CNMV and cryptocurrency events What should you know?

CNMV and cryptocurrency events What should you know?

Today we have all heard about cryptocurrencies, their revolution, and how it has changed the way we exchange and transfer money. 

We have also seen how this decentralized digital asset is increasingly regulated and controlled.

However, the rise of cryptocurrencies has been boosted by the power of the internet and social media.  

In this regard, the Comisión Nacional del Mercado de Valores (CNMV) and the Bank of Spain issued a few months ago (Circular X/2021 CNMV) on the risks that this new type of assets pose for participants in the financial system, and in particular for small investors. 

CNMV warns about cryptocurrency events 

Crypto-assets have a growing presence in the financial system which poses challenges in the area of investor protection, as there is currently no comprehensive regulation that adequately addresses the risks that can be associated with these assets. 

This is why the CNMV was obliged to draw up Circular 1/2022, the purpose of which is to develop the rules, principles and criteria to which advertising activity for crypto-assets must be subject, in particular to define the objective and subjective scope of application, to specify the advertising activity that must be subject to a prior notification regime and to establish the tools and procedures to be used to ensure effective supervision of advertising activity for crypto-assets.

Accordingly, the CNMV is requesting that experts and celebrities who participate in events related to cryptocurrencies should “adequately inform attendees about the risks of investing in cryptoassets, especially now that so many investors are seeing their money disappear as a result of investing in these unregulated and unsecured assets”.

The case of the Crypto World festival

It should be noted that to be considered a cryptocurrency operator, it is necessary to be authorised/licensed by the Bank of Spain and to be registered in the Register of cryptocurrency operators at the Bank of Spain.

To be entered in this Register, the following requirements (among others) must be met:

1. Demonstrate that the operator has the control bodies and anti-money laundering measures required by law.
2. Prove compliance with the commercial and professional honourability requirements of the Ley de Ordenación de las Entidades de Crédito (Law on the Regulation of Credit Institutions). Specifically, it refers to the fact that natural persons and managers of legal persons must accredit:
   • No negative track record with regulatory or supervisory authorities, no dismissals or terminations for irregularities in past positions.
   • No criminal or administrative sanctions for property crime, money laundering or other socio-economic activities.
   • Not being the subject of relevant and well-founded investigations with respect to the previous two points.

In relation to the above, and the uproar caused by the event held last August at the Wizink Center in Madrid, it was precisely because the organizer of the event did not have any kind of licence to advise on financial instruments or to intermediate investment transactions in financial instruments. 

The event was organized by an entity included in the grey list of the National Securities Market Commission (CNMV) and the financial supervisor is alerted to the participation, as sponsors, of several financial chiringuitos. 

Other “financial chiringuitos” under CNMV scrutiny 

Financial “chiringuitos” are entities and persons that are not authorized to act in the securities markets, such as providing investment services under the LMV (reception, transmission and execution of client orders, portfolio management or investment advice), or performing the activity reserved for collective investment undertakings (CIIs).

Only registered companies have obtained authorization after proving compliance with certain requirements (sufficient capital, adequate organisation and means, etc.) and are subject to the controls of the supervisory bodies.

The CNMV warns that in Spain alone, bankruptcies and alleged scams linked to crypto-assets have left more than 140,000 people trapped. 

In a recent survey released by the supervisor, it was highlighted that 40% of investors mistakenly believed that these types of assets are regulated.

The importance of good advice when investing in cryptocurrencies 

In view of the above, it is very important to take legal advice before investing in this attractive asset today. 

At Letslaw by RSM we have several cryptocurrency lawyers who provide legal and tax advice to companies and individuals.