As part of the European Union's Markets in Crypto-Assets (MiCA) regulation, businesses dealing with crypto-assets must adhere to strict guidelines when drafting marketing communications. This article sheds light on the intricacies of MiCA's requirements for marketing communications, empowering businesses to navigate the regulatory landscape effectively.
The Importance of Compliant Marketing Communications under MiCA
Under the MiCA regulation, adhering to the requirements for marketing communications is vital for businesses issuing any of the three types of tokens classified by MiCA. Failing to comply with these regulations can impede the issuance and trading of crypto-assets, potentially limiting a business's growth and reach in the market.
Article 4 of MiCA stipulates that for offers to the public of crypto-assets other than asset-referenced tokens or e-money tokens within the Union, businesses must draft their marketing communications in accordance with Article 7 and publish them per Article 9. Similarly, Article 5 demands compliance with Articles 7 and 9 when seeking admission to trading of such crypto-assets.
For asset-referenced tokens, Article 29 lays down specific requirements for marketing communications related to public offerings or trading admissions. It necessitates that such communications conform to a set of predefined conditions to ensure transparency and fair representation of the crypto-assets. Likewise, marketing communications pertaining to e-money tokens are governed by similar rules that must be strictly followed to ensure regulatory compliance.
The significance of adhering to these marketing communication requirements is evident in the fact that non-compliance can directly impact a business's ability to issue and trade crypto-assets in the European Union.
Key Requirements for Marketing Communications
Article 7 of the Markets in Crypto-Assets (MiCA) regulation outlines specific requirements for marketing communications related to the public offering or trading of crypto-assets, excluding asset-referenced tokens and e-money tokens. To help you navigate this regulation, we've broken down the key requirements:
Identifiable as marketing communications: All marketing materials must be clearly identifiable as marketing communications to ensure transparency.
Fair, clear, and not misleading: Information in marketing communications should be presented in a manner that is fair, clear, and not misleading to potential investors.
Consistency with the crypto-asset white paper: The content of marketing communications must be consistent with the information provided in the crypto-asset white paper, where such a document is required by Article 4 or 5 of MiCA.
Disclosure of white paper and contact information: Marketing communications should clearly state the availability of a crypto-asset white paper and provide the website address of the offeror, person seeking trading admission, or trading platform operator. Additionally, a telephone number and email address for contact should be included.
Clear and prominent statement: Marketing communications must contain a clear and prominent statement indicating that no competent authority in the EU has reviewed or approved the marketing communication. The statement should also specify that the offeror, person seeking trading admission, or trading platform operator is solely responsible for the marketing communication content.
No marketing communications before the publication of the white paper: If a crypto-asset white paper is required under Article 4 or 5, marketing communications cannot be disseminated before the white paper's publication. However, this does not affect the ability of the offeror, person seeking trading admission, or trading platform operator to conduct market soundings.
Competent authority's power to assess compliance: The Member State's competent authority where marketing communications are disseminated holds the power to assess compliance with the requirements outlined in MiCA.
"Fair, Clear, and Not Misleading"
The "fair, clear, and not misleading" principle in marketing communications is crucial for maintaining transparency and trust with potential investors. While MiCA does not explain this principle, we can draw some insights from financial regulators. For instance, the UK Financial Conduct Authority (FCA) Handbook defines what "fair, clear, and not misleading" means. Although the FCA is a UK regulator not applicable to EU regulations, it can still serve as a helpful reference point. According to the FCA Handbook:
Appropriate communication: Firms should communicate with their customers in an appropriate way, considering the means of communication, the information conveyed, and the nature of the customer and claim.
Understanding of services: Firms should consider the average customer's understanding of the services provided.
Logical presentation: Information should be presented in a logical order.
Plain and intelligible language: Firms should use plain language and explain the meaning of such terms when jargon or technical terms are unavoidable.
Prominence of key information: Key information should be prominent and easy to identify using headings, layout, display, and font attributes, as well as design devices such as tables, bullet points, and graphs.
Avoiding unnecessary disclaimers: Firms should avoid using unnecessary disclaimers that may confuse or mislead customers.
The European Securities and Markets Authority (ESMA) has published Guidelines on MiFID II product governance requirements, which include the "fair, clear, and not misleading" principle. The ESMA guidelines state that marketing communications should be accurate, balanced, and not disguise, diminish, or obscure important items, statements, or warnings.
In addition, in Article 66, it is mentioned that: "Crypto-asset service providers shall not, deliberately or negligently, mislead a client in relation to the real or perceived advantages of any crypto-assets."
Publication and Accessibility of Crypto-Asset White Papers and Marketing Communications
Article 9 outlines the requirements for the publication and accessibility of crypto-asset white papers and marketing communications for crypto-assets other than asset-referenced tokens or e-money tokens. These requirements aim to maintain transparency and protect investors by making crucial information available. The main provisions of Article 9 are as follows:
Publication on the website: Offerors and persons seeking admission to trading of crypto-assets must publish their crypto-asset white papers and, where applicable, marketing communications on their website. This website should be publicly accessible and provide the information at a reasonable time in advance of, and in any event before, the starting date of the offer to the public or the admission to trading of those crypto-assets.
Availability: The published crypto-asset white papers and, where applicable, marketing communications must remain available on the website of the offerors or persons seeking admission to trading for as long as the public holds the crypto-assets.
Consistency with notified versions: The published crypto-asset white papers and, where applicable, marketing communications should be identical to the version notified to the competent authority under Article 8, or, where applicable, to the version modified under Article 12.
Modifications to Published Crypto-Asset White Papers and Marketing Communications
Article 12 of MiCA addresses the modifications of published crypto-asset white papers and marketing communications for crypto-assets other than asset-referenced tokens or e-money tokens. The key provisions include:
Reason for modification: Offerors, persons seeking admission to trading, or operators of a trading platform must modify their published crypto-asset white papers and marketing communications when there is a significant new factor, material mistake, or material inaccuracy capable of affecting the assessment of the crypto-assets. This requirement applies for the duration of the public offer or as long as the crypto-asset is admitted to trading.
Notification to a competent authority: The modified crypto-asset white papers and marketing communications, along with the intended publication date and reasons for modification, must be notified to the competent authority of the home Member State at least seven working days before their publication.
Public information: On the date of publication or earlier, if required by a competent authority, the offeror, the person seeking admission to trading, or the operator of the trading platform must immediately inform the public on its website of the notification of a modified crypto-asset white paper with the competent authority of its home Member State, providing a summary of the reasons for the modification.
Consistency in a presentation: The order of information in the modified crypto-asset white papers and marketing communications must be consistent with that of the previously published documents.
Notification to other authorities and ESMA: Within five working days of receipt of the modified documents, the competent authority of the home Member State must notify the modified documents to the competent authorities of the host Member States and communicate the notification and publication date to ESMA. ESMA will make the modified crypto-asset white paper available in the register upon publication.
Publication on the website: Offerors, persons seeking admission to trading, or operators of trading platforms must publish the modified crypto-asset white papers and marketing communications, including the reasons for modification, on their website.
Time-stamping and versioning: The modified documents must be time-stamped, and the most recent version must be marked as the applicable version. All modified documents should remain available for as long as the crypto-assets are held by the public.
No extension of time limit: For utility tokens offering access to goods and services that do not yet exist or are not yet in operation, changes made in the modified documents shall not extend the 12-month time limit referred to in Article 4(6).
Availability of older versions: Older versions of the crypto-asset white papers and marketing communications must remain publicly available on the website for at least 10 years after the date of publication, with a prominent warning stating that they are no longer valid and a hyperlink to the section where the most recent version is published.
Marketing for Asset-Referenced Tokens
Article 29 of MiCA establishes specific requirements for marketing communications associated with the public offering of an asset-referenced token or its admission to trading.
Essential criteria for marketing communications: All marketing communications related to an asset-referenced token must meet the following requirements: (a) Be clearly identifiable as marketing communications; (b) Contain information that is fair, clear, and not misleading; (c) Present information consistent with the information found in the crypto-asset white paper; (d) Explicitly state that a crypto-asset white paper has been published, and clearly provide the issuer's website address, contact phone number, and email address.
Right of redemption disclosure: Marketing communications must include an explicit and unambiguous statement informing token holders of their right to redeem the asset-referenced token against the issuer at any time.
Publication of marketing communications: Issuers are required to publish marketing communications, along with any modifications, on their websites.
Absence of prior approval requirements: Competent authorities shall not necessitate the prior approval of marketing communications before publication.
Notification to competent authorities: Upon request, issuers must notify competent authorities of their marketing communications.
Restrictions on marketing communications: No marketing communications should be disseminated before the publication of the crypto-asset white paper. However, this restriction does not hinder the issuer's ability to conduct market soundings.
E-money Token Marketing Communications
Article 53 of MiCA sets forth requirements for marketing communications related to the public offering of an e-money token or its admission to trading. Many of the provisions in this article are similar to those outlined in Article 29 for asset-referenced tokens. One significant difference between the requirements for asset-referenced tokens (Article 29) and e-money tokens (Article 53) is the specific disclosure regarding the right of redemption. For e-money tokens, marketing communications must include a clear and unambiguous statement informing token holders of their right to redeem the e-money token against the issuer at any time and at par value.
Public Disclosure of Inside Information
Timely and accurate disclosure: According to Article 88, issuers, offerors, and persons seeking admission to trading must promptly disclose inside information, which directly affects them. The disclosure should be made to allow the public to access, assess, and comprehend the information quickly, completely, and accurately.
Separation from marketing: The disclosure of inside information must not be combined with marketing activities. This separation aims to prevent potential conflicts of interest and maintain the integrity of the disclosed information.
Website publication and retention: Issuers, offerors, and persons seeking admission to trading must publish and maintain all disclosed inside information on their website for at least five years.
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The new MiCA regulation represents a significant step towards creating a comprehensive legal framework for the crypto-asset industry in the European Union. While this regulation is crucial for fostering transparency, trust, and fair market practices, it can be challenging for businesses and individuals to navigate and understand its intricate provisions and requirements.
We are well-equipped to help you analyze and comply with the MiCA regulation. Our team is dedicated to providing support, guidance, and tailored solutions to ensure your business operations align with the regulatory environment.
DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.
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