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On 17 May 2023, new rules governing advertising for virtual currencies entered into force. They aim in particular to ensure that the risks linked to virtual currencies are sufficiently highlighted in such advertising. The Financial Services and Markets Authority (FSMA) oversees compliance.
On 5 January 2023, the FSMA issued a regulation subjecting the marketing of virtual currencies to consumers to restrictive conditions.
Justifications
Several reasons led to this regulation, notably the involvement of influencers in promoting certain crypto-assets, the risks inherent in them, and their volatility.
Virtual currencies are widely promoted to the general public and are a very popular investment. Consumers buy or sell cryptos for speculative purposes, often hoping to make a substantial gain on the currency’s price. Promotion is carried out through classic marketing channels but also through social media or applications such as TikTok or Instagram. Personalities known to the public (influencers) sometimes intervene, paid to promote virtual currencies to their followers. These personalities (artists or top athletes, for example) often have no particular financial qualifications but use their fame as a commercial argument. This promotion targets the general public, and therefore consumers. Certain categories, such as minors, are sometimes specifically targeted despite their vulnerability.
Virtual currencies also have features making them a potentially risky investment. First, they lack any real-world underlying and may be subject to sudden value swings: decentralised virtual currencies, such as Bitcoin or Ether, are not backed by an asset with intrinsic economic value or by an underlying income stream, and differ fundamentally from classic financial assets and from state currencies (not issued or guaranteed by a central bank, no legal tender status). Some crypto-assets, called stablecoins, aim to maintain a stable value and may have an underlying (a national currency or other crypto-assets), but recent events (the sudden collapse of TerraUSD, though based on the US dollar) showed that these too carry very significant risks. Second, they are vulnerable to illegal activities: trading platforms or digital wallets have been hacked, malicious actors target inexperienced consumers, and virtual currencies are widely used to circumvent anti-money-laundering rules and finance illegal activities. Third, they present particular technical risks: a virtual currency requires continuous maintenance through the permanent operation of the blockchain, which could be accidentally interrupted, and losing the identifier or password to the wallet means access is definitively lost.
Finally, the very high volatility of virtual currency prices in late 2021 and early 2022 caused significant losses for investors, a large proportion of whom were consumers who jumped on board when the market was high, influenced by the prevailing euphoria.
Legal basis
Until now, the marketing of virtual currencies to consumers, and in particular the advertising accompanying it, was not subject to any specific framework at Belgian or European level, other than the general rules on unfair commercial practices. The marketing of financial products is subject to specific and detailed rules deriving notably from the MiFID directive and the prospectus regulation, but these do not in principle apply to virtual currencies, even though these have a higher risk profile than most financial assets. Virtual currencies that constitute investment instruments fall within the Act of 11 July 2018 on public offers, and some crypto-assets also constitute financial instruments subject to MiFID. Their framework was nonetheless insufficient. In that context, an Act of 5 July 2022 amended article 30bis of the Act of 2 August 2002 on the supervision of the financial sector, to allow the FSMA to adopt regulations subjecting the marketing of virtual currencies to retail clients to restrictive conditions. The FSMA adopted its regulation on that basis.
The regulation’s mechanism
The regime rests on three elements. First, compliance with minimum rules ensuring the information in advertising is correct and not misleading: it may not be misleading or inaccurate, may not contain subjective assessments unsupported by an independent external source that tend to create a positive feeling about the product, and may not excessively emphasise a positive or purportedly positive feature. Second, the mandatory insertion of specific warnings: given the very particular nature of investing in virtual currencies, every advertisement must contain a standardised warning. All advertising must carry the message: “Virtual currency, real risks. In crypto, only the risk is guaranteed.” Third, an obligation to notify the advertising to the FSMA in advance in the case of mass campaigns. The FSMA prioritises the most significant market segments, notably advertising spread by important service providers likely to have many clients. A mass campaign means advertising spread to at least 25,000 consumers; advertising visible from public roads or public infrastructure (a stadium, station or metro), on a publicly accessible website, or on a social network by a person with at least 25,000 followers, is irrebuttably presumed to be such a campaign. The prior notification obligation falls on the person who determines the content of the advertising, not on the press organ or medium through which it is spread.
Entry into force
The regulation entered into force two months after publication of the approving Royal Decree in the Belgian Official Gazette, on 17 May 2023. Advertising spread from that date is subject to the regulation. Advertising whose diffusion began before that date had to be brought into compliance within three months of publication of the Royal Decree.
On cryptos, see also our article on MiCA (Markets in Crypto-Assets).
This article is a translation and a condensed version. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
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