Right, so picture this: you’ve got this brilliant new crypto token. You’re buzzing. Time to unleash it on the world, right? But hold your horses. I recently sat down with Emma, a lawyer specialising in crypto compliance, and honestly, the things she told me about influencer marketing and regulation… it’s a jungle out there.
“It’s all about substance over form,” Emma started, sipping her tea. “You can call it a ‘competition’, an ‘airdrop’, anything you like. But if you’re promising future returns based on the efforts of a third party – the development team, for example – regulators might see that as an unregistered security offering.”
Scary stuff. I asked her to break it down, step by step.
First: Know Your Regulators (and Their Moods)
Emma explained that the regulatory landscape is a patchwork, and it’s evolving constantly. “The SEC in the US has a particular view, but so does the FCA in the UK, and BaFin in Germany. And even within those jurisdictions, interpretations can shift.” She stressed the need for location specific advise, from lawyers or consultants.
Actionable Step: Before launching anything, map out where your target audience is located and research the specific regulations in those jurisdictions. Think about employing someone from these countries that can give better advise.
Second: Influencers Aren’t Immune
This was a big one. “It’s not just the token founders who need to be careful. Influencers can be held liable too,” Emma warned. “They need to disclose any compensation they’re receiving and make it clear that they’re not offering financial advice, unless they are actually qualified to do so. Even a casual sounding ‘this is going to moon’ can cause problems.”
Actionable Step: Contractually obligate your influencers to comply with all applicable advertising regulations. Provide them with clear guidelines on what they can and cannot say, and make sure they disclose their relationship with you in every piece of content.
Third: Airdrops: Gifts or Investments?
Airdrops seem harmless, right? Free tokens! But Emma quickly disabused me of that notion. “If you’re requiring people to perform tasks – liking, sharing, inviting friends – to get those tokens, and those tasks are designed to increase the token’s value, then it starts to look like you’re selling an investment, not giving away a gift.” What about competitions?
“Competitions are similar. If the prize is large enough, and the barrier to entry low enough, it could be viewed as an inducement to invest. The language you use is crucial.”
Actionable Step: Structure your airdrops to minimise any expectation of future returns. Keep the required tasks minimal and avoid language that promises profits. Emphasise community building, rather than financial gain.
Fourth: Disclosure, Disclosure, Disclosure
This is the golden rule, according to Emma. “Transparency is your best friend. Disclose everything. Disclose the risks associated with the token. Disclose the team behind it. Disclose any conflicts of interest. Don’t try to hide anything, it will always come back to bite you.”
Actionable Step: Create a comprehensive risk disclosure statement and make it easily accessible on your website and in all marketing materials. Be upfront about the potential downsides of investing in your token.
Fifth: Anti-Fraud is Always Relevant
“Even if you’re not technically offering a security, you still need to comply with anti-fraud laws,” Emma reminded me. “Don’t make false or misleading statements about your token, its technology, or its potential value. Avoid using manipulative or deceptive marketing tactics. And don’t engage in pump-and-dump schemes.” It sounds obvious, but she said it happens all the time.
Actionable Step: Regularly review your marketing materials to ensure they are accurate and not misleading. Don’t make any claims you can’t back up. If you can, get your claims backed by a trusted third party.
Sixth: Jurisdiction Hopping Won’t Save You
I even asked Emma whether token founders could simply incorporate in a more lenient jurisdiction. Her answer? Not so fast. “Regulators are getting smarter. They’re looking at where your users are located, where your marketing efforts are directed, and where the real decision-making is happening. Simply incorporating in a different country won’t necessarily shield you from liability.”
Ultimately, Emma’s advice boiled down to this: play it safe, get legal advice, and be upfront about everything. The crypto world is exciting, but it’s also full of potential pitfalls. Understanding the regulatory landscape and acting responsibly is crucial for long-term success. Don’t be tempted to cut corners – it’s just not worth the risk.