The key legal developments in Belgium in recent months and for future months relate to the upcoming application of the Markets in Crypto-Assets Regulation (MiCAR).

MiCAR was approved by the European Parliament in a plenary session on 20 April 2023. In that same plenary session, the European Parliament approved a recast of the Transfer of Funds Regulation (Regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets (recast)), which will include transfers of crypto-assets in its scope of application. The text aims to ensure that crypto-transfers can always be traced and suspicious transactions blocked, as is the case with any other financial operation.

The so-called travel rule, already used in traditional finance, will in future cover transfers of crypto-assets. Information on the source of the asset and its beneficiary will have to “travel” with the transaction and be stored on both sides of the transfer. Both texts (MiCAR and the Transfer of Funds Regulation (recast)) were published in the EU Official Journal on 9 June 2023. The texts entered into force on 30 June 2023 and will generally apply from 30 December 2024. Titles III and IV of MiCAR, pertaining to asset-referenced tokens and e-money tokens, respectively, will apply from 30 June 2024. For more information, please see here.

MiCAR grants the European Securities and Markets Authority (ESMA, the EU’s financial regulatory body) the authority to develop technical standards and guidelines clarifying certain provisions within MiCAR. Specifically, by 30 December 2024, ESMA is mandated to issue:

• guidelines for crypto-asset classification – these will establish criteria for determining whether a crypto-asset qualifies as a financial instrument under existing regulations; and
• guidelines for reverse solicitation – these will define the circumstances under which a company based outside the EU is deemed to be soliciting clients within the EU, thus subjecting them to MiCAR regulations.

To ensure comprehensive stakeholder engagement and to gather feedback on the appropriate implementation of MiCAR, ESMA released draft guidelines for public consultation on 29 January 2024. Concurrently, ESMA published additional Q&As pertaining to the application of the grandfathering provisions within MiCAR. These actions underscore ESMA’s proactive approach to preparing for the imminent implementation of MiCAR and its subsequent impact on businesses operating within the crypto-assets sector. For more information, please see here.

Belgium’s blockchain landscape is evolving rapidly, with a focus on collaboration, innovation and sustainable growth.

Some examples of noteworthy Belgian blockchain businesses are as follows.

Keyrock is one of Belgium’s most successful blockchain start-ups. It is a technology-driven digital asset market maker, active in over 85 trading venues worldwide. With its proprietary algorithmic technologies, Keyrock provides scalable, adaptable liquidity solutions for marketplaces and asset issuers. Founded in 2017, it currently has offices in Belgium and the UK, and over 100 team members across the world.

SettleMint is another successful blockchain start-up. It is a platform-as-a-service company with a scalable, low-code, infrastructure-agnostic solution that allows enterprise developers to quickly create and deploy blockchain-based applications. In 2019, the company developed a securities trading proof of concept for Standard Chartered. In January 2020, the company raised EUR1.9 million from KPN Ventures, with US investor Medici Ventures also participating in the round.

NGRAVE is yet another promising Belgian start-up. It offers the first complete solution for self-custody, consisting of a connectionless and highest security-certified (EAL7) hardware wallet, ZERO, and an encrypted and recoverable key backup, GRAPHENE. Binance Labs, the venture capital arm and accelerator of Binance, made a strategic investment in the company in November 2022.

Belgium-based investment firm NXMH is reported to have owned an 80% equity stake in cryptocurrency exchange Bitstamp since 2018. NXMH is a pan-European investment firm with EUR3 billion of assets under management.

Prior to any attempt at determining who owns what, the applicable law (ie, which jurisdiction’s laws apply) should be verified in accordance with the rules of private international law. In what follows, it is assumed that Belgian law applies. The default rules of civil law and civil procedure law apply to questions of ownership of crypto-assets. No specific rules have been created for dealing with ownership transfers by means of a blockchain network.

Consensual Ownership Transfer

Under Belgian law, a consensual ownership transfer system applies for transactions involving the sale and purchase of movable things. The category of “movable things” also comprises intangible things (unless, of course, these intangible things are considered “immovable”). Crypto-assets are considered intangible movable things, and so the consensual ownership transfer system applies to the sale and purchase of crypto-assets. This means that the ownership of crypto-assets transfers from the seller to the purchaser as soon as the parties agree on the crypto-assets that are to form the object of the transaction and the price at which the ownership of the crypto-assets is to transfer, unless the parties expressly agree in a contract that the ownership will transfer at a later time (eg, as soon as the transaction has received six confirmations).

If the crypto-assets are fungible – eg, where the crypto-assets are bitcoins (without reference to specific unspent transaction outputs) – these conditions are only fulfilled as soon as the exact crypto-assets that are to form the object of the transaction can be identified. In other words, if a seller who owns 100 bitcoins agrees to sell ten bitcoins, the ownership of the actual bitcoins will only transfer as soon as the transaction is included in the blockchain (unless parties agree to postpone the ownership transfer). If, on the other hand, a seller who owns ten bitcoins agrees to sell “all ten bitcoins [they] currently own”, it is clear from the outset that the object of the transaction is the ten bitcoins credited to the public key(s) of which the seller knows the associated private key(s). Therefore, in the latter case, ownership of the ten bitcoins transfers as soon as the seller and the purchaser settle on a purchase price.

Evidence

It is one thing to have a consensual ownership transfer system, but it is another thing to be able to prove that you are the owner of certain crypto-assets in a court of law. Therefore, due regard should be had for the law of evidence. Different rules apply depending on whether a sale of crypto-assets is concluded between enterprises, between an enterprise and a non-professional individual, or between non-professional individuals. An example of an important rule of evidence is that if one wants to prove that a sale of crypto-assets for a value of EUR3,500 or more took place, and where the adversary is a non-professional individual, one can only do so by submitting a copy of a signed sale and purchase agreement. This rule does not apply if the adversary is an enterprise (eg, a professional investor).

Other rules also apply if the transaction is not a sale and purchase but is, for instance, a loan or a custody agreement. In any case, the (non-)fungibility of the crypto-assets will be a major parameter in determining ownership.

If the crypto-assets at stake represent nominative shares in a Belgian company that has the legal form of a besloten vennootschap (BV), coöperatieve vennootschap (CV) or naamloze vennootschap (NV), a rebuttable presumption applies that the person registered in the share register is the owner of the shares.

Crypto-Exchanges

Crypto-assets are very often held through intermediaries, such as exchanges. In that case, the exchange or a third-party service provider holds the private key associated with the public key to which the crypto-assets are credited. Two approaches can be taken in such case.

• The party who holds the private key is considered the owner, and the investor has merely a personal right (ius ad rem) to delivery of the crypto-assets. This would mean that, if the holder of the private key goes into administration, the investor will very likely lose all or almost all their crypto-assets.
• The other approach would be to consider the holder of the private key as the mere possessor of the crypto-assets and to consider the investor as the owner.

The latter solution would offer the investor considerably more protection against insolvency risk. If the holder of the private key goes into administration, the investor can then simply recover its crypto-assets by means of a rei vindicatio. To date, Belgian courts have not been able to rule on this issue.

MiCAR

MiCAR imposes segregation requirements on crypto-asset service providers that hold crypto-assets belonging to clients or the means of access to such crypto-assets, to prevent providers from commingling clients’ crypto-assets with their own holdings. This indicates a significant improvement for the legal position of users of custody services.

The bottom line is that determining the ownership of crypto-assets is a multifaceted endeavour that wholly depends on the features of the crypto-assets at hand. It is advisable to mitigate the considerable legal uncertainty that remains around this issue by drafting watertight contracts.

Under MiCAR, the relevant categories of regulated crypto-assets are as follows:

• “electronic money token” or “e-money token”, meaning a type of crypto-asset that purports to maintain a stable value by reference to the value of an official currency of a country;
• “asset-referenced token”, meaning a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by reference to any other value or right, or a combination thereof, including one or several official currencies of a country;
• the residual category of crypto-assets (ie, digital representations of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology) that are not e-money tokens or asset-referenced tokens; and
• “utility token” (which is a subcategory of the residual category), meaning a type of crypto-asset that is only intended to provide access to a good or a service supplied by the issuer of that token.

To each of these categories, a distinct rule set will apply.

Pending the application of MiCAR, the guidelines set out by the Belgian Financial Services and Markets Authority (FSMA) in its Crypto-Assets Classification Communication are relevant. In this Communication, the FSMA clarifies the various steps that may help with the classification of crypto-assets, and briefly addresses the consequences of that classification. A stepwise plan is provided in the annex to the Communication to help the reader with the classification. For more information, please see here.

Parties seeking to issue or market crypto-assets in Belgium are highly advised to first discuss the possible regulatory qualifications of the crypto-assets with the FSMA before taking any action.

Year 2022 saw the adoption of Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 “on a pilot regime for market infrastructures based on distributed ledger technology, and amending Regulations (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU” (the “DLT Pilot Regime Regulation”). It applies from 23 March 2023.

By establishing a temporary common EU pilot regime for financial services based on distributed ledger technology (DLT), the regulation aims to remove regulatory barriers to the issuing, trading and settlement of crypto-assets that are financial instruments, and to help regulators gain experience in the use of DLT. It covers:

• the granting, withdrawal and modification of permission – including exemptions and compensatory or corrective measures – to operate DLT market infrastructure;
• the operation and supervision of DLT market infrastructure; and
• the co-operation between DLT market infrastructure operators, national authorities and ESMA.

For market participants that satisfy the conditions and receive authorisation from the competent authority, the DLT pilot regime offers certain temporary exemptions from regulatory requirements that would normally apply to traditional market infrastructures, subject to compliance with specific requirements for each type of exemption. More information on the DLT pilot regime can be found here.

Digital assets directly or indirectly pegged to another digital asset have a large likelihood of falling within the ambit of the Marketing Prohibition Regulation (discussed in 4.1.1 Regulatory Overview). If so, the professional marketing of these assets in Belgium to one or more retail clients is prohibited. Clarification in this respect should be sought with the FSMA prior to entering the Belgian market.

There are no Belgian laws or regulations that are specifically designed to apply to the creation, marketing or sale of non-fungible tokens (NFTs). It is likely that digital assets not captured by the residual category of crypto-assets under MiCAR are not subject to specific regulation under Belgian law either. Nevertheless, legal advice should be sought to determine the laws and regulations that apply to a specific digital asset.

Provided vendors agree, cryptocurrencies can be used for payment of transactions up to an equivalent of EUR3,000. Amounts exceeding EUR3,000 must be paid using scriptural money. The price of acquired real estate must always be fully paid in scriptural money.

Most digital assets do not fall within the scope of the Financial Collateral Directive, which creates legal uncertainty as to the legal instruments that do apply. Under Belgian law, a security right on digital assets can be created in the form of a register pledge (registerpand) under the Belgian Pledge Act.

Self-executing contracts, or “smart contracts”, are in principle permitted under Belgian law. No specific legal framework has been established for this phenomenon. Therefore, common contract law applies. In Belgium, contracts can generally be concluded without formal requirements, subject to certain statutory exceptions (eg, consumer credit contracts). Thus, the computer code making up a smart contract can, in principle, constitute a valid contract, provided the validity requirements under Belgian contract law are met.

Please see 4.1.1 Regulatory Overview.

Although no regulatory sandbox is in place other than the previously mentioned DLT pilot regime (discussed in 2.3 Tokenised Securities), Belgium can be seen as a fintech-friendly jurisdiction.

For new business models in the fintech realm, the FSMA launched a FinTech Contact Point in June 2016. This contact point is designed as a portal through which fintech entrepreneurs can contact the financial markets supervisor. This allows entrepreneurs to familiarise themselves with financial legislation and to ask any questions they may have. It also enables the FSMA to closely monitor fintech developments in Belgium.

In April 2017, the portal launched by the FSMA evolved into a joint portal of the FSMA and the NBB. Fintech players, who are not necessarily aware of the Twin Peaks supervision model in Belgium, thus have a single point of contact; they do not need to find out in advance to which supervisor they must put their questions. Questions lodged with the fintech portal are managed jointly by the FSMA and NBB teams. Since the launch of the fintech portal in 2016, well over 100 fintech entrepreneurs have reached out to the supervisory authorities. Their questions have covered a wide range of topics, such as crypto-assets, robo-advice and crowdfunding.

The FinTech Contact Point will continue to be helpful in guiding start-ups and established firms through the complex regulatory framework and the licensing process. Both the FSMA and the NBB tend to be approachable and supportive of new fintech business models.

So far, Belgium has not purposefully implemented standards applicable to the blockchain sector proposed by international bodies such as the Financial Action Task Force (FATF) or the Bank for International Settlements (BIS), other than to the extent that such standards are already reflected in EU legislation implemented in Belgian law.

In December 2022, the Basel Committee on Banking Supervision (BCBS) finalised a standard on the prudential treatment of banks’ crypto-asset exposures. From an EU perspective, the BCBS standard complements the forthcoming regulation of the crypto-asset sector through MiCAR. The members of the Group of Central Bank Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, agreed to implement the standard by 1 January 2025, and tasked the BCBS with monitoring the implementation and effects of the standard.

Financial supervision in Belgium is based on a Twin Peaks model, according to which there are two autonomous supervising bodies: the NBB and the FSMA. The NBB is responsible for the prudential supervision of individual financial institutions at both macro and micro levels, while the FSMA is responsible for the monitoring of the proper functioning, transparency and integrity of the financial markets as well as for the supervision of unlawful offerings of products and financial services. Furthermore, Belgian banks are fully or partially subject to the supervision of the European Central Bank.

There are no self-regulatory organisations or trade groups that perform regulatory or quasi-regulatory roles with respect to businesses or individuals using blockchain in Belgium.

Various task forces and supporting initiatives have been set up in Belgium, such as the following.

Blockchain4Belgium

Blockchain4Belgium aims to position Belgium in the European and global Web3 and blockchain landscape. Its focus areas include:

• strengthening Belgium’s attractiveness and fundraising methods;
• elaborating country benchmarking;
• stimulating the creation of a vibrant blockchain ecosystem;
• demystifying blockchain technology through education and communication;
• evolving legal aspects related to blockchain;
• promoting the use of Web3, blockchain and digital asset technologies in the economy;
• clarifying the tax regime;
• defining government use cases;
• attracting blockchain talent;
• exploring mechanisms similar to Estonia’s start-up visa or France’s tech passport;
• attracting foreign investments; and
• promoting success stories internationally.

It also seeks international funding from the European Commission and foundations, while learning from inspiring experiences and best practices abroad, especially in the United Kingdom and leading EU countries.

EBSI4BE (European Blockchain Services Infrastructure for Belgium)

EBSI4BE serves as a hub for the Belgian public sector to share ideas, know-how and solutions related to the European Blockchain Services Infrastructure (EBSI) and blockchain technology in public services. Supported by KU Leuven, SMALS, BELNET and BOSA, its areas of focus include:

• government data;
• AI and blockchain;
• certification;
• self-sovereign identity;
• energy;
• environment;
• climate; and
• the administration’s infrastructure.

Public Sector Blockchain

During Belgium’s EU Presidency, the focus has been on developing a transnational blockchain infrastructure for the storage and management of official documents within the public sector. The Minister for Digitisation, Mathieu Michel, emphasises digital sovereignty, innovation, job creation and talent retention through blockchain technology.

In addition, the Belgian Association of Digital Technology Leaders (Beltug), a private organisation, established a “Blockchain Task Force” in September 2018, which recently changed its name to “Beltug Digital Innovation Task Force”.

On 26 February 2020, the case of Bitspread v Paymium resulted in an important decision by the Commercial Court of Nanterre, France. This decision is also relevant from a Belgian law perspective, given the common origin of Belgian and French civil law.

Firstly, the Nanterre court implicitly held that Bitcoin was susceptible to ownership. Secondly, the court ruled that, upon borrowing bitcoins, a borrower acquires full ownership of the bitcoins. This implies that the borrower is entitled to the fruits of the bitcoins. In the case at hand, this meant that the borrower (Bitspread), and not the lender (Paymium), was entitled to receive Bitcoin Cash resulting from the Bitcoin blockchain’s first hard fork.

In a decision dated 23 June 2023, the FSMA ordered Binance to immediately cease offering virtual currency services in Belgium. This decision was made owing to Binance providing exchange and custody wallet services in Belgium from non-EEA countries, which is in violation of Belgian law. Non-compliance with this prohibition may result in criminal sanctions under the AML Act. The Crown Prosecutor of Brussels has been informed of the acts that are liable to constitute a criminal offence in the case at hand. In addition to the order to cease their activities in Belgium immediately, the FSMA has demanded that Binance return or securely transfer all cryptographic keys and virtual currencies held for Belgian clients to authorised entities within the EEA.

Corporate Income Tax

In a ruling dated 8 May 2018, the Office for Advance Tax Rulings confirmed that all gains from investments in cryptocurrencies and ICOs made by Belgian companies are taxable and all losses are tax-deductible.

Personal Income Tax

The income tax treatment of investments in cryptocurrencies by individuals is subject to general tax rules, and depends on the relevant facts and circumstances.

A capital gain realised within the framework of one’s professional activity will be taxed as professional income at progressive rates ranging between 25% and 50% plus local charges. If the cryptocurrencies are held as private assets, the capital gains will be exempt from individual income tax if the transaction qualifies as a normal act of management. This has been confirmed by the Office for Advance Tax Rulings in several recent rulings. If the transaction does not qualify as a normal act of management, the capital gains will be taxable as miscellaneous income at a rate of 33% plus local charges. The qualification of a transaction as a normal act of management is highly fact-driven, which renders this the most significant tax uncertainty in Belgium in this context.

Legal certainty on the applicable tax treatment can be obtained by filing a ruling request with the Office for Advance Tax Rulings. This Office has published a list of questions that should allow both the taxpayer and the tax authorities to determine the appropriate tax treatment.

VAT

In the Hedqvist case (Skatteverket v David Hedqvist, C-264/14, dated 22 October 2015), the European Court of Justice ruled that the sale of non-traditional currencies falls under the same VAT exemption as transactions relating to traditional currencies. The Belgian VAT administration has included that decision in its administrative commentary without noteworthy remark.

For the qualification of mining services for VAT purposes, the administrative commentary makes a distinction regarding whether or not the identity of the purchaser is known by the service provider (miner). If mining services are provided to a purchaser whose identity is unknown to the miner, such service is considered an activity that falls outside the scope of VAT. Hence – to the extent that the miner does not provide other services – the miner will not be considered a taxable person for VAT purposes. If, on the other hand, mining services are provided against a contractually agreed consideration to a purchaser whose identity is known by the miner, the services are subject to VAT to the extent that the miner is considered a taxable person for VAT purposes.

Taxable persons with a mixed activity (ie, carrying out VAT-taxable and VAT-exempt activities resulting in a limited right to deduct input VAT) can calculate the amount of VAT to be deducted using the general pro rata regime or the “real use” method. As of 2023, the application of the “real use” method requires a submission of a “prior notification” to the competent VAT administration, no later than at the end of the first tax return period of the current calendar year.

The compatibility of digital assets with environmental, social and governance (ESG) factors raises concerns. One primary concern is the energy consumption associated with certain digital assets. To mitigate this, solutions such as utilising renewable energy sources for mining operations and transitioning to more energy-efficient consensus mechanisms are being explored. While these solutions hold promise, geographical disparities in renewable energy adoption and the complexities of transitioning to new technologies present ongoing challenges.

Beyond environmental considerations, digital assets raise questions related to social impact and governance structures. While they have the potential to enhance financial inclusion and positively affect developing economies, they also present risks such as fraud and human rights violations due to their exploitation by malicious actors. Furthermore, the decentralised governance models inherent to many digital assets – which empower community ownership and participation in decision-making – clash with traditional financial and legal systems, creating hurdles for integration and regulation.

Problems

In a report of October 2018, the EU Blockchain Observatory and Forum (the “Observatory”) stated that “there is no contradiction in principle between the goals of the GDPR and those of blockchain technology” due to the technologically neutral manner in which the GDPR was drafted.

However, the Observatory added that, depending on the organisation of the network, difficulties could arise in relation to (for example):

• data minimisation and the rights to erasure and rectification (in particular due to data immutability);
• accountability (difficulties in determining the role of each person or entity involved); and
• international data transfers (due to the global nature of blockchain networks).

This finding was also confirmed by a study of the European Parliamentary Research Service entitled “Blockchain and the General Data Protection Regulation: Can distributed ledgers be squared with European data protection law?” (written by Dr Michèle Finck and published in July 2019). The study concluded that:

• there are many considerable points of tension between the GDPR and blockchain technology;
• considerable legal uncertainty exists as to how the GDPR should be applied in a decentralised context; and
• it is impossible to state that blockchains are, as a whole, either completely compliant or incompliant with the GDPR, and ultimately each concrete use case needs to be carefully examined on a case-by-case basis.

Solutions

While blockchain technology may seem difficult to reconcile with GDPR principles such as the right to erasure (Article 17, GDPR) and data protection by design and by default (Article 25, GDPR), researchers have been coming up with solutions. For an overview in a permitted setting, see here. A simple example would be to store personal data off-chain and store the hashes to encrypt this personal data in the blockchain layer. If a data subject were to exercise their right to erasure under Article 17 of the GDPR, the service provider could erase the “linkability” of the blockchain hash to the personal data located in distributed off-chain servers.

A recent proposal by Wangjing Jia, Tao Xie & Baolai Wang uses zero-knowledge proofs (zk-SNARKs) and attribute-based encryption (ABE). Firstly, by leveraging zk-SNARKs, this scheme achieves blockchain privacy preservation within an account model, enabling the concealment of user transaction addresses and values. Secondly, by employing ABE, a multi-level regulatory model is developed alongside the privacy protection measures, allowing for selective disclosure of transaction content. See here.