UAE: VARA issues further regulations and guidance on marketing virtual assets and related activities in Dubai

The Dubai Virtual Assets Regulatory Authority (“VARA”) has published new regulations (the “Regulations”)^[1] and accompanying guidance (the “Guidance”)^[2] on the marketing of virtual assets (“VAs”) and related activities (“VA Activities”) in Dubai (together the “Marketing Regulations”). The Marketing Regulations supersede the existing regulations^[3] in relation to marketing VAs and VA Activities in Dubai (the “Existing Regulations”), and will be effective from 1 October 2024, although entities that have received prior approval from VARA pursuant to the Existing Regulations may be able to continue marketing in compliance with the terms and conditions of the approval received explicitly for such purpose from VARA for up to 90 days after the new Marketing Regulations take effect.

The Marketing Regulations will cover all marketing of or relating to VAs or VA Activities in or targeting Dubai and will apply to both domestic and foreign entities whether or not they are authorised by VARA.

 1. General prohibitions

 All marketing of or relating to any VA or VA Activity in or targeting the United Arab Emirates (“UAE”) must comply with the Marketing Regulations. Furthermore, any marketing of or relating to a VA Activity in or targeting the UAE must be carried out by, or on behalf of and approved by, a Virtual Asset Service Provider (“VASP”) licensed by VARA.

This is a significant change from the Existing Regulations, which allowed non-licensed entities to conduct such marketing provided they had obtained authorisation from VARA for such purpose and provided a valid permit to undertake the VA Activities to which the marketing relates from the competent authority in the territory in which they are located.

The new requirements also have a strict prohibition on any marketing of “Anonymity-Enhanced Cryptocurrencies” and any VA Activities involving them. Anonymity-Enhanced Cryptocurrencies are defined as VAs which prevent the tracing of transactions or record of ownership through distributed public ledgers and for which the VASP has no mitigating technologies or mechanisms to allow traceability or identification of ownership – commonly referred to as “privacy coins”.

The Marketing Regulations clarify that marketing activities outside of the UAE are not within scope, provided that the relevant entity is not located in Dubai, does not conduct any VA Activities in Dubai and does not carry on any marketing of or relating to any VA or VA Activity in or targeting the UAE.

2. In-scope marketing

Under the Marketing Regulations, “marketing” is defined broadly to mean any advertisement, invitation, solicitation, offer or and promotion, regardless of the media or channel through which it is made. Such media or channels may include, but are not limited to, social media posts, blogs, comments endorsements, non-written communications, banners, billboards, videos, podcasts, recordings or live streams, events held in Dubai, and educational content. Also specifically referenced are “airdrops” of VAs, which are often used by VA businesses or projects as a means of avoiding triggering local regulations in the jurisdictions of their users or prospective users.

As set out in the Guidance, VARA intends for the new rules to cover all forms of marketing and will take all relevant circumstances into consideration when assessing whether a communication or activity qualifies as marketing. These include, but are not limited to, the content, the target audience, how it is publicised or otherwise made available, its relevance to a VA or VA Activity, whether there is a commercial purpose behind it, and the intent and/or objectives behind it.

3. Territorial scope

The Regulations apply to marketing “in or targeting the UAE". As set out in the Guidance, VARA will assess whether marketing is “in or targeting the UAE" in the context of the overall campaign in which it is carried out. All campaigns will be considered as a whole in terms of the channels used and the content of all materials.

The UAE is used in this context, as opposed to Dubai only, because VARA deems any marketing that targets the UAE to, by default, be targeting Dubai. This is because VARA does not view it as likely that a campaign or any marketing can target the UAE and adequately carve out Dubai – unless it is explicitly specified in every communication, which may be reviewed and proven on a case by case basis.

The Guidance also includes a non-exhaustive list of factors that VARA may consider in determining whether a campaign or any marketing is “in or targeting the UAE”. Examples include, amongst others:

• Campaigns that select the member states of the Gulf Corporation Council / UAE as a location;
• UAE specific press related to the campaign;
• Emirati Dirham (“AED”) is used as the denominator currency or one of the denominator currencies in marketing materials;
• Campaigns using UAE and/or Dubai imagery;
• Campaigns using UAE celebrities or famous individuals with large influence base / followings in the UAE; and
• Maintaining any communication channels which target UAE residents (e.g. chatrooms or social media pages).

4. Requirements for marketing

Part C of the Regulations sets out a number of requirements that apply to firms including, for example, the requirements for marketing to be fair, clear and not misleading in both substance and presentation, and to be clearly identifiable as marketing or promotional in nature. As set out in the Guidance, the following principles should be taken into consideration when designing marketing materials in order to ensure they are fair, clear and not misleading:

• Plain language;
• Clearly legible or audible;
• Proportional;
• Balanced picture;
• Clarity on regulatory status; and
• Prominent language identifying the material as marketing or an advertisement.

In addition, any marketing in or targeting the UAE must:

• not include a call to buy, or other messaging seeking, instructing or directing the purchase and/or sale of the VA;
• include a prominent disclaimer that VAs may lose their value in full or in part, and are subject to extreme volatility;
• state clearly that the owner and/or investor in the VA can lose all the money or other value they invest, and does not benefit from any form of financial protection; and
• not involve the sending of any VA to a VA wallet without prior consent, or a clear expression of interest from the owner of the VA wallet to the receipt of the VA.

The last requirement above is consistent with the reference above to “airdrops” potentially constituting in-scope marketing under the Regulations.

Like many other jurisdictions, VARA has also included restrictions around incentives and requires firms to ensure that monetary or non-monetary incentives are not used in such a way that they are likely to divert or mislead investors’ focus from the proper consideration of the risks associated with the VAs or any product or service related to any VA Activity. Furthermore, incentives must be available for an adequate period of time so as not to imply any urgency or create a fear of missing out on future appreciation in value or profits due to inaction. Finally and importantly, any incentives  must receive a compliance confirmation from VARA and comply with all conditions or restrictions notified by VARA at the time of approval or at a later date. Helpfully, the Guidance confirms that non-monetary incentives do not include information and/or research tools.

Records of any marketing and details of its distribution must be retained for at least 8 years from the date on which it is last conducted, and these must be available to VARA for inspection at its request.

Third party marketing agencies involved with the marketing content must also meet a number of requirements under the Regulation, including the requirement to take all commercially reasonable steps to ensure any marketing it carries out complies with the Marketing Regulations, including but not limited to the necessary diligence to ensure the instructing entity is permitted to carry out marketing in or targeting the UAE under the Marketing Regulations.

5. Exemptions

The Marketing Regulations contain a number of exemptions, each subject to specific criteria. These include:

• Journalist exemption – this covers entities in Dubai that are posting, publishing or presenting content of or relating to any VA or VA Activity in their capacity as journalists. “Key opinion leaders” (commonly referred to as KOLs) and/or influencers are not regarded as journalists and do not qualify for the journalistic exemption.
• Educational exemption – this covers entities that are posting, publishing or presenting educational content of or relating to any VA or VA Activity. The Guidance states that educational content for these purposes generally means content which is purely educational and for informational purposes only without the intention of leading the recipients to engage in the activity of investing in a VA or signing up for a service provided as part of a VA Activity.
• Personal or private communications exemption – the Guidance states that communications which would be considered purely personal or private will only include friends, family or colleagues, whilst communications which are accessible to by 50 individuals in aggregate, whether directly or indirectly, would not be considered personal or private.

A further limited exemption applies to in-person marketing events in Dubai, but this is subject to conditions, including not permitting any residents of the UAE to sign-up or onboard as a client at the event, the organiser being appropriately licensed in all jurisdictions for which they do offer or provide any product or service, and the marketing consisting only of: (i) the name of the entity; (ii) a logo or other image associated with the entity; (iii) a reference to the types of activities provided by the entity, or to its fees and commissions; and (iv) information for the purposes of explaining the product or service, or for educational purposes only, which may include live demonstrations and use.

Any entity responsible for organising, hosting, promoting or managing any event in Dubai at which the marketing of or relating to any VA or VA Activity may be carried out must also comply with certain requirements, including obtaining a signed undertaking from each exhibitor confirming that they will not carry out any VA Activities in or from Dubai without being appropriately licensed by VARA to do so.

6. Platforms and channels  

All entities that facilitate marketing of or relating to any VA or VA Activities in or targeting the UAE, including, but not limited to, traditional and digital broadcasters, publishers, search engines, social media and other internet platforms, must take all commercially reasonable steps to ensure that such marketing complies with all applicable laws, regulations, guidelines or other rules applicable across the UAE and specific to Dubai, including the Marketing Regulations.

Further obligations apply to operators of application stores and/or platforms which enable users to search for, download or install any application or software, including the requirement to ensure that any application or software which is searchable and downloadable in Dubai which facilitates any VA Activity is either owned and/or controlled by a VASP licensed by VARA to carry out such VA Activity, or is otherwise approved by VARA to do so.

Operators of application stores and/or platforms will be required to implement all necessary technology to ensure compliance with the Marketing Regulations, including, but not limited to, geo-blocking and location-based filtering.

7. Enforcement and fines  

Part IX of the existing Virtual Assets and Related Activities Regulations 2023 applies to the Marketing Regulations, giving VARA the power to investigate and/or examine firms where they feel necessary, and obliging firms to cooperate and provide information requested by VARA.

Part II of the Regulations emphasises VARA’s powers to issue fines or other civil penalties for violations in accordance with Schedule 1 thereof. The amount varies depending on the nature of the violation and the grounds for issuing the fine, but can be up to AED 10,000,000.

8. The Guidance

The Guidance provides further clarity on the requirements set out in the Regulations. In particular, there are a number of case studies and examples that firms should consult when considering the scope of the Regulations and determining whether any proposed marketing is or is not in scope.  

Commentary

Over the last few months, UAE regulators have continued to develop and enhance the UAE regulatory regime for VAs and VA Activities, reflecting the ever-developing industry and technologies that support it, as well as the evolving regulatory landscapes globally and in the Middle East region in particular.  

The new Marketing Regulations provide helpful clarity on the requirements for marketing VAs and VA Activities in or targeting the UAE, and reinforce VARA’s reputation as a modern and future-facing regulator, ideally suited to facilitating Dubai’s ambition of becoming a global virtual assets hub, and emphasising VARA’s commitment to fostering trust and supporting the growth of the sector through clear regulatory guidelines.

Co-authored by Milo Bates, Trainee Solicitor

^[1] Regulations on the Marketing of Virtual Assets and Related Activities 2024

^[2] Guidance on the Regulations on the Marketing of Virtual Assets and Related Activities 2024

^[3] Administrative Order No. (01) of 2022: Relating to Regulation of Marketing, Advertising and Promotions Related to Virtual Assets; and Administrative Order No. (02) of 2022: Pursuant to, and to be Read in Conjunction with Issued Administrative Order No. (01) of 2022.