The new regulatory regime can be found in the Act of 1 February 2022 amending the Act of 18 September 2017 on the prevention of money laundering and financing of terrorism and restricting the use of cash (the “AML Act”) and in two implementing royal decrees, the Royal Decree of 8 February 2022 on the status and supervision of providers of exchange services of virtual currency and fiat currency and custodian wallets providers (the “Virtual Currency Royal Decree”) and the Royal Decree of 5 March 2022 on the reimbursement of the FSMA's operating expenses with respect to the supervision of providers of virtual currency exchange services and fiduciary currency exchange services and providers of custody accounts. It results from the implementation in Belgium of the 5th AML Directive which imposes that virtual currency service providers are required to register with the FSMA for AML purposes.
As from 1 May 2022, these virtual currency service providers active in Belgium become subject to the requirements set out by the AML Act and must be registered with the Financial Services and Markets Authority (the “FSMA”), which will monitor compliance with legal professional reliability and competence requirements and supervise compliance with the AML Act. The Virtual Currency Royal Decree imposes a ban on non-EEA service providers which cannot offer Virtual Currency Services in Belgium anymore as of 1 May 2022.
Please consult our Q&As below for practical insight on the new regulatory regime, in particular if you question whether the activities of your company fall within the scope of application of the Virtual Currency Royal Decree, if you are a service provider from a non-EEA Member State that must reorganize the way it provides virtual currency services in Belgium or if you contemplate to apply for the status of Virtual Currency Service Provider.
You may also consult the Q&A published on the website of the FSMA.
The new Belgian regulatory regime applies to two different categories of Virtual Currency Service Providers:
- the Crypto Exchange Service Providers, i.e. providers of exchange services of virtual currency and fiat currency, i.e. service providers whose activities consist of purchase and sale transactions, with own fund, whereby virtual currency is exchanged for fiat currency, or fiat currency is exchanged for virtual currency; and
- the Custodian Wallet Providers, i.e. providers of services to secure cryptographic private keys on behalf of clients to hold, store and transfer virtual currency.
The Virtual Currency Royal Decree introduces a definition of virtual currency in Belgian regulation: “it is a digital representation of value that is not issued or guaranteed by a central bank or government, is not necessarily linked to a legally determined currency and does not have the legal status of currency or money, but which is accepted by natural or legal persons as a means of exchange and can be electronically transmitted, stored and traded”. The material scope of application of the Virtual Currency Royal Decree is therefore restricted to virtual currency. Virtual assets that do not have a function as "means of exchange" or "payment" are not regulated by the Virtual Currency Royal Decree.
The Virtual Currency Services as defined above which comprise both the Crypto Exchange Services and the Custodian Wallet Services are regulated if these are offered i) as a regular professional activity, even if it is an additional or complementary activity, and ii) for a remuneration, regardless of whether it is paid directly or indirectly, by the recipient of the services.
The definition of Crypto Exchange Service Provider is in line with the definition set out in the proposal for a Regulation on crypto-asset markets ("MiCA"). The service provider must act as a counterparty to the purchase or sale transaction and do so with its own fund.
The following services do not fall in the scope of the Virtual Currency Royal Decree:
- The brokerage services performed by a servicer that only orients a client towards a multilateral trading platform for virtual currencies where the client can carry-out its transactions or put him in contact with a third-party counterparty does not perform regulated crypto exchange services;
- The providers of crypto-to-crypto conversion services;
- The issue of virtual assets; or
- The multilateral exchange platforms of virtual assets.
It is however important to note that Automated Teller Machines (ATMs), with which virtual currencies can be converted into fiduciary currencies and vice versa, are targeted by the Virtual Currency Royal Decree. In this regard, it is clarified that not necessarily the operators of places where ATMs are installed should register with the FSMA, but rather the persons who manage such installations and are responsible for the services provided using those installations.
The Virtual Currency Royal Decree applies to Virtual Currency Service Providers offering Virtual Currency Services on the Belgian territory and having an establishment in Belgium or another type of physical presence in Belgium. This is in line with the principle of territorial application uphold in the AML Act.
Apart from a branch in Belgium, a permanent establishment within the meaning of the case law of the Court of Justice of the European Union (e.g. an agent or a distributor) may be sufficient. Currency Exchange Service Providers and Custodian Wallet Providers, governed by the law of another EEA Member State, who have set up electronic infrastructures in Belgium, such as but not exclusively ATMs through which they offer the possibility to exchange fiat currency against crypto currency and vice-versa, shall also be deemed to be established in Belgium.
The offering on the Belgian territory of Virtual Currency Services is a regulated activity that can only be performed by Virtual Currency Service Providers registered with the FSMA.
Registration as a Virtual Currency Service Provider is opened to:
- Legal entities under Belgian law having the form of a public limited liability company, a cooperative company, a European company or a European cooperative company; and
- Legal entities incorporated under the law of another EEA Member State with an establishment in Belgium, i.e. a branch or another form of permanent establishment within the meaning of the case law of the Court of Justice of the European Union (e.g. an agent or a distributor).
Individuals and legal entities governed by the law of a non-EEA country are therefore prohibited from offering or providing any Virtual Currency Services in Belgium even if their activities of exchange of virtual currency and fiat currency or their activities as custodian of virtual wallets even if these services are additional or complementary to other activities they offer validly on the Belgian territory. The ban regarding third country service providers was introduced in the AML Act by the Act of 1 February 2022 and entered into force on 21 February 2022. The ban imposed by the Virtual Currency Royal Decree is in line with the draft of the MiCA proposal which requires that a legal entity be established in one of the EEA Member States of the EEA.
In order to be registered with the FSMA and to maintain such registration, the Virtual Currency Service Providers must comply at all times with the following conditions:
- The central administration and the registered office of a Virtual Currency Service Provider governed by Belgian law, must remain located in Belgium. This means that service providers governed by the law of other EEA Member States who pursue their activity as a virtual currency service provider in Belgium in the framework of the freedom of establishment, except for the provider whose only establishment in Belgium is an installed electronic infrastructure (ATM), shall have their central administration in Belgium for the operations they carry out on Belgian territory. The central administration is the place where the company is managed, where the decisions for the management of the company are taken, and where the documents are kept at the disposal of the FSMA.
- Virtual Currency Service Providers established under the law of another EEA Member State who are established in Belgium other than through a branch (e.g. through an agent, a distributor or an ATM) shall designate a central contact point established in Belgium. The contact point will be the person representing the service provider in Belgium, who will be responsible on behalf of the latter for compliance with the anti-money laundering legislation and for facilitating the supervision by the FSMA, in particular by providing upon request all documents or information necessary for the exercise of the FSMA’s duties and supervisory powers in accordance with article 99 of the AML Act.
- Virtual Currency Service Providers must have a minimum capital of EUR 50,000, which must be fully paid up.
- The persons in charge of the effective management of the Virtual Currency Service Provider must be natural persons. The natural persons who are tasked with the senior management, or responsible for an independent control function may not be punished for financial crimes referred to in article 20 of the Act on the legal status and supervision of credit institutions. The persons in charge must have the appropriate expertise and required professional reliability to perform their duties. The purpose of the condition of professional reliability is to ascertain whether a person possesses the required qualities, in ethical terms, to carry out the regulated functions in question. This is not limited to the absence of a criminal conviction. It is for the FSMA to assess compliance.
- The shareholders holding at least 5% in the applicant and the persons exercising control over the service provider must demonstrate their suitability in view of the need for a sound and prudent policy. It is for the FSMA to assess compliance with this condition. Please note that where the laws, regulations or administrative provisions of a non-EEA Member State governing one or more natural persons or legal entities exercising control over the service provider, or difficulties involved in the application of those laws, regulations, or administrative provisions, prevent the proper performance of its supervisory duties, the FSMA shall refuse application of registration in the register.
- The applicant must also comply with the professional reliability requirements detailed in our answer to question 5.
A Virtual Currency Service Provider must comply with the AML Act and with all its implementing decrees and regulations.
The Virtual Currency Royal Decree therefore imposes an organisation that enables the Virtual Currency Service Provider:
- to permanently comply with its legal and regulatory obligations, which requires an independent audit function to test the required policies, procedures and internal control measures as well as procedures for verifying that its staff members demonstrate adequate reliability, taking into account the risks associated with the activities to be performed, and
- to manage all its operational risks, which requires, in particular, a resilient and secure IT system.
The Virtual Currency Service Provider must continue to meet at all time the registration conditions listed in our answer to question 4.
The following conditions must also be met by the virtual currency service provider:
- It may not invoke its provisional registration with or approval by the FSMA, or mention the FSMA in order to promote its services to clients or potential clients.
- It must notify the FSMA in advance of any change in the company's shareholding which gives other holders voting or non-voting interests of at least 5 % in the service provider, thereby changing the amounts of those interests or the identity of persons exercising control over the service provider.
- It must also notify the FSMA in advance of any proposal for the appointment of the persons in charge of the effective management and of any renewal or non-renewal of their appointment, their removal or their resignation. The FSMA will assess whether the persons nominated possess the professional reliability and appropriate expertise required to perform their duties.
Regulated companies that are already subject to similar rules as part of their regulated status do not have to fulfil the second and third condition.
Belgian regulated financial institutions such as credit institutions, payment institutions, investment firms, etc. and financial institutions regulated in other EEA Member States that wish to provide or offer Virtual Currency Services in Belgium in addition to their core services are subject to all the registration conditions detailed in our answer to question 4. It may be that the relevant entities are subject to equivalent legal requirements as a result of their regulated status and in such a case the requirements imposed by the Virtual Currency Royal decree will not be applicable (such as minimum capital requirements, expertise and professional reliability of senior managers, and suitability of shareholders). The requirement to comply with the AML Act and to implement an independent audit function will always apply.
The FSMA will ask the opinion of the National Bank of Belgium (NBB) on the registration of regulated financial institutions under the NBB’s supervision (credit institutions, payment institutions, etc.) and of the prudential supervisory authority of the entity in the EEA Member State concerned when deciding on applications from EEA regulated entities.
The FSMA holds a register for the service providers for the exchange of virtual currency and fiat currency and another register for the custodian wallets providers. An applicant may solicit to be registered on the two registers.
The FSMA provides a template of application document to be filled in by any applicant requesting registration in the register of provider of exchange services in fiat currency and virtual currency or in the register of custodian wallets providers. The template of application document covers all information and supporting documents that the applicant is required to submit in order to demonstrate that he meets the registration requirements set out by the Virtual Currency Royal Decree. The following communication must be communicated to the FSMA:
- the identity of the shareholders of the applicant holding a shareholding of at least 5% in the service provider, whether or not conferring voting rights, and the amounts of those holdings;
- the identity of the persons exercising control over the service provider; and
- information demonstrating that such shareholdings and control do not obstruct the proper performance of the supervisory duties of the FSMA.
The applicant files its application by email to email@example.com.
The FSMA may request from the applicant any additional information deemed necessary for the assessment of the registration as Virtual Currency Service Provider within a given period of time. The processing time will largely depend on the quality of the application submitted to the FSMA.
The FSMA will take a decision within three months of receiving the application for registration and all required documents. This period therefore only begins to run once the FSMA has received a complete file.
The FSMA will notify the applicant of its decision by registered letter. The applicant may not start its activities before its registration.
Two types of fees are due to the FSMA:
- A one-off fee of EUR 8,000 is payable for the review of the application for registration. This fee must be paid when submitting the application with the FSMA.
This amount remains due in case the applicant decides to withdraw the application or if the registration is refused.
The EUR 8,000 one-off fee is due per registration. This means that when applying for a registration as a service provider of exchange services of virtual currency and fiat currency and as a provider of custodian wallets, the applicant will have to pay EUR 16,000.
The one-off fee is fixed by Royal Decree and may be adjusted annually depending on the evolution of the operating expenses for the FSMA.
- An annual fee of EUR 8,000 per registration for the permanent supervision of Virtual Currency Service Providers. The companies registered as service provider of exchange services of virtual currency and fiat currency and as a provider of custodian wallets will pay an annual fee of EUR 16,000.
Regulated companies that are exempted from some registration requirements thanks to their regulated status must nevertheless pay the annual fee to contribute to the operating expenses of the FSMA.
The FSMA holds a register for the service providers for the exchange of virtual currency and fiat currency and another register for the custodian wallets service providers.
If a company is already registered as a service provider of exchange of virtual currency and fiat currency or as a provider of custodial wallets, and it wishes to offer in Belgium the other activity for which it has not yet been registered, it must submit a second application with the FSMA and pay the one-off fee again. Information and supporting documents that were included in its first application file do not need to be resubmitted provided these are still valid and accurate.
A transfer of registration from one register to the other is not possible.
There is no "European passport" for Virtual Currency Service Providers. Service providers must assess the local conditions for operating as a virtual asset service provider in each Member State of the EEA where they wish to operate. EEA virtual currency service providers can nevertheless operate in Belgium on a cross-border basis without being required to register with the FSMA provided that they have no physical presence in Belgium (see questions 2 and 3 for further details on what constitutes a physical presence in Belgium).
Virtual Currency Services Providers that are already active in Belgium before 1 May 2022 may continue to exercise their activities on a provisional basis until the FSMA has ruled on their application to be registered as a Virtual Currency Service Provider.
In order to benefit from the grandfathering regime, it is mandatory to inform the FSMA before 1 July 2022 of the regulated activities that are performed in Belgium with the company number as reference. Information should be provided by sending an e-mail to firstname.lastname@example.org.
A complete application file must be submitted to the FSMA by 1 September 2022 in order to retain the provisional authorization which will otherwise expire automatically on that date.
During the entire period in which the Virtual Currency Service Provider may continue its activities in Belgium under the benefit of the provisional grandfathering regime, it must comply with the AML Act and all its implementing decrees and regulations.
Any person offering in Belgium Virtual Currency Services without being registered with the FSMA or after a registration has been revoked or withdrawn may be punished with the following criminal sanctions:
- imprisonment between one month and one year; and/or
- criminal fines between EUR 400 and EUR 80,000.
Administrative sanctions may (and in practice will) also be applied on the basis of the Belgian Act of 2 August 2002 on the supervision of the financial sector and on financial services for exercising regulated activities without having the required license or registration. Administrative fines up to EUR 2.5 million may be charged by the FSMA.