The financial regulators in Belgium are laying out plans to determine crypto regulations. It is open consultation set to define which crypto class qualifies as securities. Other asset classes to be determined are financial instruments and investment instruments.
A Necessary Classification for Ease
Belgium’s financial regulator, L’Autorité des Services et Marchés Financiers, released a statement. It said the Authority wishes to clarify when crypto might have certain classifications. This is pending the time a unified European approach is made available.
The EU is working on a unified Markets in Crypto Assets (MiCA) regulation for the Eurozone. The EU’s MiCA is expected to begin operation in 2024. But in the meantime, crypto firms need to know if they are under existing laws.
Therefore, the Belgian regulator has established criteria to define where assets fall. It also determines which existing laws might apply to each of them.
The recent guideline gives a step-by-step order that would define the crypto asset classes. First, they have to verify if the crypto asset has been incorporated into any instrument. Meaning if they can be exchanged or simply fungible.
The guideline indicates that the crypto assets not incorporated as instruments are not securities. Nevertheless, if they become incorporated into instruments, there are two possible outcomes.
Incorporated or Not?
The first possibility is that instruments might be a voting right or stake in a project. It could also mean having a right to get paid an amount. In such cases, the instruments would be transferrable.
Such crypto assets are regarded as securities according to the Prospectus Law and Financial Instruments. Crypto issuers are required by the Prospectus Law to release a prospectus for likely investors.
The assets are equally required to follow the MiFID code of conduct. The EU MiFID stipulates laws for investment firms to protect investors.
But if the instruments involved are not transferrable, then the crypto is just investment instruments. The issuer will also be required to publish a prospectus, according to the Prospectus Law.
The second possibility is the instrument might represent rights to the issuer’s service or products. In this event, instruments are investment instruments if they have investment objectives. They will also be subjected to the Prospectus Law in that case.
But if it lacks an investment objective, then the crypto will be beyond the Prospectus Law. The guideline goes ahead to mention qualities that determine if the instrument has an investment objective.
A crypto-asset will pass as one with an investment objective when the instrument can be transferred. The issuer must also issue just a limited amount of instruments. The issuer must trade them with the aim of making a profit in the market.
The guideline clarified that cryptocurrencies such as Bitcoin and Ethereum are not subject to regulation. The reason is that they have no issuers but are generated by computer codes. The consultation welcomes every stakeholder and investors.