On November 12, NYDFS issued an industry letter setting out its expectations for advertising and marketing by virtual currency entities (VCEs). The guidance requires each VCE to maintain and enforce advertising and marketing policies and procedures that are commensurate with its size, customer base, and business model and that its board of directors, or a designated board subcommittee, reviews and approves annually. The guidance covers all content produced or distributed by or on behalf of a VCE (“Materials”) that “could reasonably be viewed as promoting or inducing engagement” with its virtual currency offerings, regardless of how the content is labeled or delivered. According to the letter, effective policies and procedures will, at a minimum, address three areas. First, Materials must not make false, misleading, or deceptive representations or omissions, including unsubstantiated or exaggerated claims, and such claims must be “evidence-based and verifiable”; separately, 23 NYCRR 200.18(d) has barred such representations or omissions by licensees since 2015. The letter’s examples include “no-fee trading” claims that omit costs such as spreads or markups, as well as misleading representations of performance or regulatory status, including licensure.

Second, the guidance provides that disclosures “must, in all cases, be clear and conspicuous” and that effective policies will ensure Materials pair any discussion of benefits with a balanced discussion of risks, state that testimonials may not be representative while disclosing the nature and amount of any compensation provided for them, and clearly identify the licensed or chartered VCE providing the product. Disclosures also should not be obscured, such as by appearing only at the end of a podcast or behind a “click for more” prompt.

Third, NYDFS indicates that effective governance and review policies will generally include, at a minimum, defined roles and responsibilities over advertising and marketing processes, formal review and approval of Materials with secondary review, monitoring for and timely addressing potentially fraudulent or otherwise wrongful use of the VCE’s name or brand (e.g., impersonation accounts), recordkeeping consistent with 23 NYCRR 200.18, and due diligence on and monitoring of third-party promoters. Under the guidance, VCEs must make policies and procedures consistent with the guidance available for NYDFS review beginning May 12, 2027, and must keep them current and retain them for the period required by 23 NYCRR 200.12(a), which is 7 years for most records.