Clarity has been requested by Belgium’s Financial Service and Markets Authority (FSMA) on its proposed digital assets guidelines. 

Outlined in a communications letter issued by the regulator is a methodology that labels digital assets as either securities, investment instruments, or financial instruments, as well as thoughts on how to apply existing regulations to each category.

The paper proposes that in order for a digital asset to be classified, it should be first determined if it’s “incorporated into an instrument” – in other words, whether it is fungible and/or exchangeable. 

If a decision is taken against this, the FSMA states that such digital assets are no longer securities and should be put under the control of the EU’s Prospectus Regulation. 

When digital assets are incorporated into an instrument, the FSMA argues that what could be often witnessed is the instrument serving investors as a voting right in a project or a right to be payment recipients. 

In such cases it should be established if the asset is transferable or not. If it is, then it passes as a security and can be placed under the Prospectus Law, which obliges digital assets issuers to put out a prospectus for investors.  

Additionally, the asset also becomes a financial instrument, which puts it under Europe’s financial instrument regulatory law – the Markets in Financial Instruments Directive (MiFiD). 

Opposite to this, the MiFiD does not relate to assets that are non-transferable. The FSMA suggests that some of these assets can be seen just as an investment instrument, therefore should only be regulated by the Prospectus Law.

The paper also details which non-transferable assets can be seen as investment instruments, pointing to those with a primary or secondary investment objective. Anything else cannot be regulated by the Prospectus law, the FSMA states.

A digital asset that does not include any issuer in its creation does not fall under any existing EU directive, according to the regulator. Bitcoin and Etherium are given as examples in the document, which reads: 

“If there is no issuer, as in cases where instruments are created by a computer code that does not give rise to a legal relationship between two persons (e.g. Bitcoin or Ether), then in principle the Prospectus Regulation, the Prospectus Law, and the MiFID rules of conduct do not apply.”