Circular 1/2022, of January 10, of the National Securities Market Commission, regarding advertising on crypto assets presented as an investment object, published in the «BOE» no. 14, of January 17, 2022, pages 4106 to 4116 (11 pages), being available at the link https://www.boe.es/eli/es/cir/2022/01/10/1 , has clearly and concisely in its article 5, paragraph 2, the following (sic):

​

<<All commercial communications will include information on the risks of the product they advertise, specifically:

​

a) The following warning message shall be included in the commercial communication, with a format and position that guarantees its relevance within the advertising piece, and should not be included as secondary information or in footnotes: «Investment in crypto assets is not regulated , may not be suitable for retail investors and the entire amount invested may be lost.

​

b) A link or indication to the location of the additional information will be included, in accordance with the provisions of point 8 of Annex I, which includes, at least, a reference to the information and the risks identified in Annex II, when result from application to the advertised product. The link will be identified with the following text: "It is important to read and understand the risks of this investment which are explained in detail in this location."

​

When the medium used only allows an indication, reference will be made to the site where information on the risks can be found and to the importance of reading that information>>.

For the above purposes, and in compliance with the provisions of the legal precept outlined "ut supra", before investing in any kind of cryptoactive, you must know the following:

​

Cryptocurrencies or cryptoactives, in accordance with the provisions of article 3 section 2) of the Regulation of the European Parliament and of the Council regarding cryptoactive markets, and by which Directive (EU) 2019/1937 is modified, as "a digital representation of value or rights that can be transferred and stored electronically, using decentralized ledger technology or similar technology”.

​

In the context of the cryptoactive market, on February 9, 2021, a joint statement was published by the National Securities Market Commission (CNMV) and the Bank of Spain on the risk of cryptocurrencies as an investment. In said statement, the two aforementioned entities emphasized the risk of this type of investment due, among other factors, to its extreme volatility, complexity and lack of transparency that make it a high-risk bet.

​

In addition to the above, you must also know the following points:

​

Crypto assets, including cryptocurrencies, non-fungible tokens (NFT), and the technology that supports them, may be elements that will invigorate and modernize the financial system in the coming years, but to assess their validity as an investment alternative or their use as means of payment, it is also necessary to bear in mind the following aspects and risks:

 

Risks from the point of view of the regulatory environment:

​

There is still no framework in the European Union that regulates cryptoactives such as Bitcoin, and that provides guarantees and protection similar to those applicable to financial products. Currently, a Regulation (known as MICA) is being negotiated at the European level that aims to establish a regulatory framework for the issuance of crypto assets and the service providers on them.

​

From a legal point of view, cryptocurrencies:

​

• they are not considered a means of payment

• are not backed by a central bank or other public authorities

• are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund.

​

Investments in crypto assets are high risk operations:

​

It is estimated that there are more than 7,000 cryptocurrencies on the market with characteristics similar to those of Bitcoin. These are complex instruments, which may not be suitable for small savers, and whose price entails a high speculative component that may even lead to the total loss of the investment.

​

Additionally, there are leveraged derivative products linked to cryptocurrencies that allow you to invest indirectly in them, which further increases their complexity and the possibility of suffering losses greater than the initial investment, which is why they require great knowledge and experience.

​

Risks derived from the price formation of cryptocurrencies and cryptoassets and their liquidity:

​

Cryptocurrency prices are formed in the absence of effective mechanisms that prevent their manipulation, such as those present in regulated securities markets. On many occasions, prices are also formed without public information to back them up.

​

In relation to the risks derived from illiquidity, it is necessary to note that many of the cryptocurrencies may lack the necessary liquidity to be able to undo an investment without suffering significant losses, especially since their circulation among investors, both retail and professional, is very limited.

​

Use as a means of payment:

​

Despite the fact that they have existed for more than a decade, the acceptance of cryptocurrencies as a means of payment is still very limited, which contrasts with many other digital developments that have had widespread acceptance in much less time. It is necessary to remember that there is no obligation to accept Bitcoin or any other cryptoactive as a means of payment of debts or other obligations. The future MICA Regulation does not foresee that this will change.

​

In addition, given their high volatility, cryptocurrencies do not adequately fulfill the functions of unit of account and store of value.

​

Risks derived from the cross-border nature of the crypto phenomenon:

​

On many occasions, the different actors involved in the issuance, custody and commercialization of crypto assets are not located in Spain or, in some cases, it is not even possible to locate them, so the resolution of any conflict could be costly and remain outside the sphere of competence of the Spanish authorities.

​

Risks of theft, fraud or loss:

​

The distributed ledger technology used for the issuance of cryptocurrencies carries specific risks. Its custody is not regulated or supervised. The loss or theft of the private keys can mean the loss of the cryptocurrencies, without the possibility of recovering them. This risk must be assessed before acquiring these assets, whether the wallet is managed personally or if its custody is left in the hands of third parties.

​

In short, crypto assets have a growing presence in the financial system, and although their development in the Spanish market presents important opportunities, it also poses challenges in the field of investor protection, since there is currently no complete regulation in this regard that adequately responds to the risks that these assets may entail.

​

The revaluations of some crypto assets have increased their attractiveness as an investment, which has been intensifying due to the numerous advertising campaigns that have been able to encourage minority investors to invest in these new assets without having sufficient information about their nature and the risks they entail. For this reason, the National Securities Market Commission and the Bank of Spain published a joint statement on February 9, 2021, in addition to another from 2018, in which they warned about the risks that this new type of asset poses for investors. participants in the financial system and, very particularly, for small investors. The statement stressed the complexity, volatility and potential lack of liquidity of these investments.

​

Each and every one of these risks that have just been described must be studied, evaluated and taken into account by you prior to making any investment in cryptocurrencies and cryptoactives.