Belgium takes a new step in regulating cryptocurrencies
1. In short
The Belgian legislator has very recently approved new legislation that marks a new step in the regulation of cryptocurrencies. It concerns, on the one hand, the Law of 1 February 2022 amending the Law of 18 September 2017 which entered into force on 21 February 2022 (the “AML Act”) and, on the other hand, the Royal Decree of 8 February 2022 which will enter into force on 1 May 2022 (the “Royal Decree”). The main features of the new legislation can be summarized as follows:
1. A further extension of the scope of the anti-money laundering Law to all ATMs located on Belgian territory;
2. A prohibition for non-EEA persons to provide crypto services on the Belgian territory;
3. A legal framework that defines the conditions that cryptocurrency service providers must meet (the registration requirement).
This article addresses the 3 different features of aforementioned legislation.
2. Expanding the scope of the anti-money laundering law
On 19 June 2018, the Fifth European Anti-Money Laundering Directive appeared in the European Official Journal. This directive extended the personal scope of the legislation to providers of services related to exchange transactions between virtual and fiduciary currencies and providers of crypto wallets, hereafter referred to as “crypto service providers”. The fifth Anti-Money Laundering Directive was transposed into the Belgian anti-money laundering Law through the Act of 20 July 2020 containing various provisions to prevent money laundering and the financing of terrorism and to restrict the use of cash.
The Belgian anti-money laundering Law stipulates, since the implementation of the aforementioned directive, that crypto service providers are required to register with the supervisory authority, the FSMA, before they can offer their services on Belgian territory. The problem here is that, in accordance with the territorial scope of the anti-money laundering Law, only those providers established in Belgium are subject to the law. The providers of crypto services that do not have a branch office, nor a permanent establishment in Belgium escape from the registration obligation and the control of the FSMA. De facto, this means that many actors in the crypto sector escape the registration obligation, including, for example, providers using so-called “ATMs” (Automated Teller Machines).
Indeed, according to the case law of the Court of Justice of the European Union, ATMs are not necessarily considered to be a permanent establishment. Such ATMs therefore only fall under the FSMA’s supervisory authority if they are operated by a person or company governed by Belgian law or by the law of another EU member state, which has a permanent establishment in Belgium. In other words, foreign providers operating these ATMs are not subject to any control in Belgium.
The solution provided by the AML Act is to equate ATMs to a permanent establishment. As a result, crypto service providers who offer their services through an ATM located on Belgian territory will also be deemed to be established in Belgium and therefore be required to register with the FSMA.
3. Prohibition of crypto service providers from third countries
The second major innovation is that providers of crypto services governed by the law of a third country will be prohibited from offering such services as a professional activity. Third countries are defined in the anti-money laundering Law as any state that is not a member of the EEA. Again, the reasoning here is that providers of such services would not be subject to Belgian law if they are not physically established in Belgium. In other words, providers of crypto services from third countries may not offer their services here because Belgium cannot control them.
Such a ban is obviously very far-reaching. However, the Belgian legislator justifies its decision by stating that this ban has also been introduced in Dutch legislation and that the same ban is also being considered at the European level in the planned Markets in Crypto Assets (“MiCa”) regulation, which will introduce an overall European framework for the regulation of cryptocurrencies. So we could say that the Belgian law is proactive, even though the “MiCa” regulation has not yet been formally adopted.
4. The registration requirement
Already discussed above was the obligation for crypto service providers based in Belgian territory to register with the FSMA.
In order to register with the FSMA as a provider of crypto services (and consequently to be able to offer their services on Belgian territory), providers will have to comply with strict conditions. These include the requirement of using specific corporate forms, minimum capital requirements, fit & proper criteria for the management and certain shareholders of the crypto service providers, appropriate governance structures, etc. The FSMA has supervisory power over registred providers.
As already mentioned, the Royal Decree will enter into force on 1 May 2022. Providers of crypto services that already offer their services in Belgium and have a physical establishment on the Belgian territory before 1 May 2022, may continue to offer their services if:
· they notify their activity to the FSMA before 1 July 2022, and
· they submit a full registration file to the FSMA by 1 September 2022.
5. Criminal Sanctions
Finally, it is important to note that the AML Act introduces new criminal penalties into the anti-money laundering law.
If a crypto service provider subject to registration offers services without being registered with the FSMA, this provider risks a prison sentence of one month to one year and/or a fine of EUR 400 to EUR 80,000. An identical criminal sanction is provided for providers governed by the law of a third country who violate the prohibition on providing their services on Belgian territory.
The goal of crypto currency regulation is to protect the user of crypto services as best as possible. We can say that the legislative intervention that we discussed contributes to this objective. From now on, crypto service providers will only be able to offer their services on Belgian territory if they meet the conditions for registration with the FSMA. Moreover, once they are registered with the FSMA, they will be subject to strict supervision. Providers governed by the law of a non-EEA country are no longer permitted to offer their services on Belgian territory.
Crypto service providers will therefore have to assess whether they can continue to offer services in Belgium and, where applicable, prepare for registration with the FSMA.
For more information on this subject, you can always reach out to one of our lawyers of the corporate practice group.
 Law of 1 February 2022, amending the Law of September 18, 2017, on the prevention of money laundering and the financing of terrorism and on restricting the use of cash to introduce provisions around the status and supervision of providers of virtual currency and fiduciary currency exchange services and providers of custodial wallets, Official Gazette February 11, 2022, 9.941.
 RD of 8 February 2022 on the status and supervision of providers of virtual currency and fiduciary exchange services and providers of custodial wallets, Official Gazette February 23, 2022, 16.166.
 Act of 18 September 2017 on the prevention of money laundering and terrorist financing and limiting the use of cash, Official Gazette October 6, 2017, 90.839.
 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU.
 Proposal (Comm.) for a Regulation of the European Parliament and of the Council on crypto asset markets and amending Directive (EU) 2019/1937, 24 September 2020, COM(2020) 593 final 2020/0265 (COD) (https://eur-lex.europa.eu/resource.html?uri=cellar:f69f89bb-fe54-11ea-b44f-01aa75ed71a1.0007.02/DOC_1&format=PDF )
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