Upcoming rules on the advertising of crypto-assets in Spain

We have all seen certain crypto-currencies soar in price, while offers and advertising of these crypto-assets are growing.

The Spanish securities markets regulator, the CNMV, has surely noticed this too and must be looking on warily as more and more retail investors have been putting their money into these highly volatile assets (according to some media reports, around 4 million people in Spain hold crypto-assets, that’s around 8.5% of the population). Statements made by the CNMV on 8 February 2018 and 9 February 2021 are evidence of its concern.

However, until now, the regulator’s response had been just that: issuing statements, including warnings to the public.

New draft rules
Things are about to change, though, as, on 14 June 2021, the CNMV published draft new rules intended to regulate communications used to advertise crypto-assets as an investment, by imposing rules on the content and presentation of those communications. They also subject mass advertising campaigns to a pre-approval regime. It is highly likely that the CNMV wanted to act sooner but it needed a change in the law to beef up its powers; this only happened in March 2021.

The impact 
The publication of these new rules is very important for all companies and firms currently advertising crypto-assets as an investment in Spain and those which may do so in the future. It will also impact advertising service providers working for these companies.

The scope
Applying the new rules will require some interpretation, starting with their scope. 

Determining which types of advertising and crypto-assets are affected can be somewhat tricky in practice. For example, only advertising which offers or brings attention to the investment potential of crypto-assets is caught by the rules. Similarly, crypto-assets which do not have the features to qualify as an investment are out of scope (as are financial instruments and NFTs).

What is clear is that white papers and certain other forms of published information, as well as campaigns to promote corporate / brand awareness, are explicitly excluded.

The rules are very similar to those applicable to the advertising of investment services and products and while some are very concrete (e.g. the inclusion of specific wording to warn about risks), others are drafted as principles (e.g. the information in the communication must not be misleading). Applying principles based rules will also be open to interpretation.

Compliance
Among other requirements, communications must be clear and not misleading and contain certain wording generally warning of risks, as well as a link to or indication of where to find additional information about the crypto-asset and its risks.

The CNMV can also demand specific information about advertising to assess its compliance, informing the relevant persons about any deviations from the rules and demanding that advertising is cancelled or corrected as necessary.

Timing
The draft rules are open to public consultation until 31 August 2021 and are expected to come into effect at the end of the year or start of 2022.

A shift in approach
The publication of these draft rules seems to indicate a shift in the approach by Spanish legislators and financial services authorities towards crypto-assets, related technologies and towards fintech more broadly. 

For years, Spanish lawmakers and regulators seemed reluctant to make any changes to the law in response to the development and growing use of distributed ledger technology (DLT). This seems to be changing. More on this soon.