Three months ago, on March 13, 2021, the National Gazette published the government approved emergency reform to the Spanish Stock Market Law (Royal Decree 4/2015, the “LMV”). The incorporation of article 240 bis to the LMV was a direct backlash to the aggressive advertisement benefiting from, as well as fostering, the rising frenzy on cryptocurrency. The article empowered the CNMV to outline the prerequisites any publicity on cryptocurrency has to comply with before getting out to the public and, also, to remove from the public’s sight any advertisement they deem as fraudulent or misleading.
A proposal for such outline was finally published last week on June 14th, 2021 by the CNMV. It contains seven norms, one final disposition and two annexes. There is a period finishing on August 2021 in which interested parties will be able to present consultations or suggestions to the CNMV, since this is merely a draft. The Circular will enter into force 3 months after its publication in the Spanish National Gazette (“B.O.E.”). Meanwhile, we will make a high-level review of the proposal’s content by highlighting the most relevant information that cryptocurrency service providers are to take into account:
A description of the Circular’s objective, which is to develop the norms, principles and criteria to be complied with by cryptocurrency advertisement.
A few definitions were incorporated in the Circular, such as “Cryptoassets”, “Cryptoasset Service Providers”, “Service on Cryptoassets”, etc. But among all, the following are the most determining for practice:
The following will fall under the scope of the Circular:
a) All advertisement on cryptoassets directed towards investors or potential investors resident in Spain.
“Directed towards residents in Spain” = When the advertisement is carried through Spanish media outlets or expressed in Spanish or other official languages (unless it contains an express disclaimer stating the product is not offered to residents in Spain).
b) Activities excluded from the Circular’s scope:
D. Subjective Scope
Individuals or entities that fall under the scope of the Circular:
a) Cryptoasset service providers whenever they advertise cryptoassets.
b) Advertisement service providers.
c) Any individual or entity, different from the above, carrying out on its own, or through third parties, an advertisement campaign related to cryptocurrencies.
E. Format & Content of the Advertisement
As a general note, all advertisement campaigns shall be tied to general principles stated in the Annex 1 of the Circular, such as being clear, impartial and not misleading. Nonetheless, all advertisement campaigns will also have to include information regarding the risks associated to buying the product by:
a) Including a disclaimer stating: “cryptoassets are not regulated, they may not be adequate for retail investors and the whole investment may be lost”.
If the inclusion of this information is problematic due to the lack of space or time, the by:
b) Including a link that will direct the investor to all relevant information associated with the investment, stating: “this link will explain all details on the risks of your investment. Important to read”.
F. CNMV Supervising Role
The rule establishes that advertisement campaigns targeted towards Spanish residents will only be subject to prior notice to the CNMV when they are Mass Campaigns (directed to more than 100.000 people). All other campaigns will be exempt of this requirement. Nonetheless, the CNMV might oblige certain Cryptoasset Service Providers to always comply with the prior notice if they deem the impact of their campaigns too high for the public.
Additionally, the CNMV can also require the cessation of the advertisement they consider misleading or fraudulent in regard to Annex 1. In such case, the required party will have two working days to respond.
G. Prior Notice
In the event of a massive campaign, a prior notice of 15 working days will have to be given to the CNMV. This notice will have to contain all relevant details of the campaign, such as dates, territory, description, etc. Nonetheless, the CNMV has not yet published official form of such notice.
If the prior notice required by the CNMV is not complied with, the sanctions established in the Stock Market Law will be applied according to article 292 Spanish Stock Law. In this respect, since the violation of these rules would be considered a serious infringement according to article 303 of Spanish Stock Market Law, fines could be set at up to the greater of three times the gross profit obtained through advertising, 2% of the offending entity’s own resources, 2% of the total funds used for the infringement or up to 300,000 euros.
I. ANNEX 1: Principles and Criteria
The principles and criteria we believe to be the most relevant are the following:
J. ANNEX 2: Risky Investments.
It outlines general principles and common knowledge of the cryptoasset market, as well as general indicators of risk in regards to investing in these assets.
Fintech and Blockchain Department
ALFONSO LÓPEZ-IBOR ALIÑO / OLIVIA LÓPEZ-IBOR JAUME / ALEJANDRO ANDRÉS SOSA RÖHL