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Virtual asset service providers subject to new registration requirements in Belgium

  • Belgium
  • Crypto assets

01-05-2022

 

 

As of 1 May 2022, virtual asset service providers need to be registered with the Financial Services and Markets Authority ("FSMA"). The Belgian Royal Decree of 8 February 2022 on the status and supervision of service providers for the exchange of virtual currencies and fiat currencies and custodian wallet providers (the “Virtual Currency Royal Decree”) introduced these registration requirements, together with some other operating conditions into Belgian law.

Background - Anti-Money Laundering Purposes

The introduction of the Virtual Currency Royal Decree should be seen in a broader European perspective of the transposition of the Fifth Anti-Money Laundering Directive of 30 May 2018, which Belgium implemented by amending the Belgian Act of 18 September 2017 on the prevention of money laundering and terrorist financing and on the limitation of the use of cash (“AML Act”).

The AML Act determines that:

  1.   Providers of exchange services between virtual and fiat currencies and custodian wallet providers (together referred to as 'virtual asset service providers' or “VASPs”) incorporated under Belgian law are now subject to the AML Act;
  2. VASPs are not allowed to provide, on a professional basis, virtual asset exchange services or custodian wallet services in Belgium if they are not governed by the laws of any jurisdiction of the European Economic Area ("EEA"); and
  3. VASPs governed by Belgian law and VASPs governed by the law of another Member State of the EEA having a branch or any other form of permanent establishment in Belgium (within the meaning of the case law of the Court of Justice of the European Union, i.e. representatives, distributors, etc.) will have to register with the FSMA for AML purposes. This includes electronic infrastructures (e.g. Automated Teller Machines allowing the exchange of virtual currency for fiat currency and vice versa located on Belgian territory).

The details of these registration requirements under (3.) are now set out in a separate royal decree, i.e. the Virtual Currency Royal Decree.

Personal scope

The Virtual Currency Royal Decree – and thus, the registration requirement - applies to:

  1.  Exchange services consisting of purchase and sale transactions, with their own funds, where virtual currency is exchanged for fiat currency, or fiat currency is exchanged for virtual currency; and
  2. Custodian wallet provider services consisting of protecting private cryptographic keys to hold, store and transfer virtual currency on behalf of clients.

Virtual currency exchange services where virtual assets are exchanged for (other) virtual assets, issuers of virtual currency, multilateral exchange platforms for virtual currency and intermediary activities where a client is put into contact with a third-party counterparty, or has to perform the transaction on a multilateral virtual currency trading platform are excluded from the scope of the Virtual Currency Royal Decree and will therefore not have to register with the FSMA.

New registration requirements 

In order to be registered as a VASP, specific conditions must be met on a continuous basis. The key conditions are:

  1.  the VASP needs to have one of the following legal forms in accordance with the Belgian Code of Companies and Associations or the European regulation: a cooperative society, a public limited liability company, a European company (SE) or a European cooperative society (SCE);
  2. the establishment of the central administration and registered office of the VASP needs to be in Belgium;
  3. a minimum capital/equity requirement of EUR 50,000, which must be fully paid up;
  4. the VASP needs to have an effective management of natural persons with the appropriate expertise and professional reliability;
  5. the FSMA should be informed on the identity and the suitability of the shareholders/those who hold control;
  6. the VASP needs to be compliant with the AML Act (including the implementation of an independent audit function); and
  7. the VASP needs to ensure full payment of the contributions of the operating costs of the FSMA.

 The FSMA will take a decision regarding the registration request within three months upon receipt of the application for registration and of all required documents. Currently, the cost for a registration request amounts to EUR 8,000 per status, meaning that VASPs that qualify as (i) an exchange service consisting of purchase and sale transactions and (ii) as a custodian wallet provider, will be required to pay EUR 16,000 for the registration. Separate from the registration fee, registered VASPs are also subject to an annual fee of EUR 8,000 per status. These amounts will be indexed on an annual basis.

Note that there is no European passport for VASPS, meaning that a VASP being active in multiple European countries will have to comply with various national requirements if it wants to operate and offer the above mentioned services in those respective countries.

Sanctions

Criminal fines for legal entities range between EUR 4,000 – EUR 192,000 and can be imposed on:

  1.   VASPs who offer their services in Belgium without complying with the registration requirement with the FSMA; and
  2. VASPs that continue to provide their services after their registration has been revoked or withdrawn by the FSMA.

 In addition to the above mentioned criminal sanctions, pre-existing administrative sanctions for non-compliance with AML obligations can be imposed. These include fines up to EUR 5 million or 10% of the annual turnover, whichever is greater.

Notification deadlines

The Belgian Virtual Currency Royal Decree was published on 23 February 2022 in the Belgian State Gazette and will enter into force on 1 May 2022. Nevertheless, a grandfathering regime will be in place for existing VASPs. They must (i) notify the FSMA of their current activities in Belgium before 1 July 2022 and (ii) fulfil their complete registration obligation with the FSMA before 1 September 2022.

 

If you would like more information or advice regarding your registration request or on VASPs in general, please do not hesitate to get in touch with us.