The CNMV publishes a proposal for a circular to regulate the mass advertising of crypto-assets

The crypto-asset market is increasingly becoming more popular. Their extreme volatility makes them particularly attractive to inexperienced investors whenever their value rises. This trend is certainly intensified by the existing advertising campaigns to promote the purchase of crypto-assets, even targeting people who are not fully aware of the risks involved with these assets. Despite the foregoing, there is no complete regulation of crypto-asset trading in Spain.

Apart from the implementation of the fifth anti-money laundering directive and some joint statements by the CNMV and the Bank of Spain warning about their risks, the regulation of crypto-assets in Spain is still at a very preliminary stage. This is partly because most of the players offering crypto-assets as an investment service are based in other jurisdictions, which could imply that resolutions of disputes that may arise are likely to fall outside the scope of competence of the Spanish authorities. However, the unrestricted mass call for Spanish citizens to invest in these volatile assets represents a risk that the Spanish legislator wants to address as soon as possible.

Recently, the Spanish Government amended the Securities Market Act through a Royal Decree-law, which granted powers to the CNMV to supervise such advertising of crypto-assets, as well as any other advertising offering assets and instruments as an investment opportunity to the general public (even if they are not assets or instruments typically, subject to the supervision of the CNMV). Thus, the CNMV has published a proposal for a circular (the "Proposal"), which foresees that such mass promotional activities shall require an authorisation from the CNMV. This deviates from the CNMV's Circular 2/2020 on the advertising of investment products and services, which sets forth that the advertising addressed to Spanish investors will not require a prior authorisation from the CNMV.

A first noteworthy aspect of the Proposal is that for the first time in Spain, it defines what is considered to be crypto-asset service by providing an open list of professional activities that would fall into this category. Thus, the following services will be considered as crypto-asset services for the purposes of the Proposal: (i) trading crypto-assets on platforms, (ii) buying, selling or swapping crypto-assets, (iii) advising on crypto-assets, (iv) managing crypto-asset wallets, (v) any form of remuneration of crypto-assets, and (vi) any other services or activities that involve the trading of crypto-assets. Although this Proposal is limited to regulating the advertising of crypto-assets, we understand that it can serve as a basis for delimiting the scope for further laws to be developed in Spain for a complete legal framework on crypto-assets.

As a brief reference, the Proposal also clarifies what would be qualified as mass advertising for the purposes of the Proposal. That is, any advertising addressed at more than 100,000 people through any advertising medium. 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 audience in terms of the viewers for television or the estimated audience and visitors for the advertising carried out via digital media and search engines).

Notwithstanding the above, the Proposal only regulates those advertising activities related to crypto-assets that are offered as an investment opportunity. In particular, the Proposal clarifies that a crypto-asset is considered to be advertised as an investment opportunity if the advertising includes any reference to its profitability, price or value (whether current or future) that would suggest that investing in such crypto-asset is a good opportunity. The Proposal also clarifies which activities would be excluded from the scope of the Proposal either because they do not pose a significant risk or because they are already regulated by other laws (e.g. the advertising of crypto-assets that may qualify as financial instruments).

Just as established in other regulatory works from the CNMV (such as the aforementioned Circular 2/2020), advertising messages promoting crypto-asset investment activities must comply with the provisions of a specific annex to ensure that such messages are clear, transparent and not misleading. In particular, it stresses that messages promoting crypto-assets should not refer to high past profitabilities in order to attract investors. In any event, advertising messages shall provide complete information regarding the risks associated with crypto-assets.

As mentioned above, the Proposal provides for a prior authorisation regime for the mass advertising of crypto-assets as an investment opportunity. In particular, this authorisation will be in the form of a notification to the CNMV fifteen days before the start of the intended advertising activity. The authorisation will be deemed to have been granted after the aforementioned fifteen days unless the CNMV, within such period, indicates to the applicant that the intended advertising does not comply with the requirements set out in the Proposal.

Therefore, the Proposal seeks to ensure that anyone intending to invest in crypto-assets due to the intense advertising activities is aware of the risks involved in such assets. Although the text of the Proposal is not final, it should be kept in mind that this initiative has been already submitted to a public consultation process held in April 2021 and that the Proposal serves as a good indicator of what standards the CNMV wishes to implement for the safe advertising of crypto-assets. Thus, the circular of the CNMV resulting from the Proposal will bring a bit more legal certainty to crypto-asset trading, though it should be taken into account that the European Regulation on crypto-assets (MiCA) is expected to complete the legal framework for crypto-assets.