Dubai - Virtual Assets Regulatory Authority (VARA) a new phase of regulations
On 25th August 2022, VARA, Dubai’s independent regulator for Virtual Assets, launched its operations officially by issuing bespoke licensing regulations. VARA announced the regulatory guidelines on marketing of Virtual Assets and the statutory fine & penalties for non-compliance in the Emirate of Dubai.
The regulations from VARA were issued under two separate regulations through Administrative Order No 1 of 2022 Relating to Regulation of Marketing Advertising and Promotions Related to Virtual Assets (the “Marketing Regulation”) and Administrative Order No 2 of 2022 Relating to the Fines and Penalties for Non Compliance (the “Penalties Regulation”).
The Marketing Regulation
The Marketing Regulation dictates the rules for promotion and advertising of Virtual Assets and includes all variety of crypto-currencies and non-fungible tokens. Marketing and promotion as described in the Marketing Regulation has broad application and a non-exhaustive list of actions is provided including all forms of communications whether the same is through conventional or modern electronic channels available for marketing and promotion. Use of social media, endorsements, billboards or plain advertising across any platform is covered under the definition of marketing. The marketing of Virtual Assets can be by an entity not licensed in the Emirate of Dubai thereby making the regulation extra-territorial and enforceable against domestic and foreign entities regardless of whether or not licensed by VARA. The key requirement for the Marketing Regulation to apply is the target market and as long as the entity is targeting clients and residents in Dubai the Marketing Regulation would apply to them.
In summary the Marketing Regulation sets out the form and standards required for any marketing or promotion of Virtual Assets. In principle, all marketing and promotion should avoid being misleading, include prominent disclaimers and not induce sales by implication nor advise the use of credit to purchase virtual assets.
The Penalties Regulation
In case of breaches to the Marketing Regulations, VARA is empowered to issue cease and desist orders. In the event of continued infractions, the penalties can range between AED 50,000 to AED 500,000.
VARA has also other powers available to it including revocation of incumbent entity’s VARA licenses, prohibition on marketing for a period of 6 months, issuance of public statements by the breaching entity confirming breach of the Marketing Regulations.
In short, these recent regulations from VARA are indicative of VARA’s goal to become the competent regulator for Virtual Assets in the Emirate of Dubai and to provide protection for consumers and retail clients who would be most vulnerable with exposure to Virtual Assets as an investment. The much awaited regulations are a positive development for the sector, we expect a number of additional regulations to be issued in the future from VARA.