Advisors and influencers also subject to the Crypto directive (Mica)

Influencers working online are increasingly able to guide consumers in their choices and purchases. Seducing consumers is allowed, but there are limits. These follow from consumer law and extensive regulations for example for financial products. The AFM already has a group of 150 financial influencers in its sights. But also recommending crypto is now entering the danger zone of regulation. Without a licence as from December 31, 2024, influencers that advise on crypto are in de danger zone if they offer their services to Dutch citizens.

Mica Directive for crypto services sets strict rules

The Mica Directive focuses on a new category of crypto assets, the so-called “stablecoins,” such as Tether and USDC. All issuers of these crypto assets and providers of crypto services must apply to the AFM for a license, the so-called Casp license. This can be done by April 22, 2024. But not only the issuers and providers of stablecoins, custodians, or trading platform must have the Casp license. The licensing requirement also applies to placement of crypto assets, receiving or transmitting orders for crypto assets, executing orders for crypto assets on behalf of third parties, and providing advice on crypto assets. Anyone offering such crypto asset services on a professional basis should be considered a “provider of crypto asset services,” which therefore includes advisory services. More on how to obtain an licence for (advising on) crypt services you can read here.

Obligations when advising and providing crypto information

Providers of crypto asset services, including advisors, shall act honestly, fairly and professionally in accordance with the interests of their clients and prospective clients (Art. 59 para. 1 Mica). They shall provide honest, clear and not misleading information, especially in advertisements, recognizable as such. Providers of crypto asset services do not mislead their clients regarding the real or perceived benefits of crypto assets (art. 59 para. 2 Mica). There is also a duty to warn: crypto asset service providers warn their clients of risks associated with the purchase of crypto assets (art. 59 para. 3 Mica). These obligations also apply to the adviser or influencer who does not have a Casp license from the Dutch AFM.

KYC also applies when offering crypto services

Crypto asset service providers who provide advice on crypto assets, either at the request of a third party or on their own initiative, shall make a preliminary assessment of their clients in terms of their experience, knowledge, objectives and ability to bear losses. When advice is provided, crypto asset providers must prepare a report summarizing the client’s needs and questions and the advice provided. When advising or recommending crypto asset services, the client should be warned that the crypto assets or crypto asset services may not be suitable for them, if that follows from the information provided by the client.

Position of influencers without a license

A Casp license is not a licence for an adviser or influencer advising on crypto. Without a license, there is a risk that if the standards of the Mica Regulation are violated, the AFM as regulator will enforce. Enforcement can be done, for example, by imposing an administrative fine. In addition, an adviser or influencer may also violate media and advertising rules, in which case ACM or the Media Authority may enforce. Dank recently happened to a vlogger responsible for hidden advertising in online videos. Influencers and vloggers who advertise must mention this with their videos, both in image and sound. A hashtag #ad, for example, does not suffice, according to the Dutch Commissariaat for Media affairs. This must be done through clear notices such as “advertising,” “advertisement” or “paid promotion. The ACM published a Guideline for the Protection of Sales to Online Consumers.

Administrative fine from Dutch regulator to influencer

The Netherlands Authority for the Financial Markets (AFM) imposed a fine on a financial influencer for the first time earlier this year. It concerns a financial and tax adviser who must pay more than 620,000 euros to the regulator. The influencer advertised an illegal wealth management company on Instagram and through master classes, among other things. He encouraged them to open accounts and deposit large sums of money into them. For those interested, it seemed interesting to invest through the adviser, because they would receive a discount on the fees charged by the asset manager, or extra money to trade with. The AFM has been warning for some time that influencers should not give financial advice at all.

Specific obligations of licensee when advising on crypto assets

Those licensed to provide advice on cryptoassets have the following obligations under Art. 73 of the Mica Directive:

• to assess the compatibility of those crypto assets with the needs of clients and recommend them only if it is in the clients’ interest to do so.
• ensure that persons providing advice or information on crypto assets or a crypto asset service on behalf of the licensee have the necessary knowledge and experience to fulfill their obligations.
• ask clients for information on the client’s or potential client’s knowledge of and experience with crypto assets, their objectives, their financial situation, including their ability to bear losses, and a basic understanding of the risks associated with purchasing crypto assets.
• warning clients that the value of crypto assets, due to their tradability, may fluctuate.
• establish, maintain and apply policies and procedures to obtain and assess all information necessary to make this assessment for each client; take all reasonable steps to ensure that information obtained about clients or potential clients is reliable. If the information received leads to the judgment that the clients or potential clients are not sufficiently knowledgeable, providers of crypto asset services shall inform those clients or potential clients that the crypto asset or crypto asset services may be unsuitable for them and provide them with a warning about the risks associated with crypto assets. That risk warning clearly states the risk of complete loss of the money invested or converted into cryptoassets. Clients should expressly acknowledge explicitly that they have received and understood the warning from the crypto asset service provider concerned.
• evaluate for each client the aforementioned assessment every two years the initial assessment made.
• report to clients summarizing the advice provided to those clients. That report shall be prepared and communicated to clients on a durable medium. At a minimum, that report shall:

(a) indicate the questions and needs of the clients;

(b) provide a summary of the advice on crypto provided.

Complying with regulations prevents liability for influencers and advisors

Influencers and other advisors must check for themselves that they are complying with all laws and regulations that apply to them.  Making recommendations in which they themselves have an interest is not allowed just like that. Online, sector-specific rules sometimes also apply. So, for example, for crypto services. Rules under the Competition Act and the General Data Protection Regulation also apply. AFM and DNB call on parties that (wish to) offer crypto services in the Netherlands to apply to the AFM for a license. The turnaround time for a license application is generally at least 5 months. Read more about the crypto services license application here.

If you have questions about what the new legislation means for you? If so, please contact Blenheim. Blenheim’s licensing team will be happy to assist you.