Article 81

2024/90275 2.5.2024

Providing advice on crypto-assets and providing portfolio management of crypto-assets

1. Crypto-asset service providers providing advice on crypto-assets or providing portfolio management of crypto-assets shall assess whether the crypto-asset services or crypto-assets are suitable for their clients or prospective clients, taking into consideration their knowledge and experience in investing in crypto-assets, their investment objectives, including risk tolerance, and their financial situation including their ability to bear losses.

2. Crypto-asset service providers providing advice on crypto-assets shall, in good time before providing advice on crypto-assets, inform prospective clients whether the advice is:

(a)

provided on an independent basis;

(b)

based on a broad or on a more restricted analysis of different crypto-assets, including whether the advice is limited to crypto-assets issued or offered by entities having close links with the crypto-asset service provider or any other legal or economic relationships, such as contractual relationships, that risk impairing the independence of the advice provided.

1. Where a crypto-asset service provider providing advice on crypto-assets informs the prospective client that advice is provided on an independent basis, it shall:

(a)

assess a sufficient range of crypto-assets available on the market which must be sufficiently diverse to ensure that the client’s investment objectives can be suitably met and which must not be limited to crypto-assets issued or provided by:

(i)

that same crypto-asset service provider;

(ii)

entities having close links with that same crypto-asset service provider; or

(iii)

other entities with which that same crypto-asset service provider has such close legal or economic relationships, such as contractual relationships, as to pose a risk of impairing the independent basis of the advice provided;

(b)

not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of the service to clients.

Notwithstanding point (b) of the first subparagraph, minor non-monetary benefits that are capable of enhancing the quality of crypto-asset services provided to a client and that are of such a scale and nature that they do not impair compliance with a crypto-asset service provider’s obligation to act in the best interests of its client shall be permitted in cases where they are clearly disclosed to the client.

1. Crypto-asset service providers providing advice on crypto-assets shall also provide prospective clients with information on all costs and related charges, including the cost of advice, where applicable, the cost of crypto-assets recommended or marketed to the client and how the client is permitted to pay for the crypto-assets, also encompassing any third-party payments.

2. Crypto-asset service providers providing portfolio management of crypto-assets shall not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by an issuer, offeror, person seeking admission to trading, or any third party, or a person acting on behalf of a third party, in relation to the provision of portfolio management of crypto-assets to their clients.

3. Where a crypto-asset service provider informs a prospective client that its advice is provided on a non-independent basis, that provider may receive inducements subject to the conditions that the payment or benefit:

(a)

is designed to enhance the quality of the relevant service to the client; and

(b)

does not impair compliance with the crypto-asset service provider’s obligation to act honestly, fairly and professionally in accordance with the best interests of its clients.

The existence, nature and amount of the payment or benefit referred to in paragraph 4, or, where the amount cannot be ascertained, the method of calculating that amount, shall be clearly disclosed to the client, in a manner that is comprehensive, accurate and understandable, prior to the provision of the relevant crypto-asset service.

1. Crypto-asset service providers providing advice on crypto-assets shall ensure that natural persons giving advice or information about crypto-assets, or a crypto-asset service, on their behalf possess the necessary knowledge and competence to fulfil their obligations. Member States shall publish the criteria to be used for assessing such knowledge and competence.

2. For the purposes of the suitability assessment referred to in paragraph 1, crypto-asset service providers providing advice on crypto-assets or providing portfolio management of crypto-assets shall obtain from their clients or prospective clients the necessary information regarding their knowledge of, and experience in, investing, including in crypto-assets, their investment objectives, including risk tolerance, their financial situation including their ability to bear losses, and their basic understanding of the risks involved in purchasing crypto-assets, so as to enable crypto-asset service providers to recommend to clients or prospective clients whether or not the crypto-assets are suitable for them and, in particular, are in accordance with their risk tolerance and ability to bear losses.

3. Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall warn clients or prospective clients that:

(a)

the value of crypto-assets might fluctuate;

(b)

the crypto-assets might be subject to full or partial losses;

(c)

the crypto-assets might not be liquid;

(d)

where applicable, the crypto-assets are not covered by the investor compensation schemes under Directive 97/9/EC;

(e)

the crypto-assets are not covered by the deposit guarantee schemes under Directive 2014/49/EU.

1. Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall establish, maintain and implement policies and procedures to enable them to collect and assess all information necessary to conduct the assessment referred to in paragraph 1 for each client. They shall take all reasonable steps to ensure that the information collected about their clients or prospective clients is reliable.

2. Where clients do not provide the information required pursuant to paragraph 8, or where crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets consider that the crypto-asset services or crypto-assets are not suitable for their clients, they shall not recommend such crypto-asset services or crypto-assets, nor begin the provision of portfolio management of such crypto-assets.

3. Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall regularly review for each client the suitability assessment referred to in paragraph 1 at least every two years after the initial assessment made in accordance with that paragraph.

4. Once the suitability assessment referred to in paragraph 1 or its review under paragraph 12 has been performed, crypto-asset service providers providing advice on crypto-assets shall provide clients with a report on suitability specifying the advice given and how that advice meets the preferences, objectives and other characteristics of clients. That report shall be made and communicated to clients in an electronic format. That report shall, as a minimum:

(a)

include an updated information on the assessment referred to in paragraph 1; and

(b)

provide an outline of the advice given.

The report on suitability referred to in the first subparagraph shall make clear that the advice is based on the client’s knowledge and experience in investing in crypto-assets, the client’s investment objectives, risk tolerance, financial situation and ability to bear losses.

1. Crypto-asset service providers providing portfolio management of crypto-assets shall provide periodic statements to their clients, in an electronic format, of the portfolio management activities carried out on their behalf. Those periodic statements shall contain a fair and balanced review of the activities undertaken and of the performance of the portfolio during the reporting period, an updated statement of how the activities undertaken meet the preferences, objectives and other characteristics of the client, as well as an updated information on the suitability assessment referred to in paragraph 1 or its review under paragraph 12.

The periodic statement referred to in the first subparagraph of this paragraph shall be provided every three months, except in cases where a client has access to an online system where up-to-date valuations of the client’s portfolio and updated information on the suitability assessment referred to in paragraph 1 can be accessed, and the crypto-asset service provider has evidence that the client has accessed a valuation at least once during the relevant quarter. Such online system shall be deemed an electronic format.

1. ESMA shall, by 30 December 2024, issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 specifying:

(a)

the criteria for the assessment of client’s knowledge and competence in accordance with paragraph 2; the criteria for the assessment of knowledge and competence in accordance with paragraph 7;

(b)

the information referred to in paragraph 8; and

(c)

the format of the periodic statement referred to in paragraph 14.