Virtual Assets Regulatory Authority issues new marketing and penalty regulations

Background

Dubai Law No 4 of 2022 or better known as the Virtual Assets Law (the “VAL”) was issued on 28 February 2022 and came into effect on 11 March 2022 for the purpose of regulating virtual assets in Dubai. VAL established the Virtual Assets Regulatory Authority (“VARA”) which is one of the world’s first independent regulator for virtual assets incorporated in Dubai. The VAL creates a legal framework for businesses and investors within the virtual asset space in Dubai. The establishment of VAL and VARA demonstrates Dubai’s commitment to become a leading jurisdiction for virtual assets.

Marketing and Penalty Regulations

With the commencement of its Minimum Viable Product (MVP) Phase, VARA announced on 25 August 2022 its regulatory guidelines on marketing, promotions and advertising of Virtual Assets across Dubai as well as the penalties for failing to abide by such requirements.

The Administrative Order No 1 of 2022 Relating to Regulation of Marketing Advertising and Promotions Related to Virtual Assets (the “Marketing Regulation”) sets out the requirements for the promotion of Virtual Assets within Dubai. The definition of “marketing” includes, but is not limited to:

• Communications, publication of data and information across any traditional new-age multi-media channels;
• Social media posts and/or blogs, comments, endorsements, billboards, videos and live-streams;
• Advertisements (paid or non-paid) and all forms of publicity driving content served across any platform and channels; and
• Any incentives within Dubai to encourage people to purchase Virtual Assets. The Marketing Regulation is extra-territorial in scope as it applies to all entities, domestic or foreign and whether or not they are licensed by VARA, if such entity targets or intents to target consumers within Dubai. The Marketing Regulation further places an obligation on entities that facilitate marketing of Virtual Assets and require that such entities comply with all applicable rules and regulations within the UAE. This would therefore capture entities such as publishing firms and social media companies. The Marketing Regulation provides that all marketing relating to Virtual Assets and/or Virtual Activities in Dubai must:
• Be fair, clear, not misleading and clearly identifiable as marketing or promotional in nature;
• Not mislead in relation to the real or perceived advantages of Virtual Assets;
• Include a prominent disclaimer that the value of Virtual Assets is variable and cannot be guaranteed;
• Not imply that investment decisions are trivial, simple, easy or suitable for all,
• Not imply that past performance of investments is an effective guide for, or guarantee of a future return;
• Not imply an urgent to buy Virtual Assets in anticipation of future gains or create a fear of missing out on future gains by not buying now;
• Not advocate the purchase of Virtual Assets using credit or other interest accruing facilities;
• Ensure that any targeted marketing is undertaken responsibly by suitably licensed entities to present only appropriate products
• Comply with all applicable laws, regulations guidelines or other rules across the UAE.

Any entity undertaking marketing in relation to Virtual Assets in Dubai must retain a record of all relevant content and the audience details for a minimum of years and must be made available to VARA upon request. In addition, any paid content on social media must make clear that the marketing is paid for.

Marketing Regulation breaches

VARA has broad discretion under the VAL and the Marketing Regulation to impose a number of penalties against entities deemed to have breached the Marketing Regulation. In the first instance, VARA reserves the right to issue a cease and desist order. VARA also reserves the right to call for activity suspension, requiring an event to be cancelled and revoke a VARA licence. In respect of monetary penalties, the fines for breaching the Marketing Regulation start at AED 50,000 and range up to AED 500,000.

Commentary

The VAL and the establishment of VARA is a welcomed development for the region and reflects the Emirate’s vision to becoming a forward-thinking tech ecosystem. The new Marketing Regulations issued by VARA seeks to balance the desire to become a leading jurisdiction in the virtual asset space and protecting consumers within Dubai.