The Financial Technology Law Review: Belgium
Fintech is gaining more and more importance in the Belgian market, especially in light of the presence of EU financial and legislative bodies in Brussels, and because of Brexit. Belgium is also the home of various fintech giants, such as payments system vendor Clear2Pay, smart cash-flow forecasting firm CashForce and the global provider of secure financial messaging services, Swift.2 Further, Belgium is the home country of various large market infrastructure players, such as Euroclear, Bank of New York Mellon, Mastercard and Lloyd's of London.
The majority of the rules applicable to the fintech sector stem from European initiatives such as:
- Directive 2015/2366 of 25 November 2015 'on payment services in the internal market' (PSD II);
- Directive 2015/849 of 20 May 2015 'on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing' (AMLD IV) and Directive 2018/843 of 30 May 2018 'amending AMLD IV' (AMLD V);
- Directive 2014/65/EU of 15 May 2014 'on markets in financial instruments' (MiFID II); and
- the General Data Protection Regulation (GDPR).
In addition, Belgium has adopted legislation targeting alternative funding platforms, which is of particular relevance to crowdfunding platforms. As of 10 November 2021, the first regulation on crowdfunding services on a European level will enter into force.3
While the regulatory financial services framework may prove to be quite overwhelming for new and sometimes inexperienced market participants, various initiatives have been taken to guide fintech companies through this jungle of regulations.
ii Legal and regulatory climate
Although many fintech stakeholders have made their case to set up a regulatory sandbox (as in the UK), Belgium has not yet implemented such a sandbox.4 However, the financial regulators have identified fintech as an important focus of their supervisory activities and acknowledge that the financial regulatory framework plays a key role in accommodating both innovation and safety within the industry. Therefore, they have launched a joint FinTech Contact Point, serving as a single point of contact for the financial regulators (as further discussed in Section VI).5 Companies can raise questions regarding the provision of new and innovative financial products or services requiring a licence. Since its launch in 2016, there have been a considerable amount of contacts regarding various topics such as robo-advice, crowdfunding, cryptocurrencies, etc.6
An important platform fostering and promoting the Belgian fintech sector is FinTech Belgium, a community for financial professionals, start-up entrepreneurs and investors.7 Apart from promoting the Belgian fintech sector in Belgium and abroad, FinTech Belgium seeks to establish an ongoing dialogue with financial regulators, and regularly organises conferences and seminars on fintech-related topics.
Generally speaking, Belgium can be considered a fintech-friendly jurisdiction.
iii Tax incentives
Belgian tax law does not provide for specific tax incentives for fintech companies. Nonetheless, there are several general tax incentives that are beneficial to fintech companies. Some of these measures are described below.
Innovation income deduction
Belgian companies are subject to corporate income tax at a rate of 25 per cent. The innovation income deduction allows Belgian companies to deduct 85 per cent of the net income that they derive from qualified IP, thus reducing the effective tax rate to 3.75 per cent. Software (original creations or derived works that fulfil a certain originality threshold) that did not generate any income before 1 July 2016 may qualify. In practice, it is advisable to request a binding opinion from the Belgian Federal Science Policy Office (Belspo) about whether the software qualifies. The innovation income deduction is based on a nexus approach; in other words, it will only be available to the extent that the company has itself incurred qualifying R&D expenditures that have given rise to the income derived from the software.
Exemption for remittance of professional withholding tax
Companies have the obligation to withhold tax on the salaries they pay to their employees. They must remit the said tax to the Treasury as an advanced payment of the personal income tax owed by the employees. Belgium partially exempts certain companies from that obligation. This measure is aimed at granting these companies more oxygen with regard to cash flow. Small or micro companies that are less than 48 months old are, respectively, exempt from remitting 10 per cent and 20 per cent of the tax withheld. These companies must fall within the scope of the Belgian Act of 5 December 1968 'regarding the collective bargaining agreements'.
A 'micro' company does not exceed more than one of the following criteria:
- balance sheet: less than €350,000;
- yearly turnover (excluding VAT): less than €700,000; and
- average amount of employees on a yearly basis equal to or less than 10.
A 'small' company does not exceed more than one of the following criteria:
- balance sheet: less than €4.5 million;
- yearly turnover (excluding VAT): less than €9 million; and
- average amount of employees on a yearly basis equal to or less than 50.
Companies involved in R&D activities may benefit from a partial exemption of 80 per cent of the withholding tax on remunerations paid to researchers holding specific academic degrees. This exemption may be limited in the case of certain academic degrees. The R&D programme must be notified to Belspo, and in practice it is advisable to request a binding advice from Belspo relating to the qualification of the R&D programme.
Tax credit for R&D activities
Companies investing in R&D may opt to apply a tax credit of 25 per cent. The invested amount is the purchase or investment value of newly purchased or manufactured tangible or intangible assets, which are used for R&D activities in Belgium.
Tax shelter start-ups and scale-ups
Individuals who wish to invest in a young company's equity may recover 25, 30 or 45 per cent of the invested amounts by means of a tax reduction. This measure is aimed at supporting companies' efforts to raise capital from individual investors. This regime is subject to a series of conditions that must be met by both investors and target companies. The applicable conditions will differ depending on whether the company is between zero and four years old (start-up) or between five and 10 years old (scale-up).
An individual investor cannot invest more than €100,000 per year. Start-ups may not attract more than €250,000 through this regime. Scale-ups are limited to €500,000 (in aggregate with investments gathered previously as a start-up). Investments may be made directly or indirectly through a crowdfunding platform or a public start-up fund.
Withholding tax exemption for crowd-lending
Individuals who wish to invest in young, small companies through crowd-lending may benefit from a withholding tax exemption on interest on loans granted up to €15,630. This regime is subject to a series of conditions that must be met by the investors, target companies and the crowdfunding platforms.
i Licensing and marketing
Financial supervision in Belgium is based on a Twin Peaks model, according to which there are two autonomous supervisors: the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA). The NBB is responsible for the prudential supervision of individual financial institutions on both macro and micro levels, while the FSMA is responsible for the monitoring of the proper functioning, transparency and integrity of the financial markets as well as the supervision of unlawful offerings of products and financial services. Furthermore, Belgian banks are fully or partially subject to the supervision of the European Central Bank.
Belgian regulatory law does not provide for a special fintech licence. However, depending on their proposed business model and activities in Belgium, fintech companies may be subject to a licence under general financial regulation. A broad range of activities are regulated in Belgium, mostly stemming from European Union (EU) legislation. These include, among others, the offering of banking services, investment services, money exchange services, payment services, issuance of electronic money, mortgage and consumer credits, insurance services, reinsurance activities and occupational retirement schemes, as well as the intermediation relating to most of such services. Both the NBB and the FSMA also regularly issue circulars and communications that apply to regulated entities.
Fintech activities in the payment sector are usually within scope of the regulated activities of the provision of payment initiation services or account information services under the Belgian legislation implementing PSD II.
Asset management companies are subject to a licence granted by the FSMA under the Belgian legislation implementing MiFID II. In order to be granted a licence, the asset management company has to meet several requirements concerning legal form, capital, adequacy of the shareholder structure, and professional and appropriate management. As of now, there is no specific regulation concerning automated digital advisory in Belgium.
Special regulatory restrictions on marketing fintech services generally do not apply as long as the activities are not regulated or the products do not constitute financial instruments or securities. Restrictions may apply if regulated activities or products are commercialised, for instance under the Information Obligations Decree (as discussed in Section V.ii). Entities are, in general, prohibited from advertising without an appropriate licence. Specific rules also apply where marketing is performed through solicitation in Belgium (see Section II.ii). It is recommended that fintech companies explore specific marketing restrictions that may apply to their specific use case.
ii Cross-border issues
Belgium has implemented the European passporting procedure, which allows firms to conduct activities and services regulated under European legislation in another Member State of the European Economic Area (EEA) on the basis of an authorisation in its home Member State. Duly licensed entities in Belgium may therefore offer financial services in other Member States after notification to the host Member State, and vice versa. Financial services generally require a licence if they are offered in Belgium (directly or on a cross-border basis). The extent to which the provision and the marketing of financial services trigger licensing requirements under Belgian law should be assessed on a case-by-case basis. According to the Belgian regulators, financial services are being offered 'in Belgium' if: (1) the financial services are delivered or carried on in Belgium; or (2) the financial institution actively solicits orders from customers in Belgium by means of remote sales and marketing techniques or advertising.
Digital identity and onboarding
i Digital identity
In Belgium, the government issues an identity card to all citizens that includes a digital identity (eID). The information contained on the eID is deemed official and certified by the government (as certificate authority). An integration with the eID is possible to read basic information regarding an individual. This digital identity can therefore be used for onboarding, and can also be used for electronic identification and authentication as well as for embedding a qualified electronic signature on electronic documents.
A number of Belgium's leading banks (Belfius, BNP Paribas Fortis, KBC/CBC and ING) and mobile network operators (Orange, Proximus and Telenet Group) created a mobile application, itsme, with a view to facilitating such identification, authentication and signatures. Initially, this could only be done on the basis of a Belgian bank account, but it has since been expanded and extended to also support the eID.
The eID is only available to Belgian citizens (irrespective of their nationality) and itsme is only available to holders of a Belgian bank account or a Belgian eID. Because of the eID's integration of certificates for qualified electronic signatures, it can be used for any contract or document, except specific documents provided for by law (e.g., there are specific conditions for the assignment of certain financial instruments).
ii Digitised onboarding of clients
In the process of onboarding of clients, 'obliged entities' have to assess the risk of money laundering and terrorist financing based on a customer due diligence as set out by the Belgian Act of 18 September 2017 'on the prevention of money laundering and terrorist financing and the restriction on the use of cash' (the AML Act), which implements AMLD IV and AMLD V into national law. Before the establishment of a business relationship or before carrying out of certain transactions, obliged entities are required to identify the customer and verify the customer's identity, assess and obtain information on the purpose and intended nature of the business relationship and conduct ongoing monitoring of the business relationship.
Digitised onboarding of customers is possible, provided that the relevant entity complies with its KYC requirements under the AML Act. In this respect, the AML Act states that when business relationships or transactions are entered into remotely without any further guarantees such as electronic identification means or relevant trust services as set out in the eIDAS Regulation8 or any other secure, remote or electronic identification process regulated, recognised, approved or accepted by the relevant national authorities, this constitutes an indication of a potentially higher risk. Where higher risks are identified, obliged entities must apply enhanced customer due diligence measures. Further, the entity should set up a process for electronic identification (in particular in accordance with the eIDAS Regulation).
The AML Act specifically provides that, to identify and verify the customer's identity, obliged entities must use (1) one or more pieces of evidence or reliable and independent sources of information; (2) where available, information obtained by electronic identification means (such as eID or itsme); and (3) where available, information obtained by relevant trust services as set out in the eIDAS Regulation (such as electronic signatures and electronic seals).9
Digital markets, payment services and funding
Various types of crowdfunding platforms exist on the Belgian market:10
- platforms through which the public makes a donation for a project or enterprise;
- platforms through which the public deposits money to receive a non-financial compensation (reward-based crowdfunding);
- platforms through which the public invests in a project or enterprise through a loan (loan-based crowdfunding, also referred to as crowd-lending); and
- platforms through which the public invests in a project or enterprise through a contribution in capital in consideration for a participation in any profit (equity-based crowdfunding).
Crowd-lending and equity-based crowdfunding are regulated in Belgium by the Belgian Act of 18 December 2016 'on the recognition and definition of crowdfunding and containing various provisions on finance' (the Crowdfunding Act).11
The Crowdfunding Act sets out the licensing and operating requirements for alternative funding platforms as well as the conduct of business rules that apply to the providers of alternative funding services. An alternative funding service, dubbed by the FSMA as 'the financial form of crowdfunding', is defined in Article 4(1) of the Crowdfunding Act as:
[T]he service consisting of commercialising investment instruments, through a website or any other electronic means, issued by entrepreneur-issuers, starter funds or funding vehicles in the framework of an offering, public or otherwise, without the provision of an investment service regarding these investment instruments, with the exception of, as applicable, the following services: (i) provision of investment advice and (ii) receiving and transmitting orders.
Each individual or legal entity that professionally provides alternative funding services within the territory of Belgium is deemed an alternative funding platform pursuant to Article 4(2) of the Crowdfunding Act (unless such individual or legal entity is a regulated undertaking).
As regards peer-to-peer lending, the Belgian regulatory framework currently does not explicitly authorise direct lending by consumers to consumers (as individuals are not allowed to make a public call to borrow money).
ii Payment services
The offering of payment services is a regulated activity in Belgium under the Belgian Act of 11 March 2018 'on the legal status and the supervision of payment institutions and electronic money institutions, the access to the undertaking of payment service provider and to the activity of issuing electronic money, and the access to payment systems' (the Payment Institutions Act), which implements PSD II. The Payment Institutions Act regulates the following payment services:
- services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
- services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
- execution of payment transactions, including transfers of funds on a payment account with the user's payment service provider or with another payment service provider (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
- execution of payment transactions where the funds are covered by a credit line for a payment service user (execution of direct debits, payment transactions through a payment instrument and credit transfers, including permanent payment orders);
- issuing of payment instruments and acquiring of payment transactions;
- money remittance;
- payment initiation services; and
- account information services.
The exemptions as outlined under PSD II also apply in Belgium. The exemptions that are regularly invoked in the fintech sphere are:
- the limited network exemption;
- the commercial agent exemption; and
- the technical service provider exemption.
Following the implementation of PSD II, banks are required to provide third parties (such as payment initiation or account aggregation providers) access to a customer's account data, upon the latter's request. The main reason is to facilitate these new business models that depend heavily on access to such data.
Cryptocurrencies, initial coin offerings (ICO) and security tokens
i Laws and regulations specifically targeting tokens and cryptocurrencies
The FSMA has issued a regulation, a communication, and several press releases and warnings12 relating to cryptocurrencies or associated phenomena. The NBB has issued a circular. These documents, as discussed in this section, are the only forms of regulatory guidance in Belgium that specifically address tokens and cryptocurrencies.
In a motion for a resolution dated 18 July 2019 and tabled again on 8 October 2019, seven Belgian senators urged the Belgian government to adopt a legal framework for the sale, purchase and use of virtual money and related financial products, to protect consumers and to fight the use of these virtual currencies for criminal purposes. The motion was discussed in a hearing before the Committee on Cross-cutting Issues on 31 January 2020, where the Chairman of the FSMA, Jean-Paul Servais, provided information on cryptocurrencies.13 So far, this motion has not resulted in new legislation.
Marketing Prohibition Regulation
On 3 April 2014, the FSMA issued the Regulation of the Financial Services and Markets Authority of 3 April 2014 'on the prohibition on marketing of certain financial products to non-professional clients' (the Marketing Prohibition Regulation), which entered into force on 1 July 2014.14 This regulation prohibits the professional marketing in Belgium to one or more retail clients of financial products, the return of which is directly or indirectly dependent on virtual money. 'Virtual money' is defined for the purposes of the regulation as 'each form of non-regulated digital money without legal tender'. This definition comprises not only Bitcoin, but also other cryptocurrencies. The prohibition only applies in respect of derivatives of virtual money, not in respect of the virtual money itself.15
On 13 March 2019, the Basel Committee issued a 'statement on cryptoassets'. In this statement, the Basel Committee warns of the risks related to cryptoassets. It then sets out the measures it expects banks to take if they acquire cryptoasset exposures or provide related services.
As a follow-up to the Basel Committee's statement, the NBB released Circular NBB_2019_20 'on expectations regarding activities related to cryptoassets' on 19 July 2019.16 This is addressed to the financial undertakings under the NBB's supervision. The NBB deemed that the substance of the Basel Committee statement was also relevant for other financial undertakings. It therefore decided to issue Circular NBB_2019_20 to reiterate the Basel Committee's statement and to extend its scope to also include non-banks under its supervision.
FSMA ICO Communication
On 13 November 2017, the FSMA issued a communication entitled 'Initial Coin Offerings (ICOs)' (with document number FSMA_2017_20: the FSMA ICO Communication).17 In this text, which is considered soft law, the FSMA endorses the statements by the European Securities and Markets Authority (ESMA) on ICOs, in which ESMA has determined that, depending on how ICOs are structured, various financial regulations, such as the Prospectus Directive, MiFID, AIFMD, MAR, etc., may apply.18 The FSMA further states that the following legislation and regulations may apply to ICOs in Belgium:
- the Act of 16 June 2006 'on public offers of investment instruments and the admission of investment instruments to trading on regulated markets' (the Old Prospectus Act). Meanwhile, however, the new Prospectus Regulation (2017/1129) has been implemented in Belgium by the Act of 11 July 2018 'on the public offering of investment instruments and the admission of investment instruments to trading on a regulated market' (the New Prospectus Act). The New Prospectus Act will fully apply, and will fully repeal the Old Prospectus Act, as from 21 July 2019;
- the Marketing Prohibition Regulation (discussed above); and
- the Crowdfunding Act (discussed above).
The FSMA notes in its communication that the application of the above laws depends on the way in which the ICO in question is structured, and that this must be assessed on a case-by-case basis. While the FSMA does not expressly mention the criteria it may apply when undertaking this assessment, it does point out elsewhere in the communication that:
[t]he characteristics of a token may be similar to: (i) investment instruments, given that they may provide rights, offer the prospects of revenues or returns, or involve a pooling of funds with a view to investment in tokens; (ii) a means of storage, calculation and exchange, given its convertibility into other tokens, cryptocurrencies or fiat money; and/or (iii) a utility token, given the access which the token provides to the product or service.
This corresponds to the classification of tokens and cryptocurrencies as either: (1) an investment token; (2) a cryptocurrency; or (3) a utility token; or any combination of these three variations, which is gaining traction among scholars and policymakers.19 Whereas thus far this trichotomy constitutes a merely descriptive classification, it can already provide a sense of the likelihood that the coin will fall within the ambit of one or another law (such as one of the laws discussed in the next section).
ii General laws and regulations that may apply to tokens and cryptocurrencies
Save for the Marketing Prohibition Regulation, there are no Belgian (hard) laws or regulations that specifically target blockchain or cryptocurrencies. Consequently, any type of cryptocurrency, token or other asset created or transferred by means of distributed ledger technology, as well as any related service, must be analysed from the perspective of existing laws and concepts. Most Belgian financial laws do not materially deviate from the EU legislation they seek to implement and will therefore not be discussed here. There are, however, some interesting deviations from or additions to the EU financial law framework, a selection of which is discussed below.
AMLD V was implemented into, among others, the AML Act by an Act dated 20 July 2020. The amended version of the AML Act generally entered into force on 15 August 2020. As a result, several new entities are brought within the personal scope of the provisions on the prevention of money laundering and terrorist financing.
The new obliged entities include (1) providers engaged in exchange services between virtual currencies and fiat currencies established on Belgian territory and specified in a Royal Decree that has yet to be adopted, and (2) custodian wallet providers established on Belgian territory and specified in a Royal Decree that has yet to be adopted. These entities will have to register with, and will be supervised by, the FSMA.
A Royal Decree has yet to be adopted in which the rules and conditions for registration with the FSMA are specified as well as the conditions for the supervision applicable to the above-mentioned new obliged entities and the exercise of their activities. Until that time, the above-mentioned new obliged entities do not fall within the scope of the AML Act.
Virtual currencies are defined in Article 4, 35°/1 of the AML Act as:
a digital representation of value that is not issued or guaranteed by a central bank or a government, that is not necessarily linked to a legally determined currency and that does not have the legal status of currency or money, but that is accepted by natural or legal persons as a means of exchange and that can be electronically transferred, stored and traded.
The Belgian prospectus legislation, among others:
- deals with the requirement of preparing a prospectus to be approved by the FSMA or an information note in the event of a public offering of investment instruments within the territory of Belgium;
- establishes a monopoly on intermediation for the placement of investment instruments within the territory of Belgium; and
- determines that advertisements used in connection with the public offering must receive prior approval from the FSMA.
Unlike the old Prospectus Directive (2003/71/EC) and the new Prospectus Regulation (2017/1129), both the Old Prospectus Act and the New Prospectus Act do not use the notion of 'securities' to determine the material scope of the prospectus regime. Instead, they use the significantly broader notion of 'investment instruments'. This latter concept includes securities, but also comprises a whole range of additional instruments (such as money market instruments, futures, forward rate agreements and equity swaps), as well as the residual category of 'all other instruments that enable a financial investment, irrespective of the underlying assets'.
Consequently, depending on the structure of the token issued in an ICO, there may be a high chance that the token qualifies as an investment instrument and therefore falls within the scope of the Belgian prospectus regime.20
The Belgian prospectus legislation also establishes an intermediation monopoly. Only the entities mentioned in Article 21, Section 1 of the New Prospectus Act, which are all regulated entities, are allowed to act as intermediaries for purposes of the placement of investment instruments within the territory of Belgium. Consequently, if a token qualifies as an investment instrument and is placed in Belgium, only regulated entities can act as intermediaries (with certain limited exceptions).21
If a token qualifies as an investment instrument for purposes of the prospectus legislation discussed above, the token will also qualify as a financial product and will thus fall within the ambit of, in particular, the Royal Decree of 25 April 2014 'on certain information obligations in respect of the marketing of financial products to non-professional clients' (the Information Obligations Decree).22 As its name suggests, this Decree provides for certain information obligations that must be complied with when professionally marketing financial products to retail clients.
Furthermore, when the service offered in respect of a token or cryptocurrency qualifies as a financial service, Book VI of the Belgian Code of Economic Law, containing various consumer protection provisions, applies.23 A financial service is defined in this Code as 'each banking service or service relating to lending, insurance, individual pensions, investments and payments'.
iii Tax treatment
Corporate income tax
The Office for Advance Tax Rulings has recently confirmed that all gains from investments in cryptocurrencies and ICOs made by Belgian companies are taxable, and all losses are tax deductible.
Personal income tax
The income tax treatment of investments in cryptocurrencies by individuals is subject to general tax rules and depends on the relevant facts and circumstances.
A capital gain realised within the framework of one's professional activity will be taxed as professional income at progressive rates ranging between 25 per cent and 50 per cent plus local charges. If the cryptocurrencies are held as private assets, the capital gains will be exempt from individual income tax if the sale qualifies as a normal act of management. If not, the capital gains will be taxable as miscellaneous income at a rate of 33 per cent plus local charges.
Legal certainty on the applicable tax treatment can be obtained by filing a ruling request with the Office for Advance Tax Rulings. The said service has recently published a list of questions that should allow both the taxpayer and the tax authorities to determine the appropriate tax treatment.24
As regards VAT, the European Court of Justice (Skatteverket v. David Hedqvist, C-264/14, dated 22 October 2015) has ruled that the sale of non-traditional currencies falls under the same exemption as for transactions relating to traditional currencies. The Belgian VAT administration has included that decision in its administrative commentary without noteworthy remark.
Other new business models
i Smart contracts
Self-executing contracts, or 'smart contracts', are in principle permitted under Belgian law. No specific legal framework has been established for this phenomenon. Therefore, common contract law applies. In Belgium, contracts can generally be concluded without formal requirements, subject to certain statutory exceptions (e.g., consumer credit contracts). The computer code making up a smart contract can thus in principle constitute a valid contract, provided the validity requirements under Belgian contract law are met.25 Some tentative attempts to analyse smart contracts under Belgian contract law have thus far been made, but a considerable degree of legal uncertainty remains.26
Automated investment advice, or 'robo-advice', is relatively popular in Belgium. In 2018, Belgium had the third-largest national portfolio within Europe, with €386 million invested with robo-advisers, equivalent to €34 per capita.27 According to Roland Berger, the Belgian market is expected to grow significantly to €3.7 billion assets under management by 2022.28 Financial regulations, such as MiFID II, apply to automated investment advice as they do for non-automated investment advice. This sometimes causes slight vexation among market participants, who feel that regulatory requirements are applied too strictly to online platforms.29
Third-party websites comparing products or providing information about financial products are subject to data protection and competition rules. The vast majority of these rules are of EU origin. The GDPR applies and must be taken into account when users' personal data are being processed. Also, comparison platforms are in particular subject to the regime of Article 101 of the Treaty on the Functioning of the European Union and the EU regulations and case law in this respect.
iii Fintech contact point
For new business models in the fintech realm, the FSMA launched a FinTech Contact Point in June 2016.30 This contact point is designed as a portal through which fintech entrepreneurs can contact the financial supervisor. This allows entrepreneurs to familiarise themselves with financial legislation and to ask any questions they may have. It also enables the FSMA to closely monitor fintech developments in Belgium. In April 2017, the portal launched by the FSMA evolved into a joint portal of the FSMA and the NBB. Fintech players, who are not necessarily aware of the Twin Peaks supervision model in Belgium, thus have a single point of contact; they do not need to find out in advance to which supervisor they need to ask their questions. Questions lodged with the fintech portal are managed jointly by the FSMA and NBB teams. Since the launch of the fintech portal in 2016, a considerable amount of entrepreneurs have reached out to the supervisory authorities. Their questions covered a wide range of topics, such as cryptocurrencies, robo-advice, crowdfunding and price comparison.31
Intellectual property and data protection
i Intellectual property
Anything that is not a technical solution, including schemes, rules and methods for performing mental acts, playing games or doing business, and software as such, is excluded from patent protection. This does, however, not preclude software-based inventions that are implemented in hardware from patent protection, provided that all applicable conditions are fulfilled.
Software and business models may also be protected by copyright if they meet the originality requirement. For acquiring copyright protection, no formalities need to be fulfilled. Only the expression of the software or business model will be protected, and not the underlying ideas or principles.
The object and source code, architecture, structure and organisation of the software are considered the 'expression of the software'. A graphic user interface does not enable the reproduction of the software and is therefore not considered an expression of the software. Consequently, a graphic user interface cannot be protected under the Software Act, but only by common copyright law.
Unless otherwise specified in the employment contract, the employee that is the creator of an original work will own the copyright on that work. The same applies to contractors. With regard to software, however, there is a legal presumption that the employer is the copyright owner of the original software created by the employee.
No specific compensation regime is provided for by law, allowing parties to freely agree on a potential compensation for any intellectual property created.
ii Data protection
Fintech companies that are based in the EU, or that offer goods or services to natural persons (data subjects) in the EU or monitor their behaviour, will have to comply with the principles and obligations of the GDPR and the Belgian Act of 30 July 2018 when processing personal data. If the client data consists of information relating to an identified or identifiable data subject, the data will be qualified as personal data.
Profiling refers to the creation and use of profiles of data subjects based on common characteristics (e.g., preferences, financial status). Depending on the objective of the profiling, it will be treated differently. The use of profiles to create recommendations and personalise the client experience, for instance, will not be treated the same way as the use of such profiles to automatically reject credit applications or otherwise significantly impact the rights of the data subject.
In the first scenario, in other words, a mere scoring or evaluation, the general rules of the GDPR will apply, and the specific requirements to carry out a data protection impact assessment (DPIA) may apply in Belgium (as well as elsewhere), depending on the other circumstances of the processing (e.g., data enrichment via other sources, scale of processing). For the second scenario, a DPIA will in any event be required under the GDPR, and specific requirements apply in relation to the permitted legal grounds for such processing, the categories of personal data that may be taken into account and data subject rights.
In each scenario, a risk assessment will be needed to determine whether the supervisory authority must be consulted in relation to the project.
The Guidelines 06/2020 'on the interplay of the Second Payment Directive and the GDPR' published on 15 December 2020 of the European Data Protection Board aim to clarify the relation between the PSD II and the GDPR.
Year in review
The most relevant developments in the regulation and legal treatment over the past years came as a result of European directives and regulations. The implementation into Belgian law of fairly recent EU legislation, such as the AMLD V, PSD II and MiFID II, has had an important impact on fintech companies. Furthermore, the entry into force of the GDPR has required fintech companies to put GDPR compliance programmes in place to safeguard the rights of individuals.
At the national level, the Crowdfunding Act provides a regulatory framework for alternative financing services. Both crowdfunding and crowd-lending platforms need a licence from the FSMA under this Act. As a result of the Crowdfunding Act and multiple tax incentives, the Belgian crowdfunding market has shown significant growth in 2020.32 It is expected that this market will continue to develop and grow in the future, in particular after the entry into force of the European Crowdfunding Regulation.
Outlook and conclusions
Although there is no regulatory sandbox in place, and there are, to our knowledge, no plans to introduce such a sandbox, Belgium can be seen as a fintech-friendly jurisdiction.
The Fintech Contact Point will continue to be helpful in guiding start-ups and established firms through the complex regulatory framework and the licensing process. Both the FSMA and the NBB tend to be approachable and supportive of new fintech business models, and we expect this to only increase in the future.
1 Pierre E Berger is a partner and Marc Van de Looverbosch is an associate at DLA Piper UK LLP.
2 Forbes, 'Four Reasons Belgium Punches Above Its Weight When It Comes To Fintech', http://www.forbes.com/sites/joewalleneurope/2018/09/30/four-reasons-belgium-punches-above-its-weight-when-it-comes-to-fintech/#1e2228867470.
3 Regulation 2020/1503 of 7 October 2020 'on European crowdfunding service providers for business' (Crowdfunding Regulation).
4 See, for example, Joris Latui and Els Ponnet, 'From sounding board to sandbox – the case for a regulatory sandbox in Belgium' (2018) 2 Bank Fin R 86, 91.
6 Financial Services and Markets Authority, Annual Report 2017, 142; Financial Services and Markets Authority, Annual Report 2016, 146.
8 Regulation 910/2014 of 23 July 2014 'on electronic identification and trust services for electronic transactions in the internal market'.
9 See Article 27, §1 of the AML Act and the Explanatory Memorandum to the AML Act, DOC 55 1324/001, 65.
10 In the past two years, at least €69 million has been invested in new projects through crowdfunding in Belgium (see study of Financial Services and Markets Authority, Market for crowdfunding: July 2018 – June 2020).
11 As of 10 November 2021, it will be possible for both new and existing crowdfunding platforms to benefit from a European passport allowing them to carry out their activities in all EU countries on the basis of the new Crowdfunding Regulation.
12 On 14 January 2014, the NBB and the FSMA issued a joint press release entitled 'Be careful with virtual money, such as Bitcoin.' On 16 April 2015, the NBB and the FSMA issued a joint press release entitled 'Reminder of the warning by NBB and FSMA against risks attached to virtual money'. On 8 July 2016, the FSMA issued a warning relating to OneCoin, a cryptocurrency. On 13 November 2017, the FSMA issued a press release entitled 'Be wary of Initial Coin Offerings (ICOs)', which accompanied the FSMA ICO Communication discussed above. On 22 February 2018, the FSMA issued a warning entitled 'Cryptocurrency trading platforms: beware of fraud!' The FSMA has also put together a regularly updated list of cryptocurrency trading platforms in respect of which it has received questions or complaints from consumers and has identified signs of fraud (see http://www.fsma.be/en/warnings/companies-operating-unlawfully-in-belgium).
14 Approved by the Royal Decree of 25 April 2014 'approving the regulation of the Financial Services and Markets Authority regarding the prohibition on marketing of certain financial products to non-professional clients'.
15 Robby Houben, 'Bitcoin: there are two sides to every coin' (2015) 2 TBR 139, 154 Paragraph 34.
19 See, for instance, Philipp Hacker and Chris Thomale, 'Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law' (2018) 15 ECFR 645, 652–653.
20 Robby Houben, 'Bitcoin: there are two sides to every coin' (2015) 2 TBR 139, 150 Paragraph 23; Niels Vandezande, Virtual Currencies: A Legal Framework (Intersentia 2018) 333. For an analysis under EU law, including the exemptions that may apply (also under Belgian law), see Philipp Hacker and Chris Thomale, 'Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law' (2018) 15 ECFR 645, 657–689.
21 Robby Houben, 'Bitcoin: there are two sides to every coin' (2015) 2 TBR 139, 152 Paragraph 30; see Articles 20–21 New Prospectus Act.
22 Niels Vandezande, Virtual Currencies: A Legal Framework (Intersentia 2018) 327.
23 Robby Houben, 'Bitcoin: there are two sides to every coin' (2015) 2 TBR 139, 153 Paragraph 32.
25 i.e., consent, capacity, certain object and lawful cause (Article 1108 of the Belgian Civil Code); Jurgen Goossens and Kristof Verslype, Blockchain en smart contracts. Het einde van de vertrouwde tussenpersoon? (Larcier 2018) 30–31.
26 See, for instance, Eric Tjong Tjin Tai, 'Juridische aspecten van blockchain en smart contracts' (2017) Tijdschrift voor Privaatrecht, 563; Jurgen Goossens and Kristof Verslype, Blockchain en smart contracts. Het einde van de vertrouwde tussenpersoon? (Larcier 2018); Maarten Herbosch, 'Smart Contracts. Het recht te slim af?' in Grenzen Voorbij (Intersentia 2020); Denis Philippe, 'Blockchain et smart contracts: lex cryptographia?' in Droit des affaires (Larcier 2020).
27 Roland Berger, Robo-advisory in Belgium: Can David challenge Goliath?, report, 2019, 5, available at http://www.rolandberger.com/publications/publication_pdf/FOCUS_Robo-advisery-in-FS-with-Espe-comments.pdf.
29 See, for instance, the MeDirect Bank responses to the questions (in particular question 5) asked to market participants in the context of the Discussion Paper on automation in financial advice of the Joint Committee of the three European Supervisory Autorities (EBA, EIOPA and ESMA), 4 December 2015, available at http://www.eba.europa.eu/node/81966/submission/61795.
31 FSMA, Jaarverslag 2018, 149, available at http://www.fsma.be/nl/jaarverslagen/jaarverslag-2018/jaarverslag-2018-pdf-versie; FSMA, Jaarverslag 2017, 142, available at http://www.fsma.be/sites/default/files/public/annual-reports/fsma_jv2017_nl.pdf.
32 FSMA, 'Interest in crowdfunding on the rise', http://www.fsma.be/en/news/interest-crowdfunding-rise (accessed on 23 February 2021) referring to the study of the Financial Services and Markets Authority, Market for crowdfunding: July 2018 – June 2020.