Sunday, October 1

The Government regulates the advertising of crypto assets

In recent months, many cryptocurrencies have experienced high volatility accompanied by a significant increase in aggressive advertising, to attract investors.

Indeed, anyone who has studied the evolution of bitcoin will have seen the vertigo involved in investing in it. It has gone from paying $800 at the end of 2016 to setting a record of nearly $68,000 last November. It has shot up 8,500% in five years, although it is now below 50,000. A decrease of almost 30%.

In this context, Royal Decree-Law 5/2021, of March 12, on extraordinary measures to support business solvency in response to the Covid-19 pandemic, granted the CNMV powers in order to control administrative your advertising.

Cryptocurrencies and the technology that supports them can be elements that will invigorate and modernize the Spanish financial system in the coming years, but to assess their validity as an investment alternative, it is necessary to keep in mind the risks that the CNMV indicates in Circular 1 /2022, dated January 10, published in the BOE on Monday, January 17.

Among other precautions, it indicates that the value of the investments and the return obtained from them may experience significant upward and downward variations, and the entire amount invested may be lost. It also points out that crypto assets are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund.

The prices of these virtual assets are constituted in the absence of mechanisms that ensure their correct formation., such as those present in regulated markets.

Registry technologies are still in an early stage of maturity, so they may not be sufficiently tested and there may be significant flaws in their operation and security.

The anonymity facilities provided by cryptoactives make them a target for cybercriminals, since in the case of stealing credentials or private keys they can transfer them to addresses that make it difficult or prevent their recovery.

The acceptance of crypto assets as a means of exchange is still very limited and there is no legal obligation to accept them.

There is still no framework in the European Union that regulates crypto assets, and that provides guarantees and protections similar to those applicable to other products. Despite the urgency, these virtual currencies will take at least another two years to have community regulations that offer legal support to their services, operations and transactions.

Currently, a Regulation known as MiCA (markets in crypto-assets) is being negotiated, which will be applicable in the first half of 2024, predictably in May or June. In the meantime and until the reform of the Securities Market Law is approved, a rule that will incorporate more detailed regulation, we will have to settle for the control that the CNMV will exercise over the advertising of these assets. For example, the obligation to avoid making references to high past returns; omit any mention of limitations or exclusions of the responsibility of the obligated subjects for the content of the advertising; clarify whether the advantages of a certain tax treatment are of a general nature or depend on the personal situation of the client; not to use the term “gift” or another equivalent in those cases in which there may be a fiscal repercussion; describe the rights of the investor when he does not have the crypto assets, being in digital purses (“wallets”) of the service provider or identify the entity that carries out the custody of the advertised crypto assets, the country in which it is carried out and the legal framework applicable.

Advertising activity aimed at investors in Spain will not require prior notification to the CNMV, except in the case of massive advertising campaigns, which must be carried out at least 10 business days in advance. However, and even when it is not a matter of massive advertising campaigns in the strict sense, certain obligated subjects may be required to provide this prior communication for all their advertising campaigns, when this is considered due to the impact they could have on the target audience.