Brussels’ Fledgling Crypto Industry Flexes Its Muscles

The city that hosts the EU also wants to influence it, with key decisions upcoming on the regulation of NFTs and DeFi.

AccessTimeIconJun 23, 2022 at 11:00 a.m. UTC
Updated May 11, 2023 at 5:05 p.m. UTC

The crypto community in the city of Brussels is attempting to amplify the voice of its fledgling crypto ecosystem, as European Union negotiators reach the closing stages of landmark licensing laws for 27 countries.

As capital of Belgium and, in effect, of the European Union, Brussels hosts a small Web3 community that's attempting to get its act together in have its voice heard – as neighboring capitals such as Paris have already done.

The inaugural Brussels Blockchain Week, which began Monday, saw repeated vows to not let the current bear market get in the way of optimism about the sector.

“Some, and many at the European Commission, will see the recent crypto market downturn as the evidence that this was just one big Ponzi scheme, that this was bound to end in tears, that we're seeing the beginning of the end,” said Peter Kerstens, a policy adviser at the EU’s executive arm, in a speech Monday. “I don't see that.”

Kerstens said that, given the transformational potential of the underlying distributed technology, he personally remained “very, very bullish about blockchain, crypto and Web3.”

Recent crypto market turbulence has spelled trouble for initiatives some thought of as the future of crypto finance – like lender Celsius and stablecoin terraUSD. But some in Brussels’ crypto industry argue that this is a mere filtering out of the froth, allowing markets to discover the businesses that add genuine value.

“What is amazing about this market today is that all the sugar is gone,” Kevin de Patoul, CEO of Keyrock, told the audience, comparing the hype about Bored Ape and currencies going to the moon to the eye-catching frosting on a donut.

With the crypto crash, “you only see the real thing, which means that you actually did what makes sense … what actually has value in the long term and what doesn't. And that is basically the promise of blockchain,” he said.

The crypto world is becoming increasingly positive about Europe. Germany topped a recent list of the world’s most crypto-friendly jurisdictions; Binance is now suggesting recent registrations in France and Italy could be the start of something bigger.

“I can imagine a situation where if things keep going the way they are going, we might eventually end up with headquarters in Europe,” Martin Bruncko, the executive vice-president for Europe of Binance – the world’s leading crypto exchange – told the conference attendees.

For companies like Keyrock, Belgium itself may not be the draw. Although his company, and around half of its 70 staffers, are based in the country, de Patoul is open about the fact that it’s not the most dynamic of locations for crypto.

Brussels sprouts

As a blockchain company in Belgium, “you're one of the one of the few,” de Patoul told CoinDesk. “Brussels is not one of the financial centers of the world.”

But the company – a market-maker that helps traders secure liquidity in favored crypto asset markets – can still serve its global market from a Belgian base, aided by cooperation from the national central bank and regulator Financial Services and Market Authority, he says.

The attitude of regulators has “very positively evolved since we started in 2017,” de Patoul said. “Now it's a lot more positive and they really know their stuff.”

Belgium appears to be following in the footsteps of its neighbor France, where the crypto industry has gathered together to make its political voice heard, and which annually hosts the equivalent event, Paris Blockchain Week.

But maybe Brussels has one thing Paris doesn’t. As seat of the EU institutions, it also offers the company proximity to policymakers, he said – people like Kerstens, and the lawmakers and negotiators developing the legal framework that could last for years to come, such as the EU’s flagship Markets in Crypto Assets Regulation (MiCA).

In terms of political influence, “clearly being here does have a positive impact,” he said, adding that rules like MiCA are “going in the right direction, simply a bit too slow for our taste.”

Talks on MiCA – which lets crypto issuers market across Europe if they publish a white paper of information for investors – are reaching their final stages, with key questions still hanging about how to treat areas like decentralized finance (DeFi) and Non-Fungible Tokens (NFTs).

“We have many bad ideas” on how to regulate DeFi, said Kerstens, because it overturns conventional financial-regulation norms that usually identify a central entity to hold responsible. “If you have good ideas … don't be shy, come and see us.”

But Kerstens, adviser for technological innovation and cybersecurity at the European Commission’s financial-services arm, does want to regulate at least some aspects of NFTs.

Despite crypto industry protests against treating Bored Ape differently from offline art markets, officials believe they need to deal with financial-market abuses such as wash trades, in which brokers and traders collude to manipulate prices.

“We accept that it's silly to do a white paper for every non-fungible token,” Kerstens said. “But when you look at the service provisions – the custody of non-fungible tokens, the exchange, the brokerage, the advice – what really is the difference between custody of an NFT and custody of bitcoin and custody of Ethereum? It's the same thing; it's the same service.”

Tax woes

How those issues are resolved could prove crucial to the future of Web3 in Belgium, and the EU’s 26 other member countries too. But in many cases, Belgian crypto companies’ woes stem not from the supranational bloc, but from homegrown problems like taxes.

Belgium takes the highest labor taxes of all developed countries measured by the Organisation for Economic Co-operation and Development – a problem for any entrepreneurial startup looking to hire – but also there’s uncertainty over how to tax crypto gains, which depends on whether trading is deemed professional or mere household budget management.

Others, like Florian Ernotte, an associate at law firm Avroy Avocats and founder of the site, also point to the lack of legal recognition for decentralized autonomous organizations, the groups that set up DeFi applications, a lacuna that he says may hamper competitiveness.

One of the lawmakers who might try to change all that is Christophe De Beukelaer, a crypto enthusiast who is also a member of the Brussels Parliament for the centrist Les Engagés party and co-founder of Brussels Blockchain Week.

In January, De Beukelaer tweeted that he would take his salary in bitcoin (BTC) in a bid to raise awareness of innovative assets as a store of value.

Since then, the currency’s value has halved – though he says he’s unmoved by the rises and falls in the market. That may also be because, in practice, he takes a conventional euro paycheck that he then converts into BTC each month, partly insulating himself from market swings.

While originally inviting hostility from colleagues, some of whom De Beukelaer says branded him an “anarchist,” he also believes his advocacy has begun to raise awareness and curiosity about the potential of crypto – which he remains convinced can make finance fairer.

“My entry point is the realization that we are in a very unfair financial world: Many people don't have access,” he told CoinDesk, adding that crypto offered transparency and the same rules for everyone. “In Belgium and also in Europe, you have very few people who have access to the financial markets.”

As a lawmaker in what is effectively the city administration for a capital of around 1.2 million, De Beukelaer concedes he has limited powers to effect change. But he hopes Belgium can use its forthcoming EU presidency, during which it will chair meetings of the bloc’s member states in the first half of 2024.

“I want to work with other members of Parliament on that to be sure we … have a real impact on important legislation at a European level, to make two or three breakthroughs on Web3,” he said.

As to whether he has the support of the federal government – or the country’s other, bigger regions of Flanders and Wallonia – to pursue that goal, he is candid.

“Not yet,” he said. “But I'm working on it.”


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.