The European markets in crypto-assets regulation (‘MiCAR’) requires any marketing communications from Crypto-asset service providers (‘CASPs’) to comply with disclosure requirements. One of the requirements is that advertisements must be fair, clear, and not misleading. The Dutch Authority on Financial Markets (‘AFM’) has conducted a review of various media outlets of CASPs to conclude whether they comply with this requirement. In this blog, we will update you on their key findings and lessons to be learned in this respect.

1. CASPs’ advertisements

The AFM signals that some advertisements are not fair, clear, or misleading. As lessons learned from the findings of the AFM, CASPs should be aware of the following:

• Advertisements should include a clear warning about the risks associated with crypto-assets that is proportionate to the advertisement’s context. The AFM concluded that in some of the cases, no warnings were given at all. In other cases, the warnings were too generic, such as “investing in crypto-assets involves risks.” According to the AFM, the warning should include the actual risk, such as: “investing in this crypto-asset involves risks; you could lose your investment.”
• An advertisement with historical returns should be based on a representative period that is not too short.
• Advertising the advantages of staking services should also include mentioning risks or conditions associated with the reward.
• Advertising promotions such as waiving fees should clearly show the timespan in which the promotion is valid and the applicable conditions.
• The wording of the advertisement should not be confusing or associated with other financial services or products that have fewer risks. Risks should not be trivialised. Using a term like ‘savings’ is associated with bank deposits. This is misleading as crypto-assets can decrease in value while bank savings fall within the deposit guarantee scheme.

2. Clarity on costs

Pursuant to MiCAR, CASPs should make their policies on pricing, costs and fees publicly available at a prominent place on their website. The study identified the following mistakes:

• No policy on pricing, costs and fees available on the website. Some CASPs did not have a policy at all, others’ policy was too generic, specifying only that “costs may apply”. The AFM stresses that the information on pricing should give a client actual insight in specific pricing, costs and/or fees. A cost schedule or a pricing calculator are examples of good practices.
• No prominent place of the policy on the website. Information on costs is sometimes scattered across the website. A good practice is to publish all the relevant information on one single webpage, which is one click away from the homepage.
• Missing plausible cost components, such as deposit/withdrawal fees or transaction costs. It is considered misleading if the client must pay these expenses although they are not mentioned by the CASP.

By publishing the outcome of explorative studies, the AFM gives insight in their expectations of CASPs regarding topics such as information disclosure. We stay on top of any development regarding MiCAR-requirements and publications by regulatory authorities. Keep an eye out for our blogs to stay updated on these developments or reach out to us if you seek legal assistance regarding crypto-assets and services.