Where is the line for advertising and solicitation of Crypto Assets? Will the self-discipline regulations for exchange advertising affect the media, internet celebrities, and KOLs?

Question

The Virtual Currency Business Association of the Republic of China (Taiwan VASP Association) recently announced self-regulatory rules, which have been submitted to the Financial Supervisory Commission (FSC) for review. The implementation of VASP regulation in Taiwan has caused panic among many foreign exchange local practitioners, investment influencers, group leaders, and media, fearing that their business and advertising activities may violate the law. According to the self-regulatory rules formulated by the VASP Association, there are detailed explanations regarding advertising solicitation, which may provide an understanding of the FSC's boundaries for 'advertising solicitation' from the perspective of self-regulation by the association.

Please note that the following regulations only apply to the self-discipline code of Taiwan VASP Association members, and do not represent other groups.

(Announcement of risk control standards! The Taiwan Virtual Currency Business Association has announced self-regulatory standards, and these behaviors will be monitored for trading.)

Crypto Assets Advertising Solicitation Definition

Definition of advertising solicitation: "Advertising, business solicitation, and business promotion activities refer to the use of the following media, promotional tools, or methods to promote business purposes, and to disseminate, spread, promote, solicit, or promote business and related matters to unspecified persons."

Advertising includes media

Brochures, posters, advertising drafts, press releases, letters, presentations, investment prospectus, insurance recommendations, public offering statements, stickers, calendars, phone books, or other printed materials.

Television, movies, telephones, computers, faxes, mobile phone messages, radio, broadcasting stations, slides, tickers, or other communication media.

Advertisement or any form of static or moving tools and facilities on billboards, banners, signs, archways, buses, or other vehicles.

Internet, electronic billboards, emails, video conferencing, electronic voice, or other electronic communication devices related to the public domain.

Hold on-site seminars, symposiums, briefings, on-site demonstrations, interviews, or other public events.

Any other form of advertising, business solicitation, and business promotion activities.

What behavior constitutes advertising solicitation?

When publishing, broadcasting advertisements, and conducting business solicitations or promotional activities (hereinafter referred to as 'advertising solicitation activities'), relevant laws and regulations should be complied with.

When engaging in advertising, business solicitation, and sales promotion activities, one should abide by the general principles of society, honesty and credit, the spirit of protecting customers, and maintaining a fair virtual asset trading market, and comply with the following principles:

The production of advertisements should carefully consider the impact on the investing public, so as not to mislead their judgment.

Advertisements introducing the price situation of virtual assets should avoid excessive or arbitrary subjective inferences.

If the disclosure of virtual assets or service content involves Intrerest Rate, fees, rewards, and risks, it should be expressed in a balanced and prominent manner. If there is a written document, it should be in the same font size and color. The font size of warning messages in print advertisements shall not be smaller than the smallest font size on other parts of the same advertisement, and shall be marked prominently in bold print, so that it can be easily seen when the general public quickly reads the relevant advertisement.

In addition to using sound to reveal the advertisement, audio advertisements must display warning messages in easily recognizable fonts for at least five seconds, and the conveyed message should be clear and unambiguous.

Members shall not engage in false, fraudulent, deceptive, speculative or other misleading practices during advertising solicitation activities, and shall ensure the truthfulness of their advertising content. Their obligations to customers shall not be lower than the content of the aforementioned advertisements and the information or explanations provided to customers during business solicitation or sales promotion activities.

Behavior that cannot appear in cryptocurrency advertisements

Advertising that violates or contravenes the relevant regulations of virtual asset platforms and trading businesses, or damages the industry's reputation.

Misappropriating or using names similar to those familiar to the public to confuse customers.

To spread advertisements that damage the business reputation of others for the purpose of competition.

Concealing important facts or other obvious exaggerations or biases, leading to the risk of misleading or deceiving the investing public.

Provision of subjective investment information at will.

Providing predictions or guarantees of investment benefits for individual virtual assets to rise or fall.

The advertisement content may be promoted in a way that could degrade the overall industry reputation.

Using false reports from newspapers and magazines as advertising content.

As an advertiser who promotes profit or investment performance, without reporting its risks at the same time, there is no balanced reporting.

The use of 'lowest', 'only', 'best', 'lifelong' or superlatives with the same meaning in advertisements.

The price, quantity, quality, content, lottery method, date, etc. of advertising gifts do not match the actual situation. Or the restriction conditions such as the period, number of people, quantity, participation method, etc. of the gift activity are not clearly indicated.

The layout, positioning, and font size of the important trading information are not proportional, leading to misleading information.

Other matters prohibited by laws or regulations of the competent authority.

Indirect restrictions on non-compliant overseas entities

The interesting thing is that the self-discipline regulations include a clause to prevent indirect advertising, which may hinder Taiwanese businesses that have invested in overseas exchanges or have not complied with overseas exchanges from cooperating with overseas businesses for business solicitation.

Members may not, in their own name or through a third party under their direct or indirect control, assist those who have not completed the declaration of compliance with the Money Laundering Prevention Act to publish advertisements or solicit business in our country.

Members shall disclose on the operating platform that their related enterprises have obtained qualifications or licenses for engaging in virtual asset platform and trading business overseas, but the announcement shall not involve business solicitation.

Will media, internet celebrities, and KOLs have any issues with advertising for Complianceexchange?

News media, influencers, and KOL who accept advertisements from non-compliant businesses may face various impacts, especially in Taiwan where the self-regulatory rules of the VASP association are now in effect.

Legal Risks

Potential legal risks: Although the self-regulatory norms of the VASP Association mainly target its members, if the FSC refers to these norms for future amendments or stricter enforcement, relevant practitioners may face legal liabilities for suspected involvement in soliciting illegal business.

Regulatory pressure: If future regulations regarding advertising solicitations extend to advertising platforms or promoters, media and KOLs may be required to conduct more rigorous reviews of advertising content and may even bear joint liability.

Reputation risk

Decline in public trust: accepting advertisements from non-compliant operators may be seen as disregarding investor protection and damaging their professional image in the public eye.

Brand image damage: If the advertisement is found to be misleading, it may lead the audience to lose confidence in the media or KOL's brand, and even face community criticism.

Economic Impact

Decreased cooperation opportunities: As more operators become compliant, media and KOLs need to shift to accepting advertisements from compliant operators, and may lose some sources of income in the short term due to market consolidation.

Market reshuffle: Compliance companies' advertising budgets may flow towards media and KOLs that are more in line with Compliance, leading to changes in industry competition.

Self-discipline pressure

Media and KOL may need to proactively adjust internal standards, for example:

Strictly review the compliance of the cooperative partner.

Distinguish between advertising and content to ensure transparency.

Future Opportunities

The competitive advantage of cooperating with Compliance: If the media or KOL takes the initiative to cooperate with Compliance, it will be able to establish a more credible market position and attract more Compliance advertisers.

The role of educating investors: the media and KOLs can take this opportunity to play the role of educating investors, emphasizing the importance of Compliance, and further enhancing professionalism.

Media, influencers, and KOLs who accept advertisements from non-compliant businesses may face challenges in the short term due to restricted income and partnerships. However, in the long run, collaborating with compliant businesses and adhering to regulations will help reduce legal and reputational risks, and shape a more stable market image. For those businesses that continue to promote high-risk advertisements, careful consideration is needed for their potential impact on market confidence and personal careers.

Where is the boundary of advertising solicitation for Cryptocurrency in this article? Will the self-discipline regulations of exchange advertising affect the media, internet celebrities, and KOL? First appeared on Chain News ABMedia.