Financial Services and Markets Authority (FMSA) of Belgium is pushing the government to craft cryptocurrency regulations. Any country’s financial authority continuously monitors local and cross-border illegal transactions. Belgium is of no exception. The country always tries to maintain transparent financial activity within its territory.

On the other hand, the use of digital currencies has been increasing exponentially for the last couple of years. There is always a risk of illegal use of any financial asset if it is not monitored seriously. Keeping this in mind, Jean-Paul Servais, the chairmen of FMSA, pressed lawmakers to come up with a legal framework for use and transactions of digital currencies and related financial products. He proposed the idea of such regulation in a Senate hearing on February 10.

Reference from other countries

Senator Jean-Paul provided reference to several other countries including Russia, China, Ecuador, Thailand, Argentina, Bolivia, and Algeria, where crypto assets are either properly regulated banned so that their people have a clear understanding of such currencies. He also pointed out the incompetency of the Belgium authorities in handling the industry that is clearly expanding at an alarming rate. Being indifferent to this potential market would either make the people engaging in illegal activities like tax evasion.

Jean-Paul raised the concern of the financial market observer, National Bank of Belgium, which criticized a recent event promoting cryptocurrency-related projects. He noted that the crypto market is overwhelmed with more than a thousand digital currencies with a total value of around $320 billion. This huge amount could mean a lot of problems for the Belgium economy because the central bank would be unable to keep the balance of the fiat-crypto ecosystem.

Lack of supervision of this blooming market could also lead to many fraudulent practices affecting investors negatively. He also reminded the growing number of Crypto ATMs budding worldwide, some of which are located in Belgium as well.

FMSA’s opinion in the resolution

Digital currency-based transactions are very secure and hence not traceable, making it difficult for government agencies to monitor the flow of such currencies. “Due to their non-traceability, virtual currencies popular in the context of cybercrime ain’t ubiquitous on the darknet, since they can become cybercrime committed without leaving traces,” says the resolution of FMSA.

The statement also includes the warnings of economists and some Nobel laureates amid crypto craze. It stated a royal decree issued in 2014 which prohibits any cryptocurrency-based professional products from offering to general investors. The resolution emphasized creating a legal framework for digital money and related items to help protect customer interest and prevent the use of such money for illegal purposes.

The current concept of cryptocurrencies in Belgium

The current regulatory framework governing financial instruments in Belgium is based on the Act of 21 November 2017 (the Act on Financial Instruments) and the Act of 25 October 2016 (the Act on Investment Services). These acts implement the second Markets in Financial Instruments Directive (MiFID II) that aims to protect the investor’s interest and deal with new and trending financial technologies.

MiFID II regulates certain types of organisations that offer investment services and projects relating to financial instruments. It is important for investors to realize if cryptocurrencies belong to financial instruments. Closed and unidirectional scheme digital currencies are not considered financial instruments and thus cannot be used for investment.

However, the concept is less clear for bidirectional scheme digital currencies because not all of those have the same attributes. If any such currency can be used as a means of payment, as a means of investment and for a utilitarian purpose, then it can be considered a financial instrument.

Currently, cryptocurrencies and utility tokens are not included in the list of financial instruments in the Act of Financial Instruments. Belgium government has been sceptical to cryptocurrencies and related products until now and it is difficult to guess whether any cryptocurrency regulation here would be restricting or flexible. However, there is no wrong to hope for the best.