Interest in crypto-assets is growing in Belgium. And they are particularly interesting young retail investors. In early 2022, nearly one-quarter of them said crypto-assets were the best possible investment. 1 But this trend is not limited to young investors. A report from the European Central Bank showed that in mid-2022, nearly 10% of Belgians households might own crypto-assets. 2
As mentioned in our previous client alert, the Financial Services and Markets Authority (FSMA), one of the two supervisory authorities of the Belgian financial sector, was given new supervisory powers regarding the commercialisation of virtual currencies in the summer of 2022. The FSMA recently used these powers and introduced a new regulation on marketing virtual currencies to consumers. The regulation was approved by a Royal Decree on 5 January 2023, as published in the Belgian State Gazette on 17 March 2023 (the FSMA Regulation).
Context
The increasing popularity of virtual currencies in Belgium is partly because of the massive campaigns promoting them. This is not only through traditional marketing channels, but also through social media like TikTok and Instagram. Well-known personalities (so-called ‘influencers’, top athletes or artists) promote virtual assets to the online community using their fame as a commercial argument.
But, until recently, there was no legal framework on the commercialisation (and advertising) of virtual currencies among non-professional investors. So there was no guarantee for Belgian and European investors that the information provided to them was correct, clear and not misleading.
In 2022, the three European supervisory authorities (the European Banking Authority, the European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) highlighted the risks of misleading advertisements related to investments in crypto-assets, including on social media. They advised consumers to be particularly wary of promised fast or high returns. Following this warning, several national financial regulators (including in Spain, UK, France and now Belgium) moved to regulate crypto-asset advertising, with an eye on promotion on social media, to curb malpractice in the sector.
New requirements on the publicity of virtual assets
The FSMA’s objective is to inform consumers of the risks if they decide to acquire virtual currencies. The Belgian regulator introduced a new regime based on three elements:
- compliance with minimum requirements to ensure the correct and non-misleading nature of the information in the advertisement;
- the mandatory insertion of specific warnings in advertising; and
- an obligation to notify the FSMA in advance of advertising for mass campaigns.
SCOPE OF APPLICATION
The FSMA Regulation targets advertising related to the marketing in Belgium of virtual currencies to customers, whether as regular or occasional professional activity but provided that this advertising is carried out against remuneration. It only applies to advertising for ‘virtual currencies’ as defined under the AMLD53 : it does not apply to advertising for crypto-assets that qualify as financial instruments or investment instruments, as such advertising is already subject to other legal requirements.
The publicity is defined in a very broad way as “any communication specifically aimed at promoting the purchase or subscription of one or more virtual currencies, regardless of the medium used or its means of distribution.” Given the large scope, the new requirements apply not only to communications circulated via a physical medium, radio or television, but also those published on a website or circulated by sending messages. It also applies to publication of written, audio or video messages on social networks or on other applications.
The FSMA Regulation is likely to apply to those who market virtual currencies or to exchange platforms. But it will also apply to people who act as intermediaries, commission agents or brokers, or who, like so-called influencers, limit themselves to making promotions for virtual currencies, in exchange for some remuneration or some other benefit.
The new rules only apply if the marketing is directed towards Belgium, ie if the marketing is directed specifically towards Belgian consumers, which will need to be assessed based on a factual analysis. A series of indicators will be used for this assessment, such as the use of one of Belgian official languages or the use of the image of people specifically known by the Belgian public (such as Belgian athletes, artists or other personalities) to promote virtual currencies. This will require a case-by-case analysis, taking into account the various factual elements of the advertising in combination with the indicators to assess whether the marketing is directed towards Belgium.
REQUIREMENTS REGARDING THE INFORMATION PROVIDED IN THE ADVERTISEMENT
Information given to consumers through advertising cannot be misleading or inaccurate. The FSMA has set out a list of conditions that advertisements have to meet.
Advertisements for virtual currencies must be clearly recognizable for consumers. They must be consistent with the warnings required by the FSMA Regulation (see below). And they must not minimize or obscure those warnings. They must also be written in a balanced way, indicating in a visible and correct manner, beyond the potential benefits of the virtual currency, the risks, limitations, and conditions applicable to the virtual currencies.
Advertisements may also not make irrelevant comparisons when explaining the nature and risks of the virtual currency (eg comparing the performance of an athlete with investment in a virtual currency). They may not contain any statements about the future value or performance of the virtual currency. And the information must be written in a clear and understandable language for the consumer, avoiding any technical vocabulary.
MANDATORY INCLUSION OF WARNINGS
Apart from the content requirements for advertising virtual currencies to consumers, the FSMA also requires advertisements to contain mandatory disclosures:
- Each advertisement must contain the following message: “Virtual currencies, real risks. The only guarantee in crypto is risk.” (in Dutch: “Virtuele munten, reëele risico’s. De enige garantie in crypto is het risico.” – in French: “Monnaie virtuelle, risques réels. En crypto seul le risque est garanti.”)
- Each advertisement must also contain a warning to draw the consumers’ attention to the various risks when investing in virtual currencies (eg regarding the volatile character of their value, the nonapplication of the deposit guarantee regime for bank deposits, etc.). In principle, the warning must be included in full text in the advertisement itself, unless the format of the advertisement does not allow so (in which case a link or reference that gives access to the warning is considered to be sufficient).
- If the (natural or legal) person featured in the advertising, or whose image is used in that advertising (eg athletes, artists or other personalities), is remunerated or receives any other benefit for the advert, the advertisement should say so.
This information must be presented to the consumer in a verbatim, visible, and understandable way, in the same format and language as the rest of the advertisement. And it must be included at the beginning of each advertisement, or, for websites, at the top of each web page.
PRIOR NOTIFICATION TO THE FSMA FOR “MASS CAMPAIGNS”
Another notable obligation imposed by the FSMA is the prior notification requirement for “mass campaigns” (ie the distribution of advertising to at least 25,000 consumers). For these campaigns, the person who determines the content of the advertisement has to notify the FSMA at least ten days before the advertisement is distributed. This is to allow the FSMA to verify whether the advertisement meets the requirements as laid down by the FSMA Regulation. The advertisement must be notified in the format in which it will be distributed to customers.
The FSMA has clarified that the following campaigns qualify as a mass campaign for which the notification obligation will apply to:
- advertisements visible from a public highway or a publicly accessible infrastructure (eg a stadium, a train station or metro station)
- advertisements on a website accessible to the public, whether broadcast by the website operator or by another person
- advertisements shared on a social network by a person who has at least 25,000 followers on that social network at the time the advertisement is published, or where the person pays the social network for the posts.
Advertisements not covered by these descriptions will have to be assessed on a case-by-case basis, taking into account the concrete elements, whether or not the campaign constitutes a “mass campaign” subject to prior notification to the FSMA.
It shall be noted that the notification procedure does not involve a prior approval mechanism, meaning that distributing an advertisement does not require explicit approval from the FSMA. But if the FSMA is of the opinion that the advertisement submitted raises objections in the light of the requirements in the FSMA Regulation, it will inform the applicant of the shortcomings. And it will ask the applicant to correct the advertisement.
For advertisements that do not qualify as mass campaigns, the FSMA will only exercise a posteriori supervision, with the objective of risk prevention. In practice, the FSMA will do this through the one-year document retention obligation applicable to persons distributing advertisements that fall within the scope of the FSMA Regulation.
Entry into force
The FSMA regulation will enter into force on May 17, 2023 (ie two months after the publication of the Royal Decree approving the FSMA regulation in the Belgian State Gazette). Advertisements distributed from that point onwards must meet the requirements laid down in the FSMA Regulation. Advertisements that were distributed before this date must be changed to conform with the FSMA Regulation within three months following the publication of the Royal Decree approving the FSMA regulation, ie by June 17, 2023.
If advertisements are published without complying with the FSMA Regulation, the regulator will be able to take measures and sanctions, including removing the advertisement and administrative fines.
