Royal Decree-Law 5/2021 of 12th March on extraordinary measures to support business solvency in response to the Covid-19 pandemic introduced a new article - 240 bis - into the Securities Market Law, which granted the CNMV the ability to regulate the advertising of certain assets -such as crypto assets presented as investment objects-, even though these assets were not regulated by the Securities Market Law itself. Following this legal empowerment, the Spanish Securities and Exchange Commission (CNMV) issued the Circular 1/2022 of 10th January, regulating the advertising of crypto assets.

Target area

The target area is obviously the advertising activity for crypto assets that are the object of investment. For these purposes, the definition of crypto asset is practically the same as that provided by the MiCA project (regulation that will regulate crypto assets at European level): "a digital representation of a right, asset or security that can be transferred or stored electronically, using distributed recording or other similar technology".

There is no need for a concrete and specific offer to potential investors. It is sufficient that the advertising activity carried out refers to profitability, price, current or future value or may suggest an opportunity to invest in a crypto asset, for it to be presumed that an advertising activity falling within the scope of the Circular has been carried out.

Advertising is also required to be directed at investors in Spain, which is presumed even if it is done from abroad if it is done in official Spanish languages, unless measures are contained that attest that the promoted services or products are not directed or accessible to investors in Spain. This situation causes a great deal of extraterritorial application, which will cause that many foreign bidders and influencers may unknowingly contravene the rule.

The rule contains certain exclusions (Standard 4.2):

(i)  Advertising in relation to certain crypto assets:

(a)  Those in the nature of financial instruments (security tokens), which are governed by the general regulations on advertising on the securities markets.

(b)  Those which, due to their characteristics and nature, are not susceptible to investment.

(c)  Those whose sole use is digital access to a product or service (i.e., utility tokens) and which are accepted only by their issuer or a limited set of commercial providers with which the issuer has a contractual relationship, if there is no expectation of revaluation, and the volume offered and terms of the offering are commensurate with the actual rights that the crypto asset would offer.

(d)  Advertising of crypto assets that are unique and not fungible with other crypto assets, where they represent collectible assets, works of intellectual property or assets whose sole purpose is their use in games or competitions, so that they are not massively offered as a mere investment object. In short, certain non-fungible tokens (NFTs) if they are not "mass offered" (we understand that this requirement would be met if they are offered to more than 100,000 investors).

(ii)  Other assumptions not related to the type of asset. To simplify as much as possible: white papers (an explanatory document that under MiCA will be the analogue of a prospectus in the securities markets), corporate advertising campaigns (not for the crypto asset), presentations to analysts or institutional investors, publications by independent financial analysts and commentators (not sponsored or promoted), and educational activities, which do not encourage investment.

Subjective scope

The subjective scope extends to any natural or legal person, who carries out on its own initiative or on behalf of third parties an advertising activity on crypto assets. This includes not only crypto-related service providers and advertising companies, but virtually anyone, including, again, influencers, who may be sponsored by issuers or service providers.

Content and control of advertising

The rule contains an annex with a set of principles to which advertising must adhere, and even requires a warning message set out in the rule itself to be included: "Investment in crypto assets is not regulated, may not be suitable for retail investors and the full amount invested may be lost". The principles are included in Annex I of the Circular. In addition, Annex II of the Circular contains several risks that the investor should be warned about, which can be incorporated via a link to which should also be referred with a pre-established message from the Circular: "it is important to read and understand the risks of this investment which are explained in detail in this location".

In general, advertising activity directed at investors in Spain does not require prior notification to the CNMV, except in the case of mass campaigns. Such campaigns are those targeting more than 100,000 people, according to Rule 2(c). The standard also provides measurement criteria depending on the medium used. Suffice it to note that, in the age of the Internet and social media, the threshold is so low that any moderately well-known influencer will always exceed this limit, so that the need for prior communication may well become the general rule. If prior notice is required, it shall be given 10 working days before the start of the execution, providing the documentation foreseen in Rule 7.

Regardless of whether prior notice is required, a record of the campaigns carried out must be kept, including those in progress and those carried out in the last two years.

Under Rule 6, the CNMV may require the rectification or even the halt of advertising.

You can read the full article in the magazine Actualidad Jurídica Aranzadi (AJA).