Promoting Crypto Currencies in Bulgaria: Are There Any Risks?

Earlier this year, the Bulgarian Supreme Administrative Court (the “SAC”) had the chance to evaluate the misleading potential of an advertisement of a Bulgarian cryptocurrencies exchange platform that was based on the denial of traditional financial institutions and displayed the Bulgarian National Bank (the Bulgarian banking regulatory authority, the “BNB”) as an opponent to the cryptocurrencies. The proceedings related to an appeal of a decision of the Bulgarian Commission on the Protection of the Competition (the “CPC”) and the SAC upheld most of the CPC’s findings and confirmed that the respective advertisement was misleading and contradicted the bona fide commercial practices.

The CPC imposed a monetary sanction in an amount of approx. EUR 100,000 or 1 % of the net turnover of the advertiser for the preceding financial year. However, SAC ruled that such an amount was excessive considering the gravity of the infringement and decreased the sanction to approx. EUR 30,000 (0.3% of that turnover) For this conclusion, the court considered that the advertisement was not distributed via radio and TV, which in SAC’s view resulted in a lower risk of impairment of the competitors.

Legal Background

The investigation was initiated upon a motion submitted by BNB stating that a Bulgarian entity providing services related to the exchange of virtual and fiat currencies not backed by gold, advertised its activities through Facebook and Instagram, as well as by billboards located on central locations in the capital city of Sofia, with images which contained the message “ЗаКопай банките/Go Crypto“ (Get rid of the banks/Go Crypto) and a hashtag “#БНБнеХаресваТова“ (#BNBdoesNotLikeThis). The text message “ЗаКопай банките“ (Get rid of the banks) was presented in a way where the first letter “З“ merged with the symbol of the “Bitcoin”, and the letter “и“, in the word “банките“ /the banks/, was depicted as a part from a shovel.

During the proceedings, the advertiser explained that its intention was not to defame the services provided by the banks and thus to attract consumers, but rather only to invoke consumers to use the blockchain technology, despite the hurdles created by the banks. It also, explained that the hashtag /#BNBdoesNotLikeThis was provoked by a press release of BNB titled “European supervisory authorities warn users about the risks of buying virtual currencies”, where BNB warned the consumers that virtual currencies such as Bitcoin, Ripple, Ether, and others display extreme price volatility and clear indicators of a price bubble. The BNB advised the consumers buying virtual currencies to be aware because there is a high risk to lose large amounts of money or even all the money they have invested.

CPC and SAC Approach

Both the SAC and the CPC accepted that the advertising message “ЗаКопай банките/Go Crypto“ (Get rid of the banks/Go Crypto) is misleading because it creates the impression that the services provided by a crypto exchange platform and the services provided by the banks are interchangeable and even the crypto services are more profitable and practical. In CPC view, this was not correct as the services provided by banks are of different nature and may not be completely replaced by the services provided by a crypto exchange platform.

SAC went even further explaining that by this message the advertiser directly motivated consumers to terminate their relations with banks by denying the traditional credit institutions. The advertising message contradicted bona fide commercial practices by aiming the advertiser to achieve advantage over its competitors by creating false impression that the services provided by it are comparable to bank services which was not asserted by advertiser’s competitors. Therefore, SAC considered that the advertisement was able to influence the economic behavior of the consumers creating confusion between the services provided by the advertiser and traditional bank services, and thus the advertiser could gain unfair advantage before its competitors that provide crypto exchange services.

With respect to the hashtag #BNBdoesNotLike, both the CPC and the SAC accepted that it was misleading because no negative attitude towards crypto currencies was outlined in BNB’s press release, rather only a warning directed to consumers tempted to invest in crypto currencies was raised therein. At the time of the publication of the press release (2018), the crypto currencies were not so popular, and BNB wanted to highlight the risks associated with investment in crypto currencies. On its side, the advertiser interpreted this statement of BNB in a completely different way and thus by misleading the consumers, it caused or may have cause damage to its competitors (other crypto currencies exchange platforms).

Authors: Violetta Kunze - Partner, Vladislav Antonov -Senior Associate
DJINGOV, GOUGINSKI, KYUTCHUKOV & VELICHKOV