Wednesday, November 29, 2023

The Spanish Securities Market Commission (CNMV) issues new rules regulating the advertising of cryptoassets

Roughly a year ago, a new regulation was approved in Spain which vested in the National Securities Market Commission (hereinafter, the "CNMV") the power to regulate the advertising of investment in cryptoassets.


Almost a year later, on January 17, 2022, the Spanish Official State Gazette (BOE) published the new Circular 1/2022 of the CNMV on the advertising of cryptoassets presented as investments (hereinafter, the “Circular”), which defines the rules, principles and criteria to which commercial communications and advertising of cryptoassets and digital currencies must adhere.

This Circular seeks to provide greater protection for investors, ensuring that advertising for these products is truthful, intelligible and not misleading.

This is a pioneering initiative in our environment

This Circular is a pioneering initiative, both in Spain and at the European level, as to date, there is no similar text in any of the markets of our environment.

It should be noted that the Circular only addresses the regulation of cryptoasset advertising but does not regulate cryptoassets themselves. The latter is currently being addressed by the European Commission through the Regulation on Markets in Crypto-assets (MiCA), which has not yet entered into force.

Advertising activity regulated in the Circular

According to Rule 3 of the Circular, advertising activity should be understood as “any advertising directed at investors or potential investors in Spain in which cryptoassets are implicitly or explicitly offered or drawn to their attention as an investment object“.

It is understood that a cryptoasset is offered or attention is drawn to it as a possible object of investment “when its acquisition is promoted or any reference is made to its profitability, price or value, current or future, that could suggest an opportunity to invest in said cryptoasset, even if they may eventually be used as a medium of exchange“.

However, the scope of the Circular specifically excludes:

  • The advertising of cryptoassets considered to be financial instruments, which are subject to their own regulation.
  • The advertising of “Utility tokens“, that is, cryptoassets that cannot be invested, due to their characteristics or nature, provided that there is no expectation of revaluation.
  • The advertising of cryptoassets whose sole purpose is to grant digital access to a product or service that is only accepted by its issuer or by a limited group of commercial suppliers with which the issuer has a contractual relationship, provided it complies with certain requirements. 
  • The advertising of the so-called “NFTs” (non-fungible tokens), which are cryptoassets that are unique and not interchangeable with other cryptoassets. 
  • White papers on new issues.
  • Corporate advertising campaigns containing exclusively generic information about a regulated entity or its corporate purpose, intended to make itself known to the public, subject to certain restrictions.
  • Certain documentation or information to be provided in presentations intended only for analysts or institutional investors.
  • The unsponsored publications issued by analysts or independent reviewers regarding cryptoassets.
  • The advertising of certain technical seminars, courses and conferences on cryptoassets that do not promote investment in cryptoassets.

Main new features of the Circular

As the main new feature, the Circular establishes the obligation to notify the CNMV ten business days prior to any mass advertising campaign (i.e. those aimed at more than 100,000 people). Such campaigns can be initiated after ten business days (i.e., there is no need to wait for formal approval) unless the CNMV notifies otherwise. The absence of a response from the CNMV during the period between the communication and the start of the campaign shall not imply that the CNMV considers the campaign to comply with all of the Circular’s rules.

All other advertising activities will also be subject to the CNMV’s supervisory action, but prior notification is not required.

As regards campaigns that are already active, it is of course no longer possible to make a prior notification, but the CNMV will be able to supervise and request information to check compliance with the Circular.

Another important new feature is the obligation to avoid including the term “gift” or any other equivalent term in the advertising message, in cases where there may be a tax impact, an economic incentive and in operations that may be considered as remuneration in kind: e.g., rewards programmes, token distributions (airdrops), etc.

Also, the Circular sets forth the obligation to keep a register of the advertisements published in the past two years.

Additionally, all advertising campaigns must contain clear, balanced and unbiased information, in accordance with the provisions of Annex I of the Circular. Specifically, they must contain specific information on the risks of the advertised product, in particular:

  • The marketing communication shall include the following warning message: “Investment in cryptoassets is unregulated, may not be suitable for retail investors and the full amount invested may be lost“.
  • A link or indication to the location of the additional information required by the Circular shall be included and identified by the following text: “It is important to read and understand the risks of this investment which are explained in detail at this location“.

This Circular will enter into force on February 17, 2022, and its publication lays the foundations for the legal obligations of advertising in the crypto sector, with the help of the threat of severe penalties which may amount to 300,000 euros.

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