ARTICLE
16 January 2025

Marketing Of Virtual Assets: Compliance And Best Practices When Promoting Tokens, Crypto, And Web3 Projects

Belisario Consulting & Legal

Contributor

Law boutique with a deep understanding of both European and UAE legal frameworks, we bridge the gap between European companies and the vibrant UAE market. Our expertise encompasses a wide range of sectors, including corporate law, commercial contracts, fintech, and new technologies.
Compliance and Best Practices for Marketing Virtual Assets: Insights on Promoting Tokens and Web3 Projects.
United Arab Emirates Technology

Compliance and Best Practices for Marketing Virtual Assets: Insights on Promoting Tokens and Web3 Projects.

As the web3 industry grows, clearer regulatory frameworks are emerging in UAE and worldwide to protect consumers and ensure transparency. A notable example is the Regulations on the Marketing of Virtual Assets and Related Activities 2024 recently issued by the Virtual Assets Regulatory Authority (VARA).

VARA is leading authority in the field of virtual assets and blockchain. Based in Dubai, VARA is an affiliated of the Dubai World Trade Centre Authority (DWTCA), and is the competent authority in charge of regulating, supervising and overseeing virtual assets and virtual assets activities in Dubai, with the exception of the free zone of the Dubai International Financial Centre.

Among the functions of VARA, it regulates, supervise and oversees all marketing activities related to virtual assets and virtual assets activities in or targeting the UAE (i.e., VARA deems that any activity targeting UAE by default targets Dubai), to ensure that all marketing campaigns are conducted in a fairly and clearly, and no content is misleading.

The Importance of Structured Marketing

Effective marketing campaigns play a crucial role in the promotion and adoption of tokens and third web3 projects. In UAE, VARA has already fined seven entities, requiring them to cease all activities and desist from undertaking any marketing or advertising of virtual asset services (VARA marketing enforcement), but given the global reach of digital marketing, the consequences of a poorly planned marketing campaign can call the attention of several authorities at the same time.

A well-structured and compliant marketing campaign is vital for building brand awareness within the dynamic and competitive space of distributed ledger technologies, and to avoid any potential issues. The last thing that a growing brand needs is a public notice from a regulatory authority due to the potential legal and reputational damages associated.

Furthermore, for tokens or Virtual Assets Service Providers to gain attraction, potential token holders must recognize and appreciate the unique value proposition of the project, and also trust the project itself. Otherwise, they are unlikely to go beyond mere 'flipping'. Your marketing says a lot about you, and failing to deliver on promises is likely to result in an involuntary community-driven "pump and dump". Reliability is key for all stakeholders.

In this sense, to effectively communicate a project's unique features and benefits, all promotional content must adhere to the following standards:

  • Clarity and Transparency: marketing materials must be fair, clear, and clearly identifiable as promotional content. Disclosures, such as whether content is sponsored (e.g. "ad"), should be prominent.
  • Avoid Misleading Claims: promotional content should accurately represent the advantages and disadvantages of virtual assets. The audience must be reminded of the importance of staying informed and seeking independent professional advice.
  • Risk Disclosure: prominent disclaimers are crucial to indicate that the value of virtual assets is variable, cannot be guaranteed, and may be highly volatile. References to significant market downturns or project failures should be included to illustrate potential risks. A clear statement highlighting the risks associated to virtual assets is of vital importance.
  • No Guarantees: marketing content should not imply that investments are safe, low-risk, or that returns are guaranteed. Potential token holders should be made aware of the inherent risks and be prepared for potentially lose all their money.
  • Realistic Expectations: claims about past performance or predictions of future returns must be avoided to prevent misleading potential investors.
  • FOMO Tactics: marketing should not induce a fear of missing out (FOMO) or suggest urgent purchasing behavior.
  • Responsible Investment: advertisements must not recommend using credit or other interest-accruing methods to purchase virtual assets.
  • Due Diligence: appropriate due diligence related to the entity offering virtual asset products or services must be conducted, considering audience demographics and event participation.
  • Legal Compliance: all marketing efforts must comply with relevant UAE laws, acknowledging that third-party regulations may also apply.

Enhancing Compliance Through Effective Communication

Marketing in the web3 domain often utilizes flashy graphics and catchy slogans to grab attention. However, these tactics can obscure essential information regarding the product's terms, risks, and overall offering. To comply with the current UAE framework, the obtention of a license is not enough, as firms must proactively ensure that their marketing content discloses realistic features about the product performance and do not make unrealistic promises. Non-compliant marketing practices can result in significant fines within the UAE.

Notwithstanding the foregoing, given the global reach of digital marketing, campaigns targeting international consumers must navigate various legal frameworks at the same time. Adhering to the common principles of fairness, clarity, and transparency is a must to avoid legal challenges in faraway jurisdictions. One common pitfall for tech companies is the use of complex jargon or technical language that can confuse average consumers or the reliance on influencers that may make bold claims to boost the number of impressions. This lack of clarity and bold statements can expose firms to compliance issues, especially if the content contradicts their legal disclaimers.

Best Practices for Effective Marketing Campaigns

  • Balanced Content: Firms must provide balanced, impartial, and straightforward content, steering clear of ambiguous or contradictory information.
  • Accurate Information: When discussing costs or returns related to virtual assets, clear and updated information should always be provided.
  • Social Media Transparency: On social media, firms should disclose paid advertisements while avoiding disproportionate or misleading impressions that could falsely incentivize trading in virtual assets.

Marketing materials should be meticulously crafted to ensure that all necessary information for informed decision-making is presented clearly and comprehensively. Many firms mistakenly believe that their services, not being classified as Virtual Asset Service Providers (VASPs), allow them to operate without regulatory constraints. However, the marketing, advertising, and promotion of virtual assets are rigorously regulated in the UAE and require strict compliance.

Building Community and Continuous Improvement

An effective marketing campaign does more than just promote a token; it fosters engagement and trust within a knowledgeable community. By adhering to VARA's guidelines, firms can enhance this community engagement ethically.

Moreover, it is vital for projects to continuously assess their marketing effectiveness, adapting strategies based on their community feedback and market trends. The guidance provided by VARA ensures that businesses not only comply with current regulations but also remain responsive to the evolving landscape of virtual assets.

In conclusion, as the virtual asset market continues to grow and evolve, firms must prioritize compliance and transparency in their marketing practices. By doing so, they will not only protect themselves legally but also foster trust and build enduring relationships within the community.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More