Bitcoin and Ethereum are not securities, Belgium says
Financial regulators in Belgium have declared that bitcoin (BTC-USD) and ethereum (ETH-USD) should not be classified as securities.
The Financial Services and Markets Authority (FSMA) of Belgium released a document on Thursday stating that issuerless cryptocurrencies are not securities.
The regulator specifically identified bitcoin and ethereum as exempt from having to operate as securities within the EU country’s financial system.
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The document said: “If there is no issuer, as in cases where instruments are created by a computer code and this is not done in execution of an agreement between the issuer and the investor, for example bitcoin or ether, then in principle the Prospectus Ordinance, the Prospectus Act and MiFID – the rules do not apply.”
EU-based MiFID rules state that negotiable instruments with an issuer are likely to constitute a security.
Apart from bitcoin and ethereum, other cryptocurrencies will be designated as having a centralized issuer and will therefore have to produce an honest prospectus with information for potential investors and comply with the EU’s MiFID rule which requires financiers to avoid conflicts of interest.
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The exemption of ethereum from securities legislation by the Belgian regulator sets a precedent in the development of cryptocurrency regulatory frameworks worldwide.
In an unusual alliance, both bitcoin maximalists – those who favor only bitcoin and renounce all other cryptocurrencies – and US regulators argue that ethereum is a security.
They point to the presence of a centralized body, called the Ethereum Foundation, and that issuance can be controlled via updates to the underlying code.
However, the Ethereum Foundation states on its website that it is a non-profit organization with a goal of supporting Ethereum and related technologies.
The website states: “The Ethereum Foundation is not a corporation or even a traditional non-profit. Their role is not to control or direct Ethereum, nor are they the only organization funding critical development of Ethereum-related technologies.”
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Some argue that Ethereum is a security because it has a recognizable co-founder, Vitalik Buterin, and holders of the cryptocurrency can stake their assets and generate returns.
US Securities and Exchange Commission (SEC) chief Gary Gensler has said on several occasions that if you can generate stakes with a crypto-asset, that makes it a security.
Ethereum can be staked under the cryptocurrency’s new proof of stake validation method and stakers are rewarded with ether.
In contrast, Gensler points to bitcoin’s unique characteristic as a decentralized digital asset without a specific founder, developer team or founding body.
Created by the pseudonymous Satoshi Nakomoto in 2011, Bitcoin has no centralized issuing body, nor does it have a marketing team or joint venture to profit from capital movements from institutional and private investors.
The move comes as the SEC grapples with how to classify digital assets in the US.
The SEC is currently locked in a lawsuit with the organization that issues the cryptocurrency Ripple (XRP-USD).
In the SEC vs Ripple case, the defense team argues that Ripple believed XRP, along with bitcoin and ether, are not securities
On Monday, bitcoin was down 0.5% over the past week at $16,209, while ether was up 2.4% at $1,171.
