA’s systematic plan, crypto assets issued by an individual or entity and integrated into instruments will likely be categorized as securities, while decentralized networks operating without central control escape this classification. This technology-neutral approach ensures that the regulatory framework remains adaptable to future innovations while maintaining consistent standards. The regulator confirmed it will modify this strategy as needed to accommodate evolving market conditions and technological developments.

While decentralized cryptocurrencies avoid securities classification, the FSMA made clear that other rules may apply when these assets serve payment or exchange functions. Businesses utilizing cryptocurrencies as means of exchange must comply with relevant financial regulations, including robust anti-money laundering requirements that apply to all cryptocurrency operations in Belgium. This layered approach ensures that while innovation isn’t stifled by inappropriate securities regulation, necessary consumer protections and financial safeguards remain in place.

The regulator’s statement specifically noted that cryptocurrencies falling under the non-securities category might still be subject to additional rules and regulations when used in commercial contexts. This reflects a pragmatic understanding that the same asset can serve different functions in different contexts, requiring tailored regulatory responses. Since 2022, Belgium has required individuals and legal entities offering custodial wallets or cryptocurrency exchange services to register in advance with authorities, maintaining this compliance framework alongside the new classification guidance.

Belgium’s stepwise strategy will serve as an interim regulatory roadmap until the European Parliament adopts the Markets in Crypto Assets Regulation (MiCA), expected to take effect in early 2024. The FSMA’s technology-neutral framework positions Belgium as an early adopter of coherent cryptocurrency regulation within the European Union, potentially setting standards for other member states. By establishing clear guidelines before MiCA’s implementation, Belgium provides market participants with much-needed certainty during this transitional period.

The FSMA explicitly stated that its approach does not depend on the technology used to qualify as a security, financial instrument, or investment instrument, ensuring that the fundamental economic substance of transactions determines their regulatory treatment. This principle-based framework allows for innovation while maintaining consistent regulatory standards. The regulator further clarified that it stands ready to update its plan to account for prospective regulatory reforms, demonstrating flexibility in the face of rapidly evolving digital asset markets.

The FSMA’s position creates a stark contrast with the United States Securities and Exchange Commission’s approach under Chairman Gary Gensler. While the Belgian regulator explicitly states that Bitcoin and Ethereum are not securities, Gensler has frequently stated his belief that Ethereum constitutes a security, though he considers Bitcoin a commodity. This transatlantic regulatory divergence highlights fundamentally different interpretations of how existing securities laws apply to decentralized digital assets.

The ongoing legal dispute between the SEC and Ripple Labs regarding the status of XRP exemplifies the regulatory uncertainty prevailing in the United States. Belgium’s clear, published guidance provides a model for other jurisdictions seeking to balance innovation with appropriate oversight. The FSMA’s ruling might establish a precedent for European regulators, offering a more predictable environment for cryptocurrency businesses and investors compared to the case-by-case enforcement approach characterizing US regulation.