1 December 2022

Belgian Financial Services and Markets Authority clarifies the characterisation of cryptoassets

By means of a communication dated 22 November 2022, the Belgian Financial Services and Markets Authority (FSMA) has provided clarification of the most common cases where cryptoassets may fall within the scope of the prospectus rules and/or the MiFID rules of conduct. The FSMA has created a decision tree, which can help with the classification of cryptoassets as securities, investment instruments or financial instruments.

  

Due to an increased interest in cryptoassets in Belgium, the FSMA has been frequently involved in discussions about the legal and regulatory characterisation of crypto-assets and services related to crypto-assets.

The FSMA notes in the communication that market players are mainly in search of clarity about when crypto-assets may be classified as a security within the meaning of the EU Prospectus Regulation or as an investment instrument within the meaning of the Belgian Prospectus Law (supplementing the EU Prospectus Regulation). Depending on an asset’s classification, other legislation may also apply, such as the MiFID rules, virtual asset service providers regulations or other pieces of legislation.

  

Stepwise plan

The FSMA has developed a stepwise plan (accessible here). In its plan, the FSMA focuses on the main questions and the situations which it has encountered most frequently to date. It does not, however, address all potential classifications. The plan is neutral as regards technology as the FSMA is of the opinion that the characterisation as security, financial instrument or investment instrument does not depend on the technology that is being used.

 

Possible legal characterisation of cryptoassets

If there is an issuer of cryptoassets incorporated into instruments, the following characterisations are possible:

  • Characterisation of cryptoassets as securities: if cryptoassets are transferable instruments and represent a right to share in the profits or losses of a project and potentially a voting right, or a right to payment of a sum of money or an equivalent, these cryptoassets are, as a rule, considered to qualify as securities within the meaning of the EU Prospectus Regulation.
  • Characterisation of cryptoassets as financial instruments: if cryptoassets are transferable instruments and represent a right to share in the profits or losses of a project and potentially a voting right, or a right to payment of a sum of money or an equivalent, these cryptoassets also qualify as financial instruments, so that MiFID rules of conduct would apply.
  • Characterisation of cryptoassets as investment instruments: if cryptoassets are non-transferable instruments and represent a right to share in the profits or losses of a project and potentially a voting right, or a right to payment of a sum of money or an equivalent, these cryptoassets are classified in principle as investment instruments under the Belgian Prospectus Law. In addition, if the cryptoassets represent a right to the delivery of a service or a product by the issuer and have an investment objective, the instruments are classified, as a rule, as investment instruments within the meaning of the Belgian Prospectus Law.

Where cryptoassets qualify as securities, investment instruments and/or a financial instrument, the FSMA notes that in addition to compliance with applicable requirements of the EU Prospectus Regulation, the Belgian Prospectus Law and/or MiFID rules, additional pieces of legislation may apply, such as the rules governing market abuse or crowdfunding.

    

Authored by Ivan Peeters, Charles-Henri Bernard, and Frederik Stappers.