Bitcoin, Ether Not Securities Because They Have No Issuer: Belgium Regulator ⋆ ZyCrypto

• The regulator of the European country said cryptocurrencies issued by computer codes are not considered securities.
• Brussels is neutral to blockchain technology, a stark contrast to the US.

Brussels’ financial authority has clarified that cryptocurrencies without an issuer cannot be classified as securities.

The Financial Services and Markets Authority (FSMA) announced that digital assets issued exclusively by computer codes could not be treated as securities. The announcement was in response to “more and more” queries on the financial policy framework and its applications to cryptocurrencies.

“If there is no issuer, as in cases where a computer code creates instruments, and this is not done in execution of an agreement between issuer and investor (for example, Bitcoin or Ether), then in principle the prospectus Regulation, the Prospectus Law, and the MiFID rules of conduct do not apply,” the statement read.

The regulator has, however, singled out certain rules that could still apply to the non-security assets – if they have a payment of exchange functionality: the 2022 law on virtual asset service providers and the FSMA regulation of 2014. The first law compels the issuer of a security to determine the classification of the instrument. The second legislation bans the marketing of specific financial products to retail clients.    

For the FSMA, the new directive ‘‘is neutral regarding technology.’’ It states that whether an asset is a security does not depend on the underlying technology. In issuing the decree, the agency termed security as any transferable instrument with an issuer requiring a prospectus free from misrepresentation or conflict of interest.

Could the new directive be a precedent in the SEC-Ripple legal battle?

In contrast, the US Securities and Exchange Commission is suing XRP issuer Ripple for not treating the cryptocurrency as a security. According to the agency, 99% of digital assets are securities. In a separate court case, SEC won against LBRY, a blockchain-based payment platform accused of marketing and selling its native tokens.

The SEC stance has attracted criticism across the crypto space – for hindering innovation in digital assets.