Circular 1/2022 of the CNMV on the advertising of crypto-assets as an investment product

As of today, the provision of services related to crypto-assets (hereinafter, Crypto) would be mainly unregulated in Spain. This unregulated status will probably be maintained until the European legislator passes the Regulation on Crypto, commonly known as MiCA. However, in the meantime, the Spanish legislator has taken actions to address some of the most concerning aspects about Crypto (e.g. their risks regarding their potential use for money laundering purposes, and the exploitation of advertising campaigns about Crypto that could potentially be misleading for non-professionals). Regarding AML, it should be noted that Royal Decree-law 7/2021 laid down the obligation for Crypto exchange and custodian wallet services providers to register with the Bank of Spain, for which they shall provide specific AML information that will be made available to the Spanish FIU. In regards to Crypto advertising, the Spanish National Securities Market Commission (the CNMV) passed a Circular on 17 January 2022 to regulate these activities (hereinafter, the Circular).

Scope of the Circular

The Circular applies to those massive marketing activities about Crypto that are presented as an investment product and addressed at Spanish investors (i.e. the Circular does not apply to reverse solicitation of Crypto). Regarding the scope of the Circular, it should be noted that:

• By massive advertising activities, the Circular refers to marketing activities addressed at 100,000 people or more. Please note that such threshold would be calculated in accordance with the information provided by sources used on a broad scale in the advertising sector (for instance, the viewership for television or the estimated audience and visitors for digital media and search engines).
• As per Crypto that are presented as an investment product, the Circular clarifies that it shall be presumed that Crypto draws the attention of addressees as a potential investment product where the advertising activity fosters their acquisition or refers to their profitability in any manner.
• The Circular also clarifies that marketing activities are addressed at Spanish investors where the activities are conducted through Spanish means of communication -including websites/domains- and where the marketing activities are carried out in Spanish, except where the Crypto provider can evidence that their services or products are not addressed at or accessible for Spanish investors.

However, the Circular excludes from the scope of its obligations a number of activities regarding Crypto where they can qualify as financial instruments (which would be subject to the scope of CNMV's Circular 2/2020 on advertising of investment products and services), when by their nature they cannot be an investment product, when Crypto can only be used to access a digital service and only accepted by the issuer and the issuer's network unless its value can increase, non-fungible tokens, white papers, corporate advertising campaigns, etc. The exclusion criteria set out in the Circular might be arguably broad and will require interpretation by the authorities to assess how they should apply.

Obligations derived from the Circular

For those marketing activities to which the Circular applies, it should be noted that obliged subjects will have to comply with the following obligations:

• Abide by the rules in the Annex I of the Circular. These rules include: transparency, impartiality, non-misleading, understandable, information of profitability must be clear, truthful, sufficient and up-to-date, references to past profitabilities must be time framed in a precise manner, also highlighting when the Crypto lost value, profitability timeframes must be referenced to 12-month periods at least, past profitabilities or history records must be as prominent as the rest of the information, format and time of the warnings, etc. Generally speaking, the criteria and recommendations point at being very careful about unduly enticing customers into the product by misleading them about the key elements of Crypto before making an investment in products of the kind. 

• Include certain messages and warnings, such as:

  a) «La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido» (Investment in Crypto is unregulated, it may not be adequate for non-professional investors and lead to losing all the amounts invested). This message should be included in a format and position that ensures its relevance within the marketing communication.

  b) A link accompanied with the following message «Es importante leer y comprender los riesgos de esta inversión que se explican detalladamente en esta ubicación» (It is important to read and understand the risks of this investment that are explained in detail here). Please note that the information that should be included in the referred link is explained in Annex II of the Circular (which relates to warnings regarding the (i) high risk of these investment products, (ii) risks inherent to the technology -blockchain-, and (iii) legal risks).

• Make a prior notification -at least ten days before the marketing activity is launched- to the CNMV. The relevant obliged subject will need to provide general information on the media, Crypto involved, audience, as well as the very contents of the advertising message to the CNMV. Obliged subjects may launch their campaigns ten days after submission, provided that the CNMV does not communicate otherwise. It is important to note that this is not an authorisation process in the sense that a lack of response or reaction from the CNMV during those ten days will mean that the latter approves of the campaign notified.

• Keep records of all the advertising campaigns on Crypto or services on Crypto even if they do not qualify as massive advertising activities. The CNMV may request specific information on the advertising campaigns and order adjustments or cessation.

Wrap up thoughts

The Circular applies from 17 February 2022 and it seeks to ensure that anyone who is interested in investing in Crypto due to marketing messages is fully aware of their risks. In this sense, obliged subjects will need to be very transparent, include specific warnings, and be subject to close scrutiny from the CNMV when conducting marketing activities around Crypto.