Dubai’s VARA publishes virtual asset marketing guidelines

Introduction

This article looks at the Dubai Virtual Assets Regulatory Authority’s (VARA) first publicly-issued policy and guidelines, which cover the marketing of Virtual Assets.

VARA, which was created by virtue of Dubai Law No 4 of 2022 (the VARA Law), released two Administrative Orders on 25 August 2022:

1. Administrative Order No 1 of 2022 Relating to Regulation of Marketing Advertising and Promotions Related to Virtual Assets (the Marketing Regulation); and
2. Administrative Order No 2 of 2022 Relating to the Fines and Penalties for Non Compliance (the Penalties Regulation).

The Marketing Regulation sets out to govern the rules for the marketing and promotion of Virtual Assets. The VARA Law has defined Virtual Assets widely such that it would capture most cryptocurrencies and non-fungible tokens (NFTs).

VARA has sought to define ‘marketing’ very widely and has provided a non-exhaustive list of activities that would constitute marketing for the purposes of the Marketing Regulation. These include:

1. Communications whether influencer led, sponsored or otherwise on traditional channels and “new age” channels; 
2. Social media posts, blogs, comments, endorsements, banners, billboards, videos and live streams;
3. Any activity in Dubai to encourage participation specifically where potential buyers are solicited or incentivised to purchase Virtual Assets; and
4. Advertisements and all forms of publicity driving content across any platform or channel.

In short, any and all forms of marketing of Virtual Assets, whether direct or indirect will be captured under the Marketing Regulation.

The Penalties Regulation, which should be read in conjunction with the Marketing Regulation, sets out the sanctions that the VARA may impose for violations of the Marketing Regulation, which includes fines and enforcement measures.

Who does the Marketing Regulation apply to?

The Marketing Regulation has a broad scope of application, applying to any entity that wishes to market Virtual Assets in Dubai. It is extra-territorial in scope: it applies to all entities, whether domestic or foreign, regardless of whether they are licensed by VARA. The only requirement – or acid test – is that an entity intends to target residents or consumers within Dubai.

VARA has also gone a step further by placing an onus on entities that facilitate marketing. This would include broadcasters, publishers, and social media companies. These entities are required to ensure that any marketing of Virtual Assets in Dubai complies with all applicable rules and regulations in the UAE, including the Marketing Regulation.

What are the rules in respect of marketing Virtual Assets?

VARA has set out guidelines on the form and content of any marketing or promotion of Virtual Assets. The Marketing Regulation requires that all marketing or promotional material must:

1. Be fair, clear, not misleading and clearly identifiable as marketing or promotional in nature;
2. Not mislead in relation to the real or perceived advantages of Virtual Assets;
3. Include a prominent disclaimer in respect of unpredictable and volatile nature of the value of Virtual Assets;
4. Not advocate that investments are safe, low risk or that returns are guaranteed;
5. Not imply that investment decisions are trivial, simple, easy or suitable for all;
6. Not imply that past performance is indicative of future returns;
7. Not imply urgency to buy a Virtual Asset in anticipation of future gains or create a fear of missing out on future gains by not buying a Virtual Asset immediately;
8. Not advocate the purchase of a Virtual Asset using credit or other interest accruing facilities;
9. Ensure that any targeted marketing is undertaken by suitably licensed entities to present only appropriate products or services to the audience, including defined criteria on investor qualification; and
10. Comply with all applicable laws, regulations and guidelines in the UAE.

In addition, any paid content, such as using social media or influencer marketing, must make clear that the marketing is paid for. Entities must also retain a record of all relevant content, including audience details, for a minimum of two years. This should be made available to VARA on request.

The guidelines set out above imply that VARA is concerned primarily about the protection of consumers, and retail clients in particular. This echoes similar steps being taken in Singapore where the Monetary Authority of Singapore is contemplating tightened access to cryptocurrencies for retail clients.

What are the consequences of a breach of the Marketing Regulations?

In the event of any breach of the Marketing Regulations, VARA has the power in the first instance to issue a cease and desist order. The Penalties Regulation, which is meant to be read in conjunction with the Marketing Regulation, sets out further penalties in the event of continued non-compliance. With regard to fines, these start at AED 50,000 and, for repeat offenders, can go up to AED 500,000.

In addition to a fine, VARA also has the power to prohibit marketing for a period of six months, revoke any VARA licenses, and require that the entity in breach issue a public statement confirming that it has breached the Marketing Regulation.

The Marketing Regulation is the first time we are seeing publicly-issued policy and guidelines from VARA, and provide an insight into the sort of regulator that VARA seeks to be. It is expected that further Administrative Orders will be published as VARA continues to develop its regulatory policy and supervisory approach.