New legal obligations imposed for virtual asset service providers in Belgium

The Belgian Law of 1 February 2022 – which amends the Law of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash, jointly with its implementing Royal Decree of 8 February 2022 – introduces new legal obligations for providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. The new obligations will become applicable as of 1 May 2022. 

Who will be subject to the new rules? 

The new rules will apply to virtual asset service providers (VASPs) incorporated under Belgian law, or under the laws of another European Economic Area (EEA) Member State who have a branch or any other form of permanent establishment (such as representatives or distributors) in Belgium engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. 

The notion of "exchange services between virtual currencies and fiat currencies" means that the service provider acts as counterparty to the purchase or sale transaction, by analogy with the activities of a currency exchange office. The activities in which a client is brought into contact with a third counterparty (broking) or is led to conclude his transaction on a multilateral trading platform for virtual currencies are, in principle, not targeted by the new rules; nor are issuers of virtual assets, cryptocurrency multilateral trading facilities, or providers of exchange services between virtual currencies. 

The new rules will also apply to all automated teller machines (ATMs) located in Belgium that allow the exchange between virtual and fiat currencies (regardless of the Member State of origin of the person operating these machines). 

Finally, natural or legal persons not governed by the law of an EEA Member State are prohibited from providing (or offering to provide) exchange services between virtual currencies and fiat currencies, as well as custodian wallets, on Belgian territory as a regular professional activity, even if complementary or ancillary to other services. 

What conditions will the service provider have to fulfil?  

1.    Registration conditions 

Before the start of the activities, the service provider will need to be registered with the Belgian Financial Services and Markets Authority (FSMA). As such, the service provider will have to fulfil several registration conditions, which include:

• Specific corporate form and minimum capital: The service provider must be incorporated under one of the following company types: cooperative company (CV/SC), public limited liability company (NV/SA), the European company (EV/SE) and the European cooperative company (ECV/SCE); and have a minimum capital of EUR 50,000, which must be fully paid-up. The service provider therefore cannot be a private limited liability company (BV/SRL) or a physical person. 
• Statutory seat and central administration – central point of contact: If the service provider is governed by the laws of Belgium, its statutory seat and its central administration must be located in Belgium. 
  
  If the service provider is governed by the laws of another EEA Member State, its central administration must be located in Belgium for the services it provides in Belgium. A service provider governed by the law of another Member State, who is established on Belgian territory other than through a branch (for example, via an agent, a distributor or an ATM), must designate a central point of contact located in Belgium.  
• Effective management - appropriate expertise and professional standing: Only natural persons may be in charge of the effective management of the service provider, and they must possess the appropriate expertise and professional standing necessary for the exercise of their function. 
• Shareholders and persons exercising control over the service provider - sound and prudent management: The shareholders of the service provider must satisfy the suitability standard for a sound and prudent administration, and the FSMA must be informed of the identity of (i) the shareholders who possess more than 5% of the shares and (ii) the persons exercising control over the service provider. 
• Anti-money laundering and countering the financing of terrorism: The service provider must comply with the Law of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash, including the decrees and regulations issued in implementation of this Law. The service provider must also establish an independent audit function to test the mandatory policies, procedures and internal control measures, as well as procedures to verify that its staff members are of sufficiently good repute in relation to the risks associated with the activities to be performed.
• Organisation: The service provider must have an organisation that enables it to meet its legal and regulatory obligations at all times; and manage all its operational risks, which implies having a resilient and secure IT system at all times.
• Contribution: The service provider must pay contributions to the operating costs of the FSMA.
   

2.    Operation conditions 

In addition, the relevant service provider will need to comply with a number of operating conditions under the supervision and control of the FSMA:

• Ongoing registration conditions: The service provider must comply with the registration conditions at all times, failing which the FSMA may impose sanctions, including administrative and criminal sanctions.
• Information obligations: The service provider will also have certain information obligations towards the FSMA relating to the (re)appointment and termination of its effective management and changes of more than 5% in its shareholding structure.

What if a service provider is currently already active on Belgian territory? 

VASPs that are already offering the regulated services may continue carrying out their activities on a temporary basis, until the FSMA has made its decision on their application for registration. 

These VASPs will need to inform the FSMA of the fact that they are currently carrying out these activities before 1 July 2022. In addition, they will need to hand in their complete application for registration with the FSMA before 1 September 2022.

Osborne Clarke comment

The scope of the Law of 1 February 2022 and the Royal Decree is rather limited in that they only apply to certain specific services (that is, exchange services between virtual currencies and fiat currencies as well as custodian wallet providers) and to providers incorporated under Belgian law or incorporated under the laws of another EEA Member State who have a branch in Belgium or any other form of permanent establishment. Based on our knowledge of the market and the information publicly available, these new rules will apply to approximately twenty service providers.

However, the new rules will have a huge impact for those service providers as they will now have to comply with the new legal framework to continue offering their services in Belgium. Criminal sanctions are applicable to VASPs who offer their services without being registered with the FSMA.

If you need more information about the new rules for VASPs, or require assistance for obtaining your registration with the FSMA, please do not hesitate to contact one of our experts mentioned below or your usual contact at Osborne Clarke.