Investigation into Advertising Statements and Cost Information Provision by CASPs

Investigation into Advertising Statements and Cost Information Provision by CASPs January 2025 ANALYSIS | REPORT

Investigation into Advertising Statements and Cost Information Provision by CASPs 2 Table of Contents What did the AFM do? 3 What must CASP advertising statements comply with? 3 Findings of the investigation into CASP advertising statements 4 What must cost information on CASP websites comply with? 5 Findings of the investigation into cost information on CASP websites 5 What does this investigation mean for the future? 6 AFM supervision of information provision 6 What else is the AFM doing regarding crypto assets? 6

Investigation into Advertising Statements and Cost Information Provision by CASPs 3 What did the AFM do? The AFM closely monitors activities and developments in the field of crypto assets. We observe that CASPs advertise the trading of crypto assets through various media. We consider it important that marketing and related activities are in the customer's interest and contribute to well-informed decisions by the customer. To gain insight into the information provision by CASPs, we conducted exploratory investigations in 2023 and 2024 into the advertising statements of CASPs. Additionally, in 2023, we conducted exploratory research into the provision of information about costs on the websites of CASPs. After all, besides advertisements, costs can play an important role for customers in choosing a particular service provider. In these investigations, the AFM encountered various examples of potentially incorrect, unclear, and misleading information provision. In this publication, we provide a brief explanation of the investigation and offer practical guidelines for the sector and insight into AFM activities. The publication is structured as follows: • What must CASP advertising statements comply with? • Findings of the investigation into CASP advertising statements • What must cost information on CASP websites comply with? • Findings of the investigation into cost information on CASP websites • What does this investigation mean for the future? • AFM supervision of information provision • What else is the AFM doing regarding crypto assets?

What must CASP advertising statements comply with? According to MiCAR, CASPs provide their clients with correct, clear, and non-misleading information, including in advertising statements,1 which must be identifiable as such, as per Article 66, second paragraph. CASPs do not mislead their clients, either intentionally or negligently, regarding the actual or perceived benefits of crypto assets. Furthermore, MiCAR stipulates that CASPs must warn clients about the risks associated with transactions in crypto assets (Article 66, third paragraph). This standard from MiCAR has similarities with comparable standards from the Markets in Financial Instruments Directive (MiFID II) and the Financial Supervision Act (Wft).2 Although these are separate standards, we will also look at the similarities where relevant and appropriate. We assess, among other things, whether the information misleads the customer. We expect the information to be at least findable, understandable, and balanced for the target audience. 1 Articles 7, 29, and 53 of MiCAR also contain requirements for advertising statements relating to an offer to the public or admission to trading of a crypto asset. The investigation carried out by the AFM does not focus on these specific requirements, but primarily on the generic standard of being correct, clear, and non-misleading. 2 Regarding Article 24, third paragraph, MiFID II and Article 4:19, second paragraph, Wft Providers of crypto asset services (Crypto Asset Service Providers, CASPs) advertise the trading of crypto assets through various media. The AFM warns that trading in crypto assets is highly risky and therefore considers it important that the information provision by CASPs is in order. With the Markets in Crypto-Assets Regulation (MiCAR), which entered into force on 30 December 2024, CASPs must comply with various requirements regarding information provision, including advertising statements.

Investigation into Advertising Statements and Cost Information Provision by CASPs 4 Findings of the investigation into CASP advertising statements For our investigation, we looked at the advertising statements of various CASPs through different media. We highlight some findings from the investigation below. These findings should be viewed as practical guidelines for CASPs that provide insight into how they can meet the requirements in MiCAR. Warning about risks associated with transactions in crypto assets We have seen various advertising statements without warnings about the risks associated with transactions in crypto assets. The standard3 stipulates that CASPs must warn clients about the risks associated with transactions in crypto assets. We see good examples in practice, where at least these risks are warned about when pointing out (possible) benefits of a crypto asset and/or crypto asset service. This contributes to clear and balanced information provision. We also saw a number of advertising statements where we did not find the given warning clear. Including a passage such as 'investing/trading in crypto assets involves risks' is considered by the AFM too general to clarify the risks associated with transactions in crypto assets. A way to comply with the standard4, according to the AFM, is to clearly state what the specific risk is, for example, that you can lose your investment. For completeness, we emphasize that we consider it important that the warning is proportionate to the context of the advertising statement. Whether a warning is correct, clear, and non-misleading depends on the context (both substantive and presentation) and can vary per advertising statement. Presentation of historical returns We saw a number of advertising statements in which historical returns are presented. In some cases, a representative period was not used because it was too short. If an advertising statement depicts historical or actual returns, we expect them to be based on a representative period. Presentation of rewards for staking We encountered a number of advertising statements mentioning benefits of staking services, for example in the form of a reward per crypto asset. The standard5 stipulates that CASPs must not mislead their clients, either intentionally or negligently, regarding the actual or perceived benefits of crypto assets. The AFM considers it important that in such advertising statements where (possible) benefits of crypto assets are mentioned, the associated risks and any limitations are also stated. An important limitation in this regard is, for example, that the promised rewards from staking services can be variable, such as when a CASP can adjust this reward at any time. We also consider it important to mention if certain conditions apply to be eligible for such rewards. Presentation of information about promotional activities We saw advertising statements for promotional activities where the customer does not have to pay transaction costs for a certain trading volume. These promotional activities usually had a limited duration. In advertising statements for such activities, we consider it important that the duration is presented clearly and correctly. After all, a limited validity period can lead to customers not being able to use the full offer, unless they execute sufficient (large) transactions. Additionally, some advertising statements use the term 'transaction credit' for such promotional activities. 3 Article 66, paragraph 3, MiCAR 4 Article 66, paragraph 2, MiCAR 5 Article 66, paragraph 2, MiCAR

Investigation into Advertising Statements and Cost Information Provision by CASPs 5 When using this term, we consider it important that no unjustified impression is created that there is a credit with which crypto assets can be purchased. Safe saving or trading in crypto In some advertising statements reviewed by the AFM, talk is had about 'safe' trading in crypto, or 'saving' in crypto assets. In the context of correct, clear, and non-misleading information provision, the AFM considers it important that risks are not trivialized, especially given the volatility of crypto assets. If an advertising statement speaks of 'safe' trading in crypto assets, it is therefore important to provide further explanation or context regarding what is meant. Additionally, the customer can be misled by the use of the term 'saving'. The term 'saving' in the Netherlands has a strong connotation with holding giro money at a bank, subject to the Deposit Guarantee Scheme.

What must cost information on CASP websites comply with? Pursuant to MiCAR, CASPs make their tariff, cost, and fee policy publicly available in a prominent place on their website (Article 66, fourth paragraph). We also assess, pursuant to the second paragraph of Article 66 MiCAR, whether the information provision about costs is correct, clear, and non-misleading.

Findings of the investigation into cost information on CASP websites We conducted research into the cost information of various CASPs on their public websites. We encountered several cases where this information was not publicly available in a prominent place on the website. We also saw some examples of potentially incorrect, unclear, and/or misleading information. Below, we outline some findings that can serve as practical guidelines for CASPs to gain insight into how they can meet the requirements under MiCAR. No tariff, cost, and fee policy available on the public website We encountered several cases where we did not see a tariff, cost, and/or fee policy on the public website. To comply with this standard6, we consider it important that CASPs do not merely mention in general terms that tariff, cost, and/or fee items may apply, but that customers actually gain insight into the specific tariffs, costs, and/or fees that a CASP charges. Generally, we view the use of a cost schedule and/or cost calculator as good practice. No prominent place for tariff, cost, and fee policy We observed that in multiple cases, cost information is not displayed on one page, but spread across the website. For example, on the landing page, on specific pages about costs, under so-called knowledge academies, under 'frequently asked questions' or support centers, and/or in the General Terms and Conditions. We note that we generally do not consider knowledge academies, 'frequently asked questions', support centers, and General Terms and Conditions to be a prominent place for making a tariff, cost, and fee policy publicly available. We find information on these platforms difficult for customers to find, as these descriptions do not indicate that cost information is available there. Furthermore, we do not consider the information sufficiently findable for customers when all information belonging to a certain subject is not made available on or via one page. A way to ensure that the information is in a prominent place is to place it one click from the homepage, or two clicks if a drop-down menu is used. 6 Article 66, paragraph 4 MiCAR

Investigation into Advertising Statements and Cost Information Provision by CASPs 6 No plausible cost elements in tariff, cost, and fee policy We observed that on various CASP websites, one or more plausible cost elements are missing. By plausible cost elements, we mean at least customary costs such as deposit and/or withdrawal costs, transaction costs, and ongoing costs. In the context of correct, clear, and non-misleading information provision, we consider it important that CASPs are complete in their communication towards customers. If CASPs do not mention such costs, while customers do pay them, customers can be misled.

What does this investigation mean for the future? As of 30 December 2024, MiCAR is fully in force, and we expect CASPs to ensure that their information provision, including advertising statements, complies with the applicable standards. We note that the findings mentioned above could qualify as violations under MiCAR. We therefore urge CASPs to apply the given guidelines. We will supervise advertising statements and consider it important how parties structure their internal policy regarding this.

AFM supervision of information provision The AFM conducts risk-based supervision, both in our ongoing supervision and in thematic investigations. The popularity of trading in crypto assets and the significant risks associated with it mean that we will critically examine the correct compliance with information provision requirements as laid down in MiCAR. We monitor current developments and conduct research. For example, in early 2024, we published an investigation into how crypto apps take into account the interests of their customers. We also previously published an exploration regarding finfluencers.

What else is the AFM doing regarding crypto assets? Currently, we are engaged in, among other things, processing license applications from CASPs, supervising crypto asset whitepapers for asset-referenced tokens (ARTs) and e-money tokens (EMTs), and advertising statements relating to an offer to the public or admission to trading of ARTs and EMTs. Since 22 April 2024, CASPs can submit an application for a license or notification to the AFM. Furthermore, we pay attention to current developments regarding crypto assets and continue to strive for customer protection, for example by sharing good practices in Q&As and press releases. Finally, we focus on additional European legislation and regulation and a level playing field in Europe.

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The AFM is committed to fair and transparent financial markets. As an independent conduct supervisor, we contribute to sustainable financial well-being in the Netherlands. The text of this publication has been compiled with care and is of an informative nature. No rights can be derived from it. Due to changing national and international legislation and regulation, it is possible that the text is not up to date at the time you read it. The Authority for the Financial Markets (AFM) is not liable for any consequences – for example, incurred losses or lost profits – arising from or in connection with actions taken in response to this text. © Copyright AFM 2025 Authority for the Financial Markets Postbus 11723 | 1001 GS Amsterdam Telephone 020 797 2000 www.afm.nl