For several years, cryptocurrencies, such as Bitcoin or Ether, have been growing in popularity as investment objects. However, their volatility and associated risks have recently attracted attention. In response, the Financial Services and Markets Authority (FSMA) in Belgium has adopted a regulation to regulate the marketing of virtual currencies to consumers. This regulation, dated January 5, 2023, approved by Royal Decree on February 8, 2023 and published in the Belgian Official Gazette on March 17, 2023, comes into force on May 17, 2023. This article examines the main elements of this regulation and explains the obligations imposed on the market participants concerned.
Following some events related to the cryptocurrency market, which took place during the year 2022, such as the UST crash, the Celsius bankruptcy or the FTX bankruptcy, the FSMA decided to react by adopting a law text defining key concepts, such as advertising, marketing of virtual currencies and cryptocurrencies themselves. Indeed, this regulation imposes various obligations, such as the insertion of mandatory mentions in advertisements related to cryptocurrencies or the notification to the FSMA of all advertisements used in the context of a mass campaign.
Moreover, this decision, of the Belgian Financial Services and Markets Authority, takes place while waiting for the implementation of specific measures at the European level. In this regard, observe that the European Parliament has voted in favor of the MiCA (Market in Crypto Asset) law, which aims to regulate the entire cryptocurrency sector. These new rules, which will include increased control of companies wishing to establish themselves within the EU, registration of the latter, transparency, traceability or even compliance with certain environmental obligations, will come into force in 2026.
Finally, the FSMA regulation, as mentioned above, aims to regulate the marketing of virtual currencies to consumers. As of May 17, 2023, market participants must comply with strict rules, on the one hand, in order to protect consumers and, on the other hand, in order to ensure transparent communication on the risks associated with investing in virtual currencies.
The FSMA regulation of January 5, 2023 imposes obligations regarding advertising to consumers when selling virtual currencies in Belgium, whether in the context of a regular or occasional professional activity, in exchange for a remuneration.
The regulation defines several key concepts:
- Advertising: this term is defined 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 dissemination";
- Marketing: this concept refers to "the presentation of a product or a virtual currency, by any means whatsoever, to encourage the customer or potential customer to buy, subscribe, accept, sign or open the product or currency in question";
- Virtual currencies: this concept implies "digital representations of value that are not issued or guaranteed by a central bank or public authority, that are not necessarily linked to a legally established currency, and that do not have the legal status of money or currency, but that are accepted as a means of exchange by natural or legal persons and that can be transferred, stored and exchanged electronically".
First, the content rules for virtual currency advertisements have been strengthened by FSMA. Indeed, these rules require that advertisements are neither misleading nor inaccurate and that they highlight warnings about the associated risks. In addition, advertisements must provide a balanced view by mentioning the risks, limitations and conditions applicable to virtual currencies, thus avoiding irrelevant comparisons. In addition, they should not make statements about the future value or performance of the virtual currency. Finally, the information should be presented in a clear and understandable way, without using technical language.
First, all advertisements for virtual currencies must contain a standardized warning message to highlight the risks involved. This message states: "Virtual currency, real risks. In crypto only the risk is guaranteed". Second, advertisements must include a detailed warning about the risks associated with virtual currencies that will take the following form:
- the value of your virtual currencies can go up and down dramatically and the amount you invest can be lost entirely;
- Virtual currencies are not covered by bank deposit guarantee schemes;
- There are no legal mechanisms in place to prevent market manipulation or insider trading in the virtual currency market;
- virtual currencies are entirely dependent on a specific technology and IT infrastructure, which in some cases may have been developed very recently and may still be insufficiently tested;
- in case of loss of the login or password to access the virtual wallet where the virtual currencies are stored, the virtual currencies will be permanently lost;
- the acceptance of virtual currencies as a means of payment is currently limited and in the vast majority of countries there is no legal obligation to accept them."
Finally, as of May 17, 2023, it is mandatory to mention in advertisements whether a person is being paid to appear in the advertisement or whether his/her image is being used. This mandatory information must be clearly visible and understandable and be presented at the beginning of the advertisement, in the same format as the rest of the advertisement.
To begin with, mass advertising campaigns must be notified to the FSMA at least 10 days before they are broadcast. The criteria for qualifying as a mass campaign include dissemination to at least 25,000 consumers, visibility from the public highway, dissemination on a publicly accessible website or infrastructure, and dissemination on a social network by a person with at least 25,000 followers or paying the social network for dissemination.
However, it is important to note that FSMA does not pre-clear advertisements, but may comment during the notification period and after the broadcast. The absence of a reaction from FSMA within ten days of notification does not imply tacit approval.
Finally, the responsibility for notification of mass campaigns rests with the person who decides on the content of the advertisement, not with the media outlet through which the advertisement is disseminated.
In conclusion, whatever our opinion, whether favorable or unfavorable, it is undeniable that the FSMA plays a crucial role in the regulation of financial services in Belgium. Charged with protecting the interests of consumers, it ensures a safe and fair financial environment. This new Belgian regulation of crypto-currencies aims to regulate the marketing of virtual currencies to consumers in order to protect their interests and to ensure transparent communication on the risks associated with these investments. This regulation is part of a broader context, pending the entry into force of specific measures at the European level to regulate the entire cryptocurrency sector. While regulation alone will not make the cryptocurrency sector risk-free, FSMA, by adopting this regulation, is taking a proactive initiative to address the volatility and risks associated with cryptocurrencies, thus underlining the importance of protecting investors and consumers in this rapidly evolving field.
Finally, and this will be the subject of a future article, it is essential to highlight, that alongside this new regulation, the FSMA has developed a series of educational videos specifically designed to raise awareness of virtual currency issues among young people. These videos adopt an attractive and accessible format, in order to capture the attention of young people and provide them with relevant information. It is accompanied by a fact sheet for teachers and an interactive quiz for students. This comprehensive educational kit is a valuable tool for addressing virtual currency issues in schools. In addition to the educational videos, FSMA has also developed a new game module for the Wikifin Lab, its financial education center. This interactive module aims to confront young people with the risks associated with virtual currencies in a fun way. By putting them in virtual situations, young people will be able to experience the consequences of their choices and become aware of the stakes associated with these forms of financial transactions. These educational initiatives by FSMA demonstrate its commitment to providing consumers, especially young people, with the tools to understand cryptocurrencies and make decisions based on knowledge and broader understanding of the subject. It seems indisputable that one of the best ways to reduce the risks associated with crypto-currencies, in addition to regulation, is by raising awareness of the risks and opportunities of crypto-currencies from an early age, with the aim of creating a generation better prepared for the financial challenges of the modern world.