Recently, a new venture capital fund that focuses exclusively on blockchain technology, Tioga Capital Partners, was established in Belgium.

In April 2021, Belgian blockchain technology provider Arkane Network completed a EUR1.55 million funding round led by High-Tech Gründerfonds.

In the same year, a registration regime was implemented in Belgium for virtual asset service providers (VASPs).

In addition, the new European licensing regime for crowdfunding service providers was implemented and organised in 2021.

Belgium-based investment firm NXMH is reported to have owned an 80% equity stake in cryptocurrency exchange Bitstamp since 2018. NXMH is a pan-European investment firm with EUR3 billion of assets under management.

SettleMint is one of Belgium’s most successful blockchain start-ups. It is a platform-as-a-service company with a scalable, low-code, infrastructure-agnostic solution that allows enterprise developers to quickly create and deploy blockchain-based applications. In 2019, the company developed a securities trading proof-of-concept for Standard Chartered. In January 2020, the company raised EUR1.9 million from KPN Ventures, with US investor Medici Ventures also participating in the round.

NGRAVE is another promising Belgian start-up. The company developed the NGRAVE Zero, a super-secure hardware wallet dubbed “the coldest wallet”. The wallet can store about 20 different types of crypto-asset.

To date, no noteworthy decentralised finance (DeFi) initiatives have sprouted on Belgian soil. There is no regulatory guidance around DeFi as of yet.

Apart from the occasional anecdotal project, such as the Dutch art student who “sold his soul” in the form of a non-fungible token (NFT), or the Belgian artist VEXX who had an artwork featured in an event that took place on Times Square, NFTs are not especially known or popular among the general public in Belgium.

The Belgian company Venly runs an NFT marketplace.

The Belgian multi-asset tracker Delta has integrated a mobile NFT explorer with its services.

The VASP Act prohibits third country (non-EEA) virtual currency exchange and custodial wallet providers that are not registered with the Financial Services and Markets Authority (FSMA) from offering their services in Belgium. The VASP Royal Decree sets out the registration requirements. The FSMA has issued a regulation, a communication, and several press releases and warnings relating to cryptocurrencies and associated phenomena. The National Bank of Belgium (NBB) has issued a circular. These documents are the only forms of regulatory guidance in Belgium that specifically address tokens and cryptocurrencies.

AML Act

The fifth Anti-Money Laundering Directive (AMLD5, Directive 2018/843 of 30 May 2018 amending Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing) broadened the personal scope of regulatory requirements under anti-money laundering and terrorist financing (AML/CFT) rules and regulations to include “providers of exchange services between virtual currencies and fiat currencies” and “custodian wallet providers” (together referred to as VASPs).

Belgium implemented AMLD5 and its predecessor legislation in the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash, as amended from time to time (the AML Act).

In summary, the AML Act provides that:

• VASPs are subject to AML/CFT laws and regulations, including know-your-customer (KYC) due diligence requirements;
• it is prohibited for VASPs governed by the laws of a third country (ie, non-EEA jurisdictions) to carry out virtual asset exchange services or custodian wallet services in Belgium; and
• VASPs with an establishment or electronic infrastructure in Belgium must register with the Belgian competent authority (the FSMA).

VASP Act and Royal Decree

Ban on third-country VASPs

On 21 February 2022, the act amending the AML Act to introduce provisions on the status and supervision of service providers for the exchange between virtual assets and fiat currencies and custodian wallet providers (the VASP Act) entered into force.

The VASP Act introduces a prohibition on natural persons and legal entities domiciled in or governed by the laws of a non-EEA jurisdiction (third country) providing, on a professional basis, exchange services between virtual currencies and fiat currencies and custodian wallet services on Belgian territory. The Act also brings all ATMs on Belgian territory that enable the exchange of virtual assets against fiat currency within the FSMA’s supervision.

In practice, the legislature expects third-country VASPs to establish an entity in Belgium or another EEA jurisdiction and to operate via that entity in Belgium.

The prohibition only applies to providers of exchange services when they offer to exchange virtual currencies and fiat currencies (crypto-to-fiat or fiat-to-crypto) with their own capital. It does not apply to platforms where users of the platform can exchange virtual assets between each other, nor does the prohibition apply to exchange services where one virtual asset is exchanged for another (crypto-to-crypto). Furthermore, the Act does not cover initial coin offerings (ICOs).

The VASP Act sanctions non-compliance with criminal sanctions (imprisonment from one month to one year and/or a fine of EUR400–80,000). These criminal sanctions supplement the pre-existing administrative sanctions for non-compliance with AML/CFT obligations (such as fines up to EUR5 million or 10% of the annual turnover, whichever is higher).

Registration conditions for VASPs

All VASPs with an establishment or electronic infrastructure in Belgium must register with the FSMA.

The Royal Decree of 8 February 2022 on the regulation and supervision of virtual assets services providers (VASP Royal Decree) lays down the rules and conditions for registration with the FSMA, the conditions for carrying out these activities, and the supervision that such service providers are subject to.

Furthermore, the FSMA published an FAQ on its website to assist VASPs with the application of the new regulatory framework.

The obligation to register with the FSMA applies to:

• VASPs domiciled in or governed by the laws of Belgium who provide, on the Belgian territory, virtual asset services;
• VASPs domiciled in or governed by the laws of another EEA country having a branch or any other form of permanent establishment in Belgium; and
• VASPs domiciled in or governed by the laws of another EEA country with electronic infrastructure, in particular ATMs, in Belgium.

Third-country VASPs that seek to provide virtual assets exchange services or custodian wallet services must set up a legal entity in the EEA before they can register with the FSMA.

It is not relevant whether the VASP carries out the activity as its principal or ancillary activity. Undertakings that are already regulated under other financial services laws remain subject to the registration requirement but benefit from less comprehensive registration conditions.

The VASP Royal Decree introduces detailed requirements that VASPs must meet on a permanent basis.

The key requirements are:

• establishment of a company with a minimum capital of EUR50,000;
• central administration in Belgium;
• the persons responsible for the effective management are natural persons who meet fit and proper conditions;
• suitability of shareholders;
• compliance with the AML Act;
• organisational requirements; and
• payment of a financial contribution to the FSMA.

Transitional regime for current VASPs

The VASP Act did not contain any transitional provisions. Therefore, the ban on non-EEA VASPs entered into force ten days after its publication, on 21 February 2022.

The VASP Royal Decree entered into force on 1 May 2022. However, the Royal Decree provides for a grandfathering provision. Existing VASPs could maintain their authorisation, provided that they notify the FSMA before 1 July 2022 and submit a complete application to the FSMA before 1 September 2022.

Marketing Prohibition Regulation

On 3 April 2014, the FSMA issued the Regulation of the Financial Services and Markets Authority “on the prohibition on marketing of certain financial products to non-professional clients” (the Marketing Prohibition Regulation), which entered into force on 1 July 2014. This regulation prohibits the professional marketing in Belgium to one or more retail clients of financial products, the return on which is directly or indirectly dependent on “virtual money”. The Marketing Prohibition Regulation only applies in respect of derivatives of virtual money, not in respect of the virtual money itself.

The term virtual money is defined for the purposes of the regulation as “each form of non-regulated digital money without legal tender”. In the explanatory note to the regulation, Bitcoin is quoted as an example of virtual money. Since 2014, however, many types of crypto-asset have been developed that are unlike Bitcoin and do not have typical “currency” characteristics. It is unclear to what extent the regulation applies to novel types of crypto-asset, and clarification can and should be sought with the FSMA in this respect prior to the launch of a product.

Circular NBB_2019_20

On 13 March 2019, the Basel Committee issued a “statement on crypto-assets”. In this statement, the Basel Committee warns of the risks related to crypto-assets. It then sets out the measures it expects banks to take if they acquire crypto-asset exposures or provide related services.

As a follow-up to the Basel Committee’s statement, the NBB released Circular NBB_2019_20 “on expectations regarding activities related to crypto-assets” on 19 July 2019. This circular is addressed to the financial undertakings under the NBB’s supervision. The NBB deemed that the substance of the Basel Committee statement was also relevant for other financial undertakings. It therefore decided to issue Circular NBB_2019_20 to reiterate the Basel Committee’s statement and to extend its scope to also include non-banks under its supervision.

FSMA ICO Communication

On 13 November 2017, the FSMA issued communication No FSMA_2017_20 entitled “Initial Coin Offerings (ICOs)” (the FSMA ICO Communication). In this text, which is considered soft law, the FSMA endorses the statements by the European Securities and Markets Authority (ESMA) on ICOs, in which ESMA has determined that, depending on how ICOs are structured, various financial regulations – such as the Prospectus Directive, the Markets in Financial Instruments Directive (MiFID), the Alternative Investment Fund Managers Directive AIFMD, the Market Abuse Regulation (MAR), etc – may apply. The legislation and regulations outline below may, the FSMA further states, apply to ICOs in Belgium.

The New Prospectus Act

The new Prospectus Regulation (2017/1129) has been implemented in Belgium by the Act of 11 July 2018 “on the public offering of investment instruments and the admission of investment instruments to trading on a regulated market” (the New Prospectus Act). The New Prospectus Act repealed the Act of 16 June 2006 “on public offers of investment instruments and the admission of investment instruments to trading on regulated markets” (the Old Prospectus Act) and has fully applied since 21 July 2019.

The Marketing Prohibition Regulation

As discussed above.

The Crowdfunding Act

The Belgian Act of 18 December 2016 “on the recognition and definition of crowdfunding and containing various provisions on finance” (the Crowdfunding Act), which is discussed below.

The FSMA also mentions the importance of adequately categorising crypto-assets issued in an ICO. This is discussed in 3.2 Categorisation.

General Laws and Regulations That May Apply to Blockchain Services

Save for the AML Act, as amended by the VASP Act, and the Marketing Prohibition Regulation, there are no Belgian (hard) laws or regulations that specifically target blockchain or cryptocurrencies. Consequently, any type of crypto-asset, as well as any related service, must be analysed from the perspective of existing laws and concepts. A selection of Belgian laws that may be relevant to blockchain service providers is discussed below.

Prospectus regime

The Belgian prospectus legislation, among other things:

• deals with the requirement of preparing a prospectus to be approved by the FSMA or an information note in the event of a public offering of investment instruments within the territory of Belgium;
• establishes a monopoly on intermediation for the placement of investment instruments within the territory of Belgium; and
• determines that advertisements used in connection with the public offering must receive prior approval from the FSMA.

Unlike the old Prospectus Directive (2003/71/EC) and the new Prospectus Regulation (2017/1129), both the Old Prospectus Act and the New Prospectus Act do not use the notion of “securities” to determine the material scope of the prospectus regime. Instead, they use the significantly broader notion of “investment instruments”. This latter concept includes securities, but also comprises a whole range of additional instruments (such as money market instruments, futures, forward rate agreements and equity swaps), as well as the residual category of “all other instruments that enable a financial investment, irrespective of the underlying assets”.

Consequently, depending on the structure of the token issued in an ICO, there may be a high chance that the token qualifies as an investment instrument and therefore falls within the scope of the Belgian prospectus regime.

The Belgian prospectus legislation also establishes an intermediation monopoly. Only the entities mentioned in Article 21, Section 1 of the New Prospectus Act, which are all regulated entities, are allowed to act as intermediaries for the purposes of the placement of investment instruments within the territory of Belgium. Consequently, if a token qualifies as an investment instrument and is placed in Belgium, only regulated entities can act as intermediaries (with certain limited exceptions).

Consumer protection

If a token qualifies as an investment instrument for the purposes of the prospectus legislation discussed above, the token will also qualify as a financial product and will thus fall within the ambit of, in particular, the Royal Decree of 25 April 2014 “on certain information obligations in respect of the marketing of financial products to non-professional clients” (the Information Obligations Decree). As its name suggests, this Decree provides for certain information obligations that must be complied with when professionally marketing financial products to retail clients.

Furthermore, when the service offered in respect of a crypto-asset qualifies as a financial service, Book VI of the Belgian Code of Economic Law, containing various consumer protection provisions, applies. A financial service is defined in this Code as “each banking service or service relating to lending, insurance, individual pensions, investments and payments”.

Crowdfunding

Blockchain platforms that provide crowdfunding-type services will likely fall within the ambit of the Crowdfunding Act, which regulates crowd-lending and equity-based crowdfunding in Belgium.

The Crowdfunding Act sets out the licensing and operating requirements for alternative funding platforms as well as the conduct of business rules that apply to the providers of alternative funding services. An alternative funding service, dubbed by the FSMA as “the financial form of crowdfunding”, is defined in Article 4(1) of the Crowdfunding Act as: “[T]he service consisting of commercialising investment instruments, through a website or any other electronic means, issued by entrepreneur-issuers, starter funds or funding vehicles in the framework of an offering, public or otherwise, without the provision of an investment service regarding these investment instruments, with the exception of, as applicable, the following services: (i) provision of investment advice and (ii) receiving and transmitting orders.”

Each individual or legal entity that professionally provides such alternative funding services within the territory of Belgium is deemed an alternative funding platform pursuant to Article 4(2) of the Crowdfunding Act (unless that individual or legal entity is a regulated undertaking).

Investment Services Act

Another important piece of legislation that may apply is the Act of 25 October 2016 on the access to the investment services business and on the status and supervision of companies for asset management and investment advice (the Investment Services Act). The Investment Services Act will only apply if the crypto-assets qualify as “financial instruments” in the sense of MiFID II. Pure investment tokens are likely to qualify as financial instruments and therefore trigger the application of the Investment Services Act. If the Investment Services Act applies, the exchange will need to have or obtain a licence from the FSMA or the NBB to provide “investment services or activities”, which include, among others, receiving and transferring buy and sell orders, placing financial instruments, offering investment advice and asset management.

Payment services

The offering of payment services is a regulated activity in Belgium under the Belgian Act of 11 March 2018 “on the legal status and the supervision of payment institutions and electronic money institutions, the access to the undertaking of payment service provider and to the activity of issuing electronic money, and the access to payment systems” (the Payment Institutions Act), which implements the Payment Services Directive (EU) 2015/2366 (PSD II).

The Payment Institutions Act regulates the following payment services:

• services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
• services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
• execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
• execution of payment transactions where the funds are covered by a credit line for a payment service user (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
• issuing of payment instruments and acquiring of payment transactions;
• money remittance;
• payment initiation services; and
• account information services.

The exemptions, as outlined under PSD II, also apply in Belgium. The exemptions that are regularly invoked in the fintech sphere are:

• the limited network exemption;
• the commercial agent exemption; and
• the technical service provider exemption.

Since the implementation of PSD II, banks have been required to provide third parties (such as payment initiation or account aggregation providers) access to a customer’s account data, upon the latter’s request. The main reason is to facilitate new business models that depend heavily on access to such data.

So far, Belgium has not purposefully implemented standards applicable to the blockchain sector proposed by international bodies such as the Financial Action Task Force (FATF) or the Bank for International Settlements (BIS), other than to the extent such standards are already reflected in EU legislation implemented in Belgian law.

Financial supervision in Belgium is based on a Twin Peaks model, according to which there are two autonomous supervisors: the NBB and the FSMA. The NBB is responsible for the prudential supervision of individual financial institutions on both macro and micro levels, while the FSMA is responsible for the monitoring of the proper functioning, transparency and integrity of the financial markets as well as the supervision of unlawful offerings of products and financial services. Furthermore, Belgian banks are fully or partially subject to the supervision of the European Central Bank.

There are no self-regulatory organisations or trade groups that perform regulatory or quasi-regulatory roles with respect to businesses or individuals using blockchain in Belgium.

On 26 February 2020, there was an important decision by the Commercial Court of Nanterre, France in the case of Bitspread v Paymium. This decision is also relevant from a Belgian law perspective, given the common origin of Belgian and French civil law. First, the Nanterre court implicitly held that Bitcoin was susceptible to ownership. Secondly, the court ruled that, upon borrowing Bitcoins, a borrower acquires full ownership of the Bitcoins. This implies that the borrower is entitled to the fruits of the Bitcoins. In the case at hand, this meant that the borrower (Bitspread), and not the lender (Paymium), was entitled to receive Bitcoin Cash resulting from the Bitcoin blockchain’s first hard fork.

No enforcement actions relating to blockchain have been brought and made public in Belgium during the past 12 months.

Although there is no regulatory sandbox in place, and there are, to the authors’ knowledge, no plans to introduce such a sandbox, Belgium can be seen as a fintech-friendly jurisdiction.

For new business models in the fintech realm, the FSMA launched a FinTech Contact Point in June 2016. This contact point is designed as a portal through which fintech entrepreneurs can contact the financial markets supervisor. This allows entrepreneurs to familiarise themselves with financial legislation and to ask any questions they may have. It also enables the FSMA to closely monitor fintech developments in Belgium. In April 2017, the portal launched by the FSMA evolved into a joint portal of the FSMA and the NBB. Fintech players, who are not necessarily aware of the Twin Peaks supervision model in Belgium, thus have a single point of contact; they do not need to find out in advance to which supervisor they need to put their questions. Questions lodged with the fintech portal are managed jointly by the FSMA and NBB teams. Since the launch of the fintech portal in 2016, well over 100 fintech entrepreneurs have reached out to the supervisory authorities. Their questions have covered a wide range of topics, such as crypto-assets, robo-advice and crowdfunding.

The Fintech Contact Point will continue to be helpful in guiding start-ups and established firms through the complex regulatory framework and the licensing process. Both the FSMA and the NBB tend to be approachable and supportive of new fintech business models.

Corporate Income Tax

The Office for Advance Tax Rulings has confirmed, in a ruling dated 8 May 2018, that all gains from investments in cryptocurrencies and ICOs made by Belgian companies are taxable and all losses are tax deductible.

Personal Income Tax

The income tax treatment of investments in cryptocurrencies by individuals is subject to general tax rules and depends on the relevant facts and circumstances.

A capital gain realised within the framework of one’s professional activity will be taxed as professional income at progressive rates ranging between 25% and 50% plus local charges. If the cryptocurrencies are held as private assets, the capital gains will be exempt from individual income tax if the sale qualifies as a normal act of management. This has been confirmed by the Office for Advance Tax Rulings in several recent rulings. If the sale does not qualify as a normal act of management, the capital gains will be taxable as miscellaneous income at a rate of 33% plus local charges.

Legal certainty on the applicable tax treatment can be obtained by filing a ruling request with the Office for Advance Tax Rulings. This service has published a list of questions that should allow both the taxpayer and the tax authorities to determine the appropriate tax treatment.

VAT

In the Hedqvist case (Skatteverket v David Hedqvist, C-264/14, dated 22 October 2015), the European Court of Justice ruled that the sale of non-traditional currencies falls under the same VAT exemption as transactions relating to traditional currencies. The Belgian VAT administration has included that decision in its administrative commentary without noteworthy remark.

No prominent public task forces have been established by Belgian government bodies.

The Belgian Association of Digital Technology Leaders (Beltug), a private organisation, established a Blockchain Task Force in September 2018.

Prior to undertaking any attempt to determine who owns what, it should be verified in accordance with the rules of private international law what the applicable law is (ie, the laws of which jurisdiction apply). In what follows, it is assumed that Belgian law applies.

The default rules of civil law and civil procedure law apply to questions of ownership of crypto-assets. No specific rules have been created for dealing with ownership transfers by means of a blockchain network.

Consensual Ownership Transfer

Under Belgian law, a consensual ownership transfer system applies for transactions involving the sale and purchase of movable things. The category of “movable things” also comprises intangible things (unless, of course, these intangible things are considered “immovable”). Crypto-assets are considered intangible movable things, and so the consensual ownership transfer system applies to the sale and purchase of crypto-assets. This means that the ownership of crypto-assets transfers from the seller to the purchaser as soon as the parties agree on the crypto-assets that are to form the object of the transaction and the price at which the ownership of the crypto-assets is to transfer, unless the parties expressly agree in a contract that the ownership will transfer at a later time (eg, as soon as the transaction has received six confirmations).

If the crypto-assets are fungible – eg, if the crypto-assets are bitcoins (without reference to specific unspent transaction outputs) – these conditions are only fulfilled as soon as the exact crypto-assets that are to form the object of the transaction can be identified. In other words, if a seller who owns 100 BTC agrees to sell 10 BTC, the ownership of the actual bitcoins will only transfer as soon as the transaction is included in the blockchain (unless parties agree to postpone the ownership transfer). If, on the other hand, a seller who owns 10 BTC agrees to sell “all 10 bitcoins I currently own”, it is clear from the outset that the object of the transaction is the 10 bitcoins credited to the public key(s) of which the seller knows the associated private key(s). Therefore, in the latter case, ownership of the 10 bitcoins transfers as soon as the seller and the purchaser settle on a purchase price.

Evidence

It is one thing to have a consensual ownership transfer system, but it is another thing to be able to actually prove that you are the owner of certain crypto-assets in a court of law. Therefore, due regard should be had for the law of evidence. Different rules apply depending on whether a sale of crypto-assets is concluded between enterprises, between an enterprise and a non-professional individual or between non-professional individuals. An example of an important rule of evidence is that, if one wants to prove that a sale of crypto-assets, for a value of EUR3,500 or more, took place, and the adversary is a non-professional individual, one can only do so by submitting a copy of a signed sale and purchase agreement. This rule does not apply if the adversary is an enterprise (eg, a professional investor).

Still other rules apply if the transaction is not a sale and purchase but, for instance, a loan or a custody agreement. In any case, the (non-) fungibility of the crypto-assets will be a major parameter in determining ownership.

If the crypto-assets at stake represent nominative shares in a Belgian company that has the legal form of a besloten vennootschap (BV), coöperatieve vennootschap (CV) or naamloze vennootschap (NV), a rebuttable presumption applies that the person registered in the share register is the owner of the shares.

Crypto-exchanges

Crypto-assets are very often held through intermediaries, such as exchanges. In that case, the exchange or a third-party service provider holds the private key associated with the public key to which the crypto-assets are credited. Two approaches can be taken in that case. Either the party who holds the private key is considered the owner, and the investor has merely a personal right (ius ad rem) to delivery of the crypto-assets. That would mean that if the holder of the private key goes into administration, the investor will very likely lose all or almost all of their crypto-assets. The other approach would be to consider the holder of the private key as the mere possessor of the crypto-assets and to consider the investor as the owner. The latter solution would offer the investor considerably more protection against insolvency risk. If the holder of the private key goes into administration, the investor can then simply recover its crypto-assets by means of a rei vindicatio. As of yet, Belgian courts have not been able to rule on this issue.

The bottom line is that determining the ownership of crypto-assets is a multi-faceted endeavour that wholly depends on the features of the crypto-assets at hand. It is advisable to mitigate the considerable legal uncertainty that remains around this issue by drafting watertight contracts.

In the FSMA ICO Communication, the FSMA noted that the application of securities laws to crypto-assets issued by means of an ICO depends on the way in which the ICO in question is structured, and that this must be assessed on a case-by-case basis. While the FSMA does not expressly mention the criteria it may apply when undertaking this assessment, it does point out in the communication that “[t]he characteristics of a token may be similar to: (i) investment instruments, given that they may provide rights, offer the prospects of revenues or returns, or involve a pooling of funds with a view to investment in tokens; (ii) a means of storage, calculation and exchange, given its convertibility into other tokens, cryptocurrencies or fiat money; and/or (iii) a utility token, given the access which the token provides to the product or service.”

This corresponds to the classification of tokens and cryptocurrencies as either (i) an investment token, (ii) a cryptocurrency, or (iii) a utility token, or any combination of these three variations. Whereas, thus far, this trichotomy constitutes a merely descriptive classification, it already provides a sense of the likelihood that a coin will fall within the ambit of one or another law.

Parties seeking to issue or market crypto-assets in Belgium are, therefore, highly advised to first discuss the possible regulatory qualifications of the crypto-assets with the FSMA before taking any action.

Digital assets directly or indirectly pegged to another digital asset, have a large likelihood of falling within the ambit of the Marketing Prohibition Regulation (discussed in 2.1 Regulatory Overview). If so, the professional marketing of these assets in Belgium to one or more retail clients is prohibited.

Clarification in this respect should be sought with the FSMA prior to entering the Belgian market.

Provided vendors agree, cryptocurrencies can be used for payment of transactions up to an equivalent of EUR3,000. Amounts exceeding EUR3,000 must be paid using scriptural money. The price of acquired real estate must always mandatorily and fully be paid in scriptural money.

There are no Belgian regulations that are specifically designed to apply to the creation, marketing, or sale of non-fungible tokens.

To the authors’ knowledge, bit4you is the only cryptocurrency exchange operating out of Belgium. It is a centralised custodial exchange for non-security digital assets.

Venly (previously Arkane Network) runs an NFT marketplace. Venly has its registered office in Belgium.

Receiving and transferring fiat currencies and/or cryptocurrencies may qualify as a “payment service” in the sense of the Payment Institutions Act, which implements PSD II. This Act regulates the following payment services:

• services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
• services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
• execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
• execution of payment transactions where the funds are covered by a credit line for a payment service user (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
• issuing of payment instruments and acquiring of payment transactions;
• money remittance;
• payment initiation services; and
• account information services.

Businesses offering payment services must be licensed as such, given that offering payment services is a regulated activity in Belgium.

Some exemptions apply. These are the same exemptions as under PSD II. The exemptions that are regularly invoked in the fintech sphere are:

• the limited network exemption;
• the commercial agent exemption; and
• the technical service provider exemption.

Although crypto-assets are relatively new, the anti-money laundering (AML) risks associated with these assets are not. From a regulatory point of view, many of the risks associated with digital assets echo those presented by novel financial products and technologies in the past: untested business models, potential for abuse and fraud, lack of clear understanding on how crypto-asset transactions work and the underlying uncertainty of a rapidly evolving regulatory environment.

On 19 July 2019, the NBB released its circular NBB_2019_20 “on expectations regarding activities related to crypto-assets”. This circular is addressed to the financial undertakings under the NBB’s supervision, including insurance and reinsurance undertakings. The NBB warns financial entities under its supervision of, among other things, money laundering and terrorist financing risks. It imposes the obligation, on the financial institutions under its supervision, to apply adequate due diligence and risk governance processes.

The fifth Anti-Money Laundering Directive (AMLD5) was implemented into Belgian law by the AML Act. Under AMLD5, several new entities are brought within the personal scope of the provisions on the prevention of money laundering and terrorist financing. These newly obliged entities include virtual currency exchanges (ie, providers engaged in exchange services between virtual currencies and fiat currencies), and custodian wallet providers (see 4.6 Wallet Providers for a definition).

Virtual currencies are defined in Article 4, 35°/1 of the AML Act as “a digital representation of value that is not issued or guaranteed by a central bank or a government, that is not necessarily linked to a legally determined currency and that does not have the legal status of currency or money, but that is accepted by natural or legal persons as a means of exchange and that can be electronically transferred, stored and traded”.

In any case, the acceptance of a client and/or the acceptance of sale proceeds of crypto-assets by an obliged entity must always be determined on a case-by-case basis while taking specific risk factors into consideration.

Risk-Based Approach

Firstly, the extent of the due diligence requirements has to be assessed based on the given risk situation. AML legislation does not prohibit the acceptance of sale proceeds of crypto-assets in general. Obliged entities have to adapt their due diligence procedures depending on the underlying risk.

Risk Assessment

Secondly, obliged entities must have a meticulous insight into their counterparties and have to perform an accurate assessment of their clients’ inherent and residual risks.

Risk Mitigation

Finally, obliged entities have to define their own risk appetite (eg, not accepting sales proceeds from crypto-assets that went through a tumbler/mixer service). In this regard, obliged entities must develop a consistent framework for determining their specific risk factors and risk management. Additionally, obliged entities must have sound transaction monitoring systems in place, allowing them to track and report suspicious activities. 

The relevant authority for the supervision of financial markets is the FSMA (see also 2.3 Regulatory Bodies). At this point, the most important piece of regulation specifically addressed to the crypto-assets sector is the Marketing Prohibition Regulation, discussed in 2.1 Regulatory Overview.

There are no specific regulatory limits on the ability of a crypto-asset exchange to re-hypothecate the crypto-assets they hold for customers, provided customers have agreed to this. Depending on the regulatory status of the exchange, prudential limits on this practice may apply.

Custodian wallet providers fall within the personal scope of the provisions on the prevention of money laundering and terrorist financing (see 4.3 KYC/AML) and must register with the FSMA (see 2.1 Regulatory Overview). Custodian wallet providers are defined in the AML Act as “entities that provide services to safeguard private cryptographic keys on behalf of their customers, to hold, store and transfer virtual currencies”. If the wallet provider also provides payment services, the Payment Institutions Act may apply (see 2.1 Regulatory Overview).

Please refer to FSMA ICO Communication in 2.1 Regulatory Overview for an overview of the FSMA’s regulation of ICOs.

In its ICO Communication, the FSMA also stressed the importance of adequately categorising crypto-assets issued in an ICO. The FSMA notes that the application of securities laws to crypto-assets issued by means of an ICO depends on the way in which the ICO in question is structured, and that this must be assessed on a case-by-case basis. While the FSMA does not expressly mention the criteria it may apply when undertaking this assessment, it does point out in the communication that “[t]he characteristics of a token may be similar to: (i) investment instruments, given that they may provide rights, offer the prospects of revenues or returns, or involve a pooling of funds with a view to investment in tokens; (ii) a means of storage, calculation and exchange, given its convertibility into other tokens, cryptocurrencies or fiat money; and/or (iii) a utility token, given the access which the token provides to the product or service.”

Parties seeking to issue or market crypto-assets in Belgium, are therefore highly advised to first discuss the possible regulatory qualifications of the crypto-assets with the FSMA before taking any action.

Prospectus Regime

The Belgian prospectus legislation, among other things:

• deals with the requirement of preparing a prospectus to be approved by the FSMA or an information note in the event of a public offering of investment instruments within the territory of Belgium;
• establishes a monopoly on intermediation for the placement of investment instruments within the territory of Belgium; and
• determines that advertisements used in connection with the public offering must receive prior approval from the FSMA.

Unlike the old Prospectus Directive (2003/71/EC) and the new Prospectus Regulation (2017/1129), both the Old Prospectus Act and the New Prospectus Act do not use the notion of “securities” to determine the material scope of the prospectus regime. Instead, they use the significantly broader notion of “investment instruments”. This latter concept includes securities, but also comprises a whole range of additional instruments (such as money market instruments, futures, forward rate agreements and equity swaps), as well as the residual category of “all other instruments that enable a financial investment, irrespective of the underlying assets”.

Consequently, depending on the structure of the token issued in an ICO, there may be a high chance that the token qualifies as an investment instrument and therefore falls within the scope of the Belgian prospectus regime.

The Belgian prospectus legislation also establishes an intermediation monopoly. Only the entities mentioned in Article 21, Section 1 of the New Prospectus Act, which are all regulated entities, are allowed to act as intermediaries for the purposes of the placement of investment instruments within the territory of Belgium. Consequently, if a token qualifies as an investment instrument and is placed in Belgium, only regulated entities can act as intermediaries (with certain limited exceptions).

Consumer Protection

If a token qualifies as an investment instrument for purposes of the prospectus legislation discussed above, the token will also qualify as a financial product and will thus fall within the ambit of, in particular, the Information Obligations Decree. As its name suggests, this Decree provides for certain information obligations that must be complied with when professionally marketing financial products to retail clients.

Intermediaries

Various regulations may apply to crypto-asset exchanges if they decide to act as intermediary in an initial exchange offering, especially if the crypto-asset is a security token.

Only the entities mentioned in Article 21, Section 1 of the New Prospectus Act, which are all regulated entities, are allowed to act as intermediaries for purposes of the placement of investment instruments within the territory of Belgium. Consequently, if a token qualifies as an investment instrument and is placed in Belgium, only regulated entities can act as intermediaries (with certain limited exceptions). The category of “investment instruments” is a broad one. As soon as the crypto-asset that is being offered resembles a security token, it is likely that the asset will qualify as an investment instrument. As emphasised in 2.1 Regulatory Overview, it is highly advisable to enter into a discussion with the FSMA in this respect prior to engaging in any sort of issue or marketing of crypto-assets in Belgium.

Qualification of the Crypto-Asset

Another important piece of legislation that may apply is the Act of 25 October 2016 “on the access to the investment services business and on the status and supervision of companies for asset management and investment advice” (the Investment Services Act). The Investment Services Act will only apply if the crypto-assets qualify as “financial instruments” in the sense of MiFID II. Pure investment tokens are likely to qualify as financial instruments and therefore trigger the application of the Investment Services Act. If the Investment Services Act applies, the exchange will need to have or obtain a licence from the FSMA or the NBB to provide “investment services or activities”, which include, among others, receiving and transferring buy and sell orders and placing financial instruments.

If the crypto-asset qualifies as an investment instrument, the Information Obligations Decree (as discussed in Consumer Protection in 5.1 Initial Coin Offerings) applies.

Furthermore, when the service offered in respect of a crypto-asset qualifies as a financial service, Book VI of the Belgian Code of Economic Law, containing various consumer protection provisions, applies. A financial service is defined in this Code as “each banking service or service relating to lending, insurance, individual pensions, investments and payments”.

Alternative Funding

The initial exchange offering may also qualify as an “alternative funding service”, which is defined in Article 4(1) of the Crowdfunding Act as: “[T]he service consisting of commercialising investment instruments, through a website or any other electronic means, issued by entrepreneur-issuers, starter funds or funding vehicles in the framework of an offering, public or otherwise, without the provision of an investment service regarding these investment instruments, with the exception of, as applicable, the following services: (i) provision of investment advice and (ii) receiving and transmitting orders.”

Each individual or legal entity that professionally provides alternative funding services within the territory of Belgium is deemed an “alternative funding platform” pursuant to Article 4(2) of the Crowdfunding Act (unless such individual or legal entity is a regulated undertaking). The Crowdfunding Act sets out the licensing and operating requirements and the conduct of business rules for alternative funding platforms.

Other token launch mechanisms, such as airdrops, are not systematically launched out of Belgium and are not targeted by specific Belgian laws or regulations, other than as mentioned elsewhere in this chapter (see 2.1 Regulatory Overview).

There are no special Belgian regulations that deviate from the general investment funds legislation and that apply to funds that invest in crypto-assets.

There are no special Belgian regulations that deviate from the general investment services legislation and that apply to financial intermediaries that deal in crypto-assets.

Self-executing contracts, or “smart contracts”, are in principle permitted under Belgian law. No specific legal framework has been established for this phenomenon. Therefore, common contract law applies. In Belgium, contracts can generally be concluded without formal requirements, subject to certain statutory exceptions (eg, consumer credit contracts). The computer code making up a smart contract can thus in principle constitute a valid contract, provided the validity requirements under Belgian contract law are met.

Ordinary liability rules apply when determining the liability of developers of blockchain-based networks, but considerable legal uncertainty remains as to how these rules should be applied to a decentralised context. In common law jurisdictions, the concept of “fiduciary duty” might be used to hold developers responsible for losses that arise through the use of their software. But, considering Belgium is a civil law jurisdiction, the concept of “fiduciary duty” is not used under Belgian law to determine the liability of developers.

Decentralised financial platforms are not principally prohibited in Belgium. Self-evidently, any type of financial activity that is carried out in Belgium, must comply with Belgian financial laws.

If the crypto-assets qualify as “financial instruments” in the sense of MiFID II, they can be pledged in accordance with the Belgian Financial Collateral Act, which implements the Financial Collateral Directive (No 2002/47/EC) into Belgian law. If the crypto-assets do not qualify as financial instruments, they can be pledged in accordance with the provisions of the Belgian Civil Code on security interests in movable assets.

There are no special Belgian regulatory requirements to act as a custodian for crypto-assets, or to transfer crypto-assets to a custodian. Ordinary financial laws apply.

In a report of October 2018, the EU Blockchain Observatory and Forum (the Observatory) stated that “there is no contradiction in principle between the goals of the GDPR and those of blockchain technology” due to the technologically neutral manner in which the GDPR was drafted.

However, the Observatory added that, depending on the organisation of the network, difficulties could arise in relation to, for example, data minimisation and the rights to erasure and rectification (in particular due to data immutability), accountability (difficulties in determining the role of each person or entity involved) and international data transfers (due to the global nature of blockchain networks).

This finding was also confirmed by a study of the European Parliamentary Research Service entitled “Blockchain and the General Data Protection Regulation: Can distributed ledgers be squared with European data protection law?”, written by Dr Michèle Finck and published in July 2019. The study concluded that:

• there are many considerable points of tension between the GDPR and blockchain technology;
• considerable legal uncertainty exists as to how the GDPR should be applied in a decentralised context; and
• it is impossible to state that blockchains are, as a whole, either completely compliant or incompliant with the GDPR and that ultimately each concrete use case needs to be carefully examined on a case-by-case basis.

While blockchain technology may seem difficult to reconcile with GDPR principles such as the right to erasure (Article 17, GDPR) and data protection by design and by default (Article 25, GDPR), some researchers, such as Claudio Lima, have proposed creative solutions. An example of such a proposed solution would be to store personal data off-chain and store the hashes to encrypt this personal data in the Blockchain layer. If a data subject were to exercise their right to erasure under Article 17 of the GDPR, the service provider can erase the “linkability” of the blockchain hash to the personal data located in distributed off-chain servers.

See 8.1 Data Privacy.

Mining of cryptocurrencies is not prohibited as such in Belgium.

There are no special Belgian regulations that apply to the staking of crypto-assets.

DAOs are unpopular among service providers and investors in Belgium, due to the bad reputation they acquired in the aftermath of The DAO hack and the unresolved legal questions they face.

The authors are not aware of DAOs operating out of Belgium, or having a meaningful connection to Belgium.

The authors are not aware of DAOs operating out of Belgium, or having a meaningful connection to Belgium.