The industry desperately needs to refresh how it does marketing to avoid lasting reputation damage.

Marketing in the crypto world feels a bit on edge lately. It’s almost as if crypto marketers are thinking more about how to stay out of jail than maximizing the next bull run. I was thinking about this conflicted feeling during a hiking trip with a friend in the Washington Mountains outside of Seattle. We thoroughly discussed malpractices in crypto marketing, looking back at the many unfortunate examples of common approaches used by big-name exchanges.

All that nonsense now seems to be nearing its final lap. According to a bombshell story first reported by SCMP, Hong Kong authorities took decisive action against six individuals, two of whom are (or shall I say were) social influencers. The exchange, deemed operating in the city without a license, is set to become the biggest challenge for Hong Kong regulators since the policy declaration, which paved the way for the region to become a leading player in Web3, of the Hong Kong Fintech Week last year.

However, besides the legal ramifications and severe financial losses due to the fraud, it seems the unresolved issue is the hype-driven marketing campaigns in centralized and decentralized crypto circles. This regulatory action against crypto marketers should be a wake-up call that hype-driven and misleading marketing practices in crypto have no place in this respectable and systemically important industry.

Honesty is the best policy

Of course, it is common sense that in communicating with regulators, licensed crypto companies (or licensee) have to be honest, truthful, and comprehensive. misrepresentation to a regulator is a criminal offense in most jurisdictions. So, when it comes to describing areas such as systems, procedures, internal controls, and governance, the applicant has to elaborate completely and in detail on how they are handled. This honest accounting of the truth enables the regulator to form an accurate impression of the effectiveness of a regulation or sanction, as well as the competence of the staff.

Unfortunately, these principles often get completely ignored when crypto companies start marketing. They often seem to think that regulators either don’t pay attention to how the marketing is done, or assume they don’t care. In reality, neither is accurate. Regulators pay very close attention to general behavior, including the marketing department, of licensed persons and entities, as well as those who are applying to be licensed.

Indeed, the regulator in Hong Kong has specifically pointed out that in the JPEX case, they expected those VASP applicants who were operating in Hong Kong without a license before June 1st –and intending to apply in the grandfathering period until March 31, 2024 –to operate their business as if they already were licensed and compliant and have a business to say they intend to get licensed while actively marketing products outside the regulatory framework, such as margin services or leveraged products for digital assets.

More focus on public education

I often hear from founders of crypto companies that they already see enough workshops and seminars out there for public education, so doing more will yield little benefit to the public good or a company’s ESG or brand awareness. But that isn’t true. As more details of the victims of JPEX start to surface, it shows that most of them lacked a basic understanding of the legitimacy of their service provider in that jurisdiction or the ability to differentiate financial products and their risks. It is thus no surprise that the hype brought by KOLs and influencers promoting JPEX products clouded the customers’ understanding of what they were actually buying.

The focus on public education should be noted with two key considerations: the first being fact-based sharing and the second on knowledge sharing in non-commercial settings. Preparing a presentation with sound financial knowledge, and fact-driven analysis will help potential investors gain a better understanding of one’s business model and potential risk points. The intent is to truly empower your audience with the right knowledge and tools to make decisions in their best interest.

Then it comes to the setting, it needs to be accessible to your target audience and diverse opinions should be present to balance out any biases. For example, a crypto exchange inviting three other exchanges to talk about roughly similar products or services does not help the audience to be educated and raises red flags. While it makes sense for business executives to gravitate toward speaking with peer institutions when promoting a new concept, they reinforce each other’s biases on stage, and the audience won’t benefit from a balanced discussion.

On the other hand, CEOs who engage with college students on campuses and with government agencies are admirable. By speaking with future talents directly, they not only invest in their time teaching future talents skills they need to be successful but also emphasize the power of crypto to drive greater good for the public.

Where do we go from here?

Things can get worse before they get better. Look no further than the latest case of OPNX. Judging by its marketing more fallout will almost certainly occur before the industry fully integrates with traditional traditional finance. As more institutions enter crypto in a bid for a possible Bitcoin ETF, marketing professionals should be aware of the sea change in the industry and new shaping forces at play in the industry.

In sharp contrast to what has promoted the astonishing growth of hype marketing of which FTX and JPEX represent, the lasting, successful strategies in crypto are in fact rooted in empathy and fact-based marketing. This is a much better way for companies seeking sustainable growth and a trustworthy reputation. I’m confident that a return to responsible marketing marked by a strengthened understanding of compliance and emphasis on public education will take place at a much faster pace and certainly will be seen in Hong Kong.

With Contribution from Donald Day, Chief Operating Officer, VDX.

Yiwei Wang is an avid blockchain enthusiast with a focus on the intersection of crypto, economics, and public policy. He was previously the Global PR Lead at Babel Finance and he began his career at Ogilvy in Beijing. He is currently the Head of Global PR at Metalpha.

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