New rules on cryptocurrency advertising highlights major volatility

New rules on cryptocurrency advertising highlights major volatility
Credit: Belga

The Financial Services and Markets Authority (FSMA) has announced plans to enforce new regulation to stop advertising for cryptocurrency. The rules were published last Friday in the Belgian Official Gazette and come into force on 17 May.

The new regulation has three key criteria: advertisements must be accurate and not misleading, they must include mandatory risk warnings, and mass campaigns must be notified to the FSMA in advance. Any promotion that targets at least 25,000 consumers is considered a mass campaign.

“Virtual currencies are a fad with considerable risks. They do not yet have a legal framework, lack a real-world underpinning, and are often subject to sudden changes in value. Moreover, they are vulnerable to fraud and are exposed to particular technical and IT risks,” the financial watchdog said.

The regulation now says that an advertisement cannot emphasise the “potential benefits of the virtual currency without also giving a correct indication of the risks, limitations or conditions applicable to that currency”. Each advertisement will have to be accompanied by this brief warning: “Virtual currency, real risks. In crypto only risk is guaranteed.”

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According to a survey conducted last autumn by FSMA, more than a third of young investors (16-29 years old) are getting into cryptocurrencies. The sums of money traded in virtual currencies are lower than in traditional investments. Over 60% of people dealing in cryptocurrencies have bought them for less than €2,500. In 31% of cases, the investment did not surpass €500.

Belgium is not the only country to regulate advertisements on cryptocurrency. A year ago, the UK mandated risk warnings for ads and said that advertisements must not incite a "fear of missing out" on virtual currencies.

Regulation rolled out in South Africa earlier this year requires that advertisements make clear the potential for loss. In January, the governor of the Central Bank of Ireland urged for a ban on crypto adverts targeted to young adults.

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