Crypto businesses often rush into marketing without thoroughly considering their legal positioning, inadvertently creating substantial regulatory risks. To mitigate these risks, legally sound marketing must begin with the careful structuring of the project and clearly defining the positioning of its associated products or services.

It is important to recognise that the Web3 industry includes a broad variety of projects, each of which may be subject to different regulatory regimes depending on their structure, features, and the sectors they operate in. Some projects may offer financial services, act as virtual asset service providers (VASPs), or engage in activities connected to crowdfunding, pensions, or real estate. Others may have characteristics that bring them under investment or securities regulation.

Given this diversity, there are no one-size-fits-all compliance recommendations. The legal framework that applies will depend on how the project functions, for instance, whether it provides custody of assets or is built on decentralised infrastructure.

Define the Legal Positioning of Your Crypto Project

The first essential part of regulatory work is determining whether the project or its products fall within the scope of specific legal frameworks. This requires a thorough evaluation of the key factors that regulators typically consider, such as the project’s business model, the structure of its products, and the way those products are marketed or presented, including on social media. For example, a product may appear similar to a financial instrument, such as a deposit or an investment. However, that alone does not automatically mean it is subject to financial regulation. A careful legal assessment is needed to determine whether existing laws apply and, if so, how.

This type of analysis helps projects determine the applicable legal framework and decide whether a licence or authorisation is necessary or whether the structure allows them to operate without obtaining additional permissions. The aim is to ensure the project is designed and presented in a way that is legally sound and aligned with applicable regulations.

In traditional businesses, it's straightforward to distinguish between distinct products, like metal and wool. However, in crypto, distinguishing between different types of tokens is less clear-cut. Some tokens may qualify as securities, while others do not, each attracting vastly different regulatory frameworks.

Only after proper legal structuring can projects proceed to marketing. First, it is necessary to identify the legislation applicable to the project’s business model and assess whether adjustments in product design are advisable. Based on this foundation, the next step is to develop compliant public communications.

In the Web3 industry, marketing-related risks often arise when the messaging does not accurately reflect the nature of the product or service. For example, exaggerated claims or unclear descriptions can lead to regulatory concerns. In some cases, marketing rules incorporate consumer protection standards, particularly when a product is offered to retail users. However, this is not always the case, and whether such standards apply depends on who its target audience is.

Without proper regulatory structuring, compliant marketing is practically impossible. But once the analysis is completed, the marketing team can focus on delivering accurate and aligned communications.

Understand Jurisdictional Targeting Rules for Crypto Marketing

Another key aspect of regulatory compliance in crypto marketing is understanding your geography and which country's rules may apply to the project. Regulatory requirements can vary significantly across jurisdictions. What is allowed or remains unregulated in one jurisdiction may be tightly controlled or completely banned in another.

To determine whether national laws apply, regulatory authorities generally assess if a product or service is offered to persons located or registered in their jurisdiction, regardless of where the operating company is registered. Many countries apply what is known as the targeting principle: if a product is promoted to local residents, even by a foreign company, their national rules may apply. Targeting may be inferred from various elements, such as the language of the website, the domain used, the content of marketing materials, or the use of references to specific countries, flags, or cities.

At the same time, not all user interactions are treated as targeted offers. Some jurisdictions recognise the concept of reverse solicitation, where a user discovers and engages with a product on their own initiative, without being specifically targeted. While this can provide a potential safeguard, it should be applied with caution and legal advice.

Understanding which rules are likely to apply, and in which jurisdictions, is the foundation for building compliant marketing strategies in Web3 and blockchain.

Five Essential Rules to Follow in Web3 Marketing

There are certain general rules that should be followed by any crypto or Web3 project regardless of the applicable regulation, in particular:

1. Never state or imply that your product, service or project is approved or endorsed by a public or private body unless you have explicit and verifiable authorisation.
2. Don’t falsely claim the offer will be available only for a very limited time or under special conditions to pressure immediate purchasing decisions.
3. Clearly avoid any statements or implications that item can be legally sold if it cannot.
4. Avoid providing misleading or incorrect information about market conditions or item availability designed to push customers into purchasing at unfavourable terms.
5. Always deliver on promises made in promotional campaigns. For example, if you offer a prize or competition, ensure you award the promised prizes or a fair equivalent.

Legal Recommendations for Different Types of Projects

Marketing positioning is heavily influenced by both the nature of the project and the legal frameworks that apply to it. Below, we outline key considerations for marketing several common types of Web3 projects.

1. Token Issuance: Avoid Misleading Information

Tokens are typically issued to serve a specific utility, either within a particular project or on a standalone basis, as in the case of stablecoins. Some tokens, such as meme tokens, may not have any functional use. The regulatory implications for each type of token can vary significantly, so it is important to always align the communication strategy with the legal strategy of the project.

Across all token types, marketing materials must avoid presenting unfair, exaggerated, or misleading information. Proper disclosure of risks is advisable. If the token is intended to remain unregulated, avoid making any promises of returns, passive income, or value appreciation in any marketing communications or public materials. Such claims may result the token being classified as a security or other regulated instrument in many jurisdictions.

When promoting utility tokens or meme tokens, avoid implying that simply holding the token or selling it later on the secondary market will result in financial gain. In the case of meme tokens, it is advisable to include clear disclaimers stating that the token has no utility or intrinsic value and is created purely for entertainment or similar purposes.

2. DeFi Projects: Avoid Investment Terminology and Focus on Utility

By way of example, let’s consider a project offering a liquidity provision (e.g. staking) protocol. Ensuring compliance involves more than using careful wording or avoiding phrases related to passive income. A product may still attract regulatory attention if its structure resembles that of a financial instrument, such as a deposit or investment, but lacks the relevant licence. It is the overall design and functionality of the product that determines whether it falls within a regulated activity. Authorities assess the substance of the product, including its features and how it operates. But equally important is how the product is presented to the public, as much of what project communicates can be interpreted as product description for regulatory assessment.

Therefore, an unregulated DeFi project should generally avoid investment and financial terminology like “earn,” “yield,” “passive income,” or “high returns,” especially in public-facing materials. Promoting a product or service as a source of effortless or promised income may lead it to be classified as an investment product, which will likely trigger the application of financial and securities laws, and relevant compliance obligations.

To minimise this risk, focus on user utility, and not on financial gain. Emphasise on active user engagement, for example, supporting network validation, governance, or broader ecosystem contribution.

Finally, do not claim that the staking protocol is under the project’s control if that is not the case.

3. Web3 Startups: Highlight Utility, Not Speculation

Some projects leverage blockchain technology to support operations, such as securely recording specific types of information. In such cases, the most effective marketing strategy is to focus on promoting the products or services itself, their features, and utility, while presenting blockchain use as a means to enhance transparency and efficiency. In this context, the likelihood of the tokens falling within the scope of financial regulations is generally low.

Other projects may involve the tokenisation of real-world assets themselves. Here, regulatory considerations become more complex. As a general rule, avoid positioning such tokens as regulated instruments or suggesting they are approved or guaranteed by any authority. Instead, it is advisable to clearly communicate the risks associated with using decentralised technologies.

As mentioned earlier, these matters are often nuanced and depend on specific circumstances. For a more detailed exploration of real-world asset tokenisation and the resulting regulatory implications, you may refer to our dedicated article.

4. Custodial Wallets and Regulated Exchanges: Meet Disclosure and Marketing Obligations

Entities such as custodial wallets and regulated exchanges, which operate under a licensing regime, are already within the scope of their applicable regulation which almost always has its special marketing rules attached. Regulatory frameworks frequently impose disclosure obligations to ensure users clearly understand the nature of the service, the risks involved, and their own responsibilities. The primary aim is to promote transparency and avoid misunderstandings about the level of protection users may expect.

For example, under the Markets in Crypto-Assets Regulation (MiCA), marketing materials may be required to include disclaimers noting that communications haven’t been approved by any European Union authority and that the offeror is solely responsible for the content. Such disclaimers are particularly relevant for exchanges and reinforce the earlier recommendation not to claim any approvals or guarantees that are not in place.

Disclosures must also inform users of specific risks associated with blockchain-based services, such as the volatility of digital asset values, the possibility of partial or total losses, and the potential lack of liquidity.

Clear and transparent communication of these risks, typically within the Terms of Service, is essential not only for legal compliance but also for maintaining user trust.

Final Thoughts

An effective and compliant crypto marketing strategy involves:

1. Clearly defining the regulatory framework applicable to your project, alongside its positioning and operational strategy.
2. Identifying targeted markets and securing the necessary licences or authorisations, if required.
3. Developing compliant marketing materials before launching promotional campaigns.

Decisions, especially regarding regulatory status, must be proactively determined at the outset of the project's lifecycle rather than left to regulators.

Whether you're planning a new project, introducing new features, or expanding into new markets with an existing operation, feel free to contact us. At Aurum, we provide specialised legal support tailored to your project's stage of development and compliance needs.