Belgium Bans Virtual Derivatives

[bluemeanie1]

http://dcmagnates.com/belgium-regulator-fsma-issues-ban-of-virtual-currency-based-derivatives-effective-july-1/

The Financial Markets and Services Authority (FSMA) has announced a new regulatory edict that will effectively ban the use of derivatives based on virtual currencies such as Bitcoin as of July 1, 2014, according to an FSMA statement.

Belgium’s paramount regulatory organization FSMA has been keen to police a variety of financial instruments as of late, including binary options. However, the most recent FSMA regulatory announcement takes a far more pointed stance towards virtual currencies.

-bm

[1715334362]

1715334362

[Krang]

What are virtual derivatives? crytocurrencies?

[5flags]

What are virtual derivatives? crytocurrencies?

http://en.wikipedia.org/wiki/Derivative_(finance)

Examples would be futures and options.

[bluemeanie1]

it appears to be a response to the release of ShortNXT which is the first pure P2P Crypto Derivative.  You can purchase short positions(NXT is the underlying) on the NXT network.

https://nxtforum.org/assets-board/official-nxtshort-thread-faq/

-bm

[311]

This isnt good news. Really wish countries would stop trying to ban or restrict bitcoin.

[wachtwoord]

So derivatives are fine everywhere but in crypto? Right ....

[Ron~Popeil]

I don't really want to use my btc like fiat anyway. Derivatives and futures etc. are an old economy thing.

[Meuh6879]

So derivatives are fine everywhere but in crypto? Right ....

yes, but belgium is the one of the most user of tresor US paper money (paper debt deposit). 

[bluemeanie1]

so far I'm pretty sure not a single person in this thread actually knows what a Derivative is.

-bm

[wachtwoord]

so far I'm pretty sure not a single person in this thread actually knows what a Derivative is.

-bm

Incorrect.

[Neg]

so far I'm pretty sure not a single person in this thread actually knows what a Derivative is.

-bm

lol, you're probably mostly right  .

[shadypepe]

I don't really want to use my btc like fiat anyway. Derivatives and futures etc. are an old economy thing.

that's an extremely dumb statement and the kind of thinking that's slowing the advance of bitcoin. bitcoin should integrate into the existing financial system, not in some way overthrow it. there's just absolutely no way bitcoin could stand up against an established, working and (in large parts) useful multi trillion dollar derivatives market. and it doesn't need to. everything else is anarchism.

[Peter R]

A derivative is a financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate, called the "underlying."

It will be very interesting to watch how this develops in regards to colored coins.  A company like Groupon could issue vouchers using colored coins for their small-business clients, leveraging the accounting/verification system offered by bitcoin.  In my opinion, vouchers would not be banned under the Belgium FSMA regulation, but I'm not sure.  And what about issuing bonds or shares with colored coins?  In this case, the colored coins are the underlying because the underlying is just a contract and the colored coins represent pieces of that contract so to speak.  

The rational for the FSMA decision was:

an overall prevalence for operating risk, hacking virtual currency platforms, exchange rate risks and volatility, and the lack of legal guarantee for actual face value

With colored coins, the "virtual currency platform" that a hacker would have to hack is the blockchain itself and probably the least hackable thing in the world.  The "exchange rate risk and volatility" is irrelevant IMO and the "prevalence for operating risk" is ambiguous.

One point I think it partially valid is "the lack of a legal guarantee for actual face value."  If a company issues bonds as colored coins and creates a contract with the hash of that contract embedded within the colored-coins-issuance transactions, this becomes very strong proof of the agreement the was made between the issuer and the colored coin holders.  IMO this is as legally binding as any other contract and is a guarantee of face value, but IANAL.  However, whether the issuer will actually honour the contract is another matter.  But the credit worthiness of the issuer is a problem that has nothing to do with bitcoin.  

[bluemeanie1]

"the least hackable thing in the world"

"BITCOIN IS BEST COIN!"

[bitsmichel]

it appears to be a response to the release of ShortNXT which is the first pure P2P Crypto Derivative.  You can purchase short positions(NXT is the underlying) on the NXT network

still wondering if any post is not about NXT   

[hellscabane]

Clearly the Belgian government wants to straddle their citizens by not allowing them to straddle Bitcoins...

[bluemeanie1]

it appears to be a response to the release of ShortNXT which is the first pure P2P Crypto Derivative.  You can purchase short positions(NXT is the underlying) on the NXT network

still wondering if any post is not about NXT   

can I buy derivatives on Bitcoin?

-bm

[Kluge]

Y'know... their reasoning's fairly sound. I don't think they should have authority to do such a thing, but it doesn't seem particularly unreasonable a position for a conservative nation stuck in the 20th century, clinging to extreme luddite worldviews which will maintain them as a footnote in history, lagging in global GDP growth and continuing to treat their citizens as some type of abominable dog-children while the prestige of holding the highest public offices in Belgium does not rise any more than that of the local rat-catcher.

*cough*

But yes, extrapolating from the apparently-accepted axioms was done in proper fashion, I think.

[franky1]

in short, peeling away the opinions of reporters and forum people

a derivative is essentially what the winklevosses are doing. hoarding bitcoin and offering shares paid in fiat, where the share is based on the price of the bitcoin hoard.

so no belgium EFT basically.

they also make a statement that although the same risks apply there is nothing stopping people from buying actual bitcoins.

so chill out folks

[Kluge]

in short, peeling away the opinions of reporters and forum people

a derivative is essentially what the winklevosses are doing. hoarding bitcoin and offering shares paid in fiat, where the share is based on the price of the bitcoin hoard.

so no belgium EFT basically.

they also make a statement that although the same risks apply there is nothing stopping people from buying actual bitcoins.

so chill out folks

From you, I am not picking up the distinct odor of unfettered idealism. It's the principle, man - the principle!

[franky1]

From you, I am not picking up the distinct odor of unfettered idealism. It's the principle, man - the principle!

the principle that they dont want to regulate bitcoin...?
the principle that they dont want to offer money transmission licences for bitcoin businesses... ?
the principle that they want to keep their FIAT bait and switch tricks within their own non bitcoin boys clubs?
the principle that nothing stops people from buying bitcoin normally.. and then using bitcoin however people please?

all i see as being banned is FIAT paying EFT's that have a bitcoin hoard in the middle of it. basically no belgium winklevoss clones asking for Euro's for their shares.

which to me does not affect bitcoins usage or growth, just prevents FIAT investors making more FIAT.

[Peter R]

Wait a second, when the say "derivatives based on virtual currencies" do they mean derivatives that trade as traditional assets where crytpo is the underlying?  Or do they mean derivatives issued through a process such as coloring coins, where the underlying is, for example, USD?

[bluemeanie1]

as I mentioned above I think this is direct response to ShortNXT.

-bm

[wachtwoord]

Wait a second, when the say "derivatives based on virtual currencies" do they mean derivatives that trade as traditional assets where crytpo is the underlying?  Or do they mean derivatives issued through a process such as coloring coins, where the underlying is, for example, USD?

I'm pretty sure they mean the former (and don't even comprehend the latter).

[LostDutchman]

so far I'm pretty sure not a single person in this thread actually knows what a Derivative is.

-bm

Wrongo, Boyo!

[bluemeanie1]

btw - rumor has it they are releasing an entire suite of Forex Futures on NXT.

-bm

[LostDutchman]

Now let me see here...........................

The Belgians.

Is that the same lot who many years ago claimed to own a place in Africa called the Belgian Congo?

Yeah.

Oh, wait.

Excuse me.

It was the King of The Belgians who claimed that one and of course in order to support that claim, he ordered the slaughter of hundreds of thousands of locals and virtually enslaved millions.

And we are concerned about what Belgium thinks, just why?

[5flags]

And we are concerned about what Belgium thinks, just why?

Because they make my favourite beer, Hoegaarden. This alone makes Belgium more important than pretty much any other European state, except the one that I happen to be in at any one time.

[2kman]

Great chocolate as well - what else do you need? Beer and chocolate!

Anyway, apparently it will be illegal to offer a financial product which derives its yield, value from virtual currency, but only to non-professional clients.

This seems to be about consumer protection more than anything else.

[LostDutchman]

And we are concerned about what Belgium thinks, just why?

Because they make my favourite beer, Hoegaarden. This alone makes Belgium more important than pretty much any other European state, except the one that I happen to be in at any one time.

Well, there is that I guess.

[zimmah]

I know what derivatives are, but i'm not sure bitcoin needs them.

[edmundedgar]

From you, I am not picking up the distinct odor of unfettered idealism. It's the principle, man - the principle!

the principle that they dont want to regulate bitcoin...?
the principle that they dont want to offer money transmission licences for bitcoin businesses... ?
the principle that they want to keep their FIAT bait and switch tricks within their own non bitcoin boys clubs?
the principle that nothing stops people from buying bitcoin normally.. and then using bitcoin however people please?

all i see as being banned is FIAT paying EFT's that have a bitcoin hoard in the middle of it. basically no belgium winklevoss clones asking for Euro's for their shares.

which to me does not affect bitcoins usage or growth, just prevents FIAT investors making more FIAT.

If I'm reading the thread right this would also affect people doing useful commerce in bitcoin by preventing them from insuring themselves against changes in the price that affect them adversely. For example, if you're earning bitcoins but you need to pay your suppliers in euros, you'd want to short bitcoins to reduce your exposure. That way you'd give up part of the gains you make if the value of the bitcoin suddenly increased, but if the value of the bitcoin dropped, you'd still be able afford to pay your bills.

The result is exactly the opposite of what the regulators say they're trying to achieve, because the vendor ends up much more exposed to currency volatility than they could be.

[freedomno1]

This seems like an interesting legal decision I wonder how they came to that decision legal process.
That said if it is only derivatives that isn't so bad as an outright ban on virtual currencies.
So no Bitcoin futures trading fund etc.

Congrats you beat bitlegal on this one just hope it doesn't turn into a trend
http://bitlegal.net/nation/BE.php

[bluemeanie1]

From you, I am not picking up the distinct odor of unfettered idealism. It's the principle, man - the principle!

the principle that they dont want to regulate bitcoin...?
the principle that they dont want to offer money transmission licences for bitcoin businesses... ?
the principle that they want to keep their FIAT bait and switch tricks within their own non bitcoin boys clubs?
the principle that nothing stops people from buying bitcoin normally.. and then using bitcoin however people please?

all i see as being banned is FIAT paying EFT's that have a bitcoin hoard in the middle of it. basically no belgium winklevoss clones asking for Euro's for their shares.

which to me does not affect bitcoins usage or growth, just prevents FIAT investors making more FIAT.

If I'm reading the thread right this would also affect people doing useful commerce in bitcoin by preventing them from insuring themselves against changes in the price that affect them adversely. For example, if you're earning bitcoins but you need to pay your suppliers in euros, you'd want to short bitcoins to reduce your exposure. That way you'd give up part of the gains you make if the value of the bitcoin suddenly increased, but if the value of the bitcoin dropped, you'd still be able afford to pay your bills.

The result is exactly the opposite of what the regulators say they're trying to achieve, because the vendor ends up much more exposed to currency volatility than they could be.

that's an interesting theory, and certainly if we did have an options market the price would be much more stable and it would be easier to conduct commerce in Bitcoin.

-bm