Token Sale in the MiCAR Era – How Can a Token Issuance be Advertised?

Since the new Regulation on Markets in Crypto Assets (MiCAR) came into full legal force at the end of last year, the regulatory requirements for token sale events and initial coin offerings have also expanded considerably. This applies in particular to issuers of e-money tokens (EMT) and asset-referenced tokens (ART), but also to issuers of other crypto assets. Provided that no exemptions provided for by MiCAR can be utilized, the provider of the crypto assets must prepare and publish a detailed crypto asset whitepaper prior to the public offering via a token sale event. In addition, providers of new crypto assets must now meet compliance requirements and, in particular, identify, avoid and disclose any conflicts of interest. MiCAR also requires providers to draft their marketing communications for a public offering in compliance with certain minimum requirements and publish them on their website prior to the launch of the token sale. Marketing communications must be clearly recognizable as such and must contain a specific reference, pre-formulated in MiCAR, to the fact that they have not been reviewed or approved by an authority and that the provider bears sole responsibility for their content. In any case, any marketing communications must be consistent with the details and information in the underlying crypto asset whitepaper. But what exactly are marketing communications within the meaning of MiCAR?

What Constitutes a Marketing Communication Under MiCAR?

Modern marketing for token sale events is difficult to compare with advertising measures that issuers and distribution service providers carry out for traditional capital market issues. The usual marketing measures prior to MiCAR coming into force took place almost entirely online and ranged from content marketing via articles placed in specific portals, community building on social media channels or the provision of digital giveaways such as NFTs. Under MiCAR, the question therefore arises as to whether these marketing measures also qualify as marketing communications and are therefore subject to the corresponding labeling and publication obligations under MiCAR. However, MiCAR itself does not contain an independent definition of the term marketing communication. However, it can be inferred from the recitals preceding the text of the regulation that marketing communications should at least also include advertising messages and marketing materials that are disseminated via social media platforms. According to this statement, not only text messages would be covered by the term marketing communication, but possibly also other modern advertising measures such as memes or images. The term must be further substantiated by interpretation. In this respect, for example, recourse can be made to the definition of advertising in securities law, which in any case requires a certain promotion of the willingness to subscribe through a measure that relates to a specific public offer of securities. This objective could also be used for the interpretation of the marketing communication within the meaning of MiCAR.

How Can Providers Label Memes and NFTs as Marketing Communications?

The more modern and unconventional the individual advertising measure, the more difficult it becomes to comply with the MiCAR requirements for the labeling of marketing communications. In particular, the affixing of the provider’s unambiguous and clearly recognizable declaration of responsibility in accordance with the textual requirements of MiCAR causes difficulties where only a very limited number of characters may be possible or even where communication is to take place exclusively via an image. Ultimately, BaFin or ESMA would have to clarify whether short links or asterisk references may be used in this respect, as long as such aids do not restrict the clear recognizability of the declaration. In individual cases, such reference solutions could even be conducive to the visibility of the markings required by supervisory law if, for example, a presentation in small font size or in a less conspicuous color design could be avoided in this way. As long as there is no official administrative practice on the details of the design of marketing communications under MiCAR, the provider will have to assess for each individual advertising measure for token sales if it constitutes a marketing communication and how specifically the applicable design obligations are to be implemented.

Attorney Lutz Auffenberg, LL.M. (London)