New FSMA Regulation on commercializing virtual currencies to consumers

On 17 March 2023, a new FSMA Regulation on the commercialization of virtual currencies to consumers was published in the Belgian Official Gazette.1 As of 17 May 2023, the new rules will start to apply, with the understanding that advertising campaigns launched prior to 17 May can benefit from a one-month grace period and are expected to comply with the new rules as of 17 June 2023.

Why is a new FSMA Regulation needed?

Over the past couple of years, virtual currencies have become increasingly popular as a potentially profitable alternative to investments in traditional financial assets. Marketing in relation to virtual currencies has soared accordingly, in many cases targeting consumers. In addition to traditional marketing channels, virtual currencies are often presented to consumers via alternative venues such as social media networks.

However, as has been extensively documented, virtual currencies may pose significant risks to investors, e.g., due to their volatility, lack of intrinsic value, and vulnerability to fraud. According to the FSMA, such risks are barely highlighted in marketing campaigns today.

Against that backdrop, article 30bis of the Belgian Financial Supervisory Law (Law of 2 August 2002), which constitutes the legal basis for product interventions by the FSMA, was amended last year, broadening the competence of the FSMA to issue regulations "imposing restrictive conditions on the commercialization or certain forms of commercialization to non-professional customers of virtual currencies or of certain categories of virtual currencies".2

What is the scope of the Regulation?

In line with the definition of virtual currencies in the Belgian Financial Supervisory Law, the scope of the new FSMA Regulation only captures a subset of virtual currencies. That is to say, the new FSMA Regulation does not apply to the commercialization of virtual currencies that qualify as investment instruments within the meaning of the Belgian Prospectus Law (Law of 11 July 2018). Viewed from that perspective, the new FSMA Regulation adds to the existing commercialization ban of financial products whose returns depend directly or indirectly on virtual currencies, as incorporated in the FSMA Regulation of 3 April 2014.3

What obligations does the Regulation lay down?

For the virtual currencies that are in scope, the new FSMA Regulation lays down certain obligations to be complied with in connection to the marketing of virtual currencies to consumers when commercialization occurs in Belgium as a regular professional activity or on an occasional basis in exchange for compensation. It should be noted that the ‘marketing’ notion has been defined broadly, capturing any communication specifically aimed at promoting the purchase of or subscription to virtual currencies, regardless of the channel through which or the manner in which this is done. 

The obligations in the new FSMA Regulation are structured around three key principles:

• First, the information contained in marketing materials must not be misleading or inaccurate. As such, the commercialization must not emphasize the potential benefits of the virtual currency without also giving a correct, clear and balanced indication of the risks, limitations, or conditions associated;

• Second, the marketing materials must contain mandatory statements referencing the involved risks. For instance, all marketing materials must include a clear general warning that reads: "Virtual currencies, real risks. The only guarantee in crypto is the risk.";

• Third, so-called ‘mass campaigns’ must be notified to the FSMA ten days prior to their commencement, with mass campaigns generally being understood as the distribution of marketing to at least 25,000 consumers, for example through social media by a person who has at least 25,000 followers.

What now?

The supervision to be exercised by the FSMA will follow a risk-based approach, with a primary focus on the market segments that are most important for the protection of Belgian consumers. Against this backdrop, marketing materials distributed by large service providers having a wide reach and the commercialization in which there is a close and obvious connection with the Belgian public will be prioritized.

In line with the scope of application briefly outlined above, the new FSMA Regulation will affect a wide range of people active in the emerging market for virtual currencies, including so-called “finfluencers”. Different stakeholders in distribution chains for non-traditional financial assets have started to assess to what extent they are captured by the new FSMA Regulation and, if so, how existing distribution processes may have to be altered to be compliant with the new rules.

1 See Royal Decree of 5 January 2023 approving the FSMA Regulation imposing restrictive conditions on the commercialization of virtual currencies to consumers.

2 Article 6 Law of 5 July 2022 laying down miscellaneous financial provisions, which amended the Belgian Financial Supervisory Law.

3 See Royal Decree of 24 April 2014 approving FSMA Regulation of 3 April 2014 on the prohibition of the commercialization of certain financial products to non-professional clients.