UAE: VARA's New Marketing Regulations for Virtual Assets

This article provides an analysis of the latest regulations introduced by the Virtual Assets Regulatory Authority (VARA) in Dubai concerning the marketing of virtual assets and related activities. The newly implemented Marketing Regulations, supported by the "Guidance on Regulations on the Marketing of Virtual Assets and Related Activities 2024," replace the previous framework, bringing updated standards to ensure compliance and investor protection. The article outlines key aspects of the new regulations, including definitions of marketing, general prohibitions, the scope of applicability, and specific rules regarding anonymity-enhanced cryptocurrencies and key opinion leaders.

Regulatory Context

The Virtual Assets Regulatory Authority (VARA) has recently released updated regulations governing the marketing of virtual assets and related activities in Dubai. These new Marketing Regulations are supported by the "Guidance on Regulations on the Marketing of Virtual Assets and Related Activities 2024," which serves as a non-binding, explanatory reference. The updated rules replace the previous regulations - Administrative Order No. (01) of 2022, which covered marketing, advertising, and promotions of virtual assets, and Administrative Order No. (02) of 2022, which supplemented it. The new regulations officially came into effect just a week ago, on October 1, 2024.

For entities that had previously obtained approval from VARA under Administrative Order No. (01) of 2022, they may continue their marketing activities in line with their original approval for up to 90 days after the new regulations come into force, without being in breach of the new rules. However, after the 90-day grace period, full compliance with the new Marketing Regulations will be required to continue marketing efforts.

“Marketing”: Definition

Under the new regulations, "marketing" is defined broadly to cover any form of promotion or invitation related to virtual assets. This includes any advertisement, offer, inducement, or solicitation made through various means, regardless of the media or platform used.

Marketing under these rules can occur through a wide range of channels. These channels may include, but are not limited to, promotional communications, publications, social media posts, blogs, endorsements, videos, podcasts, live streams, airdrops and events in the Emirate that facilitate client solicitation or promote VA-related products or services.

It's important to note that the list of examples provided in the Marketing Regulations is not exhaustive. It aims to illustrate the types of communications and activities that might be considered marketing, but other forms of promotion may also fall within the scope. VARA will assess whether a communication or activity qualifies as Marketing by considering factors such as the content, target audience, method of publicity, its relevance to a Virtual Asset or VA Activity, commercial purpose, the intent behind the activity, and VARA's regulatory objectives.

General Prohibition

No entity is permitted to conduct any marketing activities related to VAs or VA Activities in or targeting the UAE unless they fully adhere to VARA’s Marketing Regulations at all times. 

All marketing related to any Virtual Asset (VA) Activity targeting the UAE must be carried out by either:

• A VASP licensed by VARA to conduct the specific VA Activity being promoted, or
• A third party acting on behalf of, and with approval from, a licensed VASP for that particular VA Activity.

This ensures that only authorized entities are involved in promoting Virtual Asset services within the UAE, maintaining compliance with VARA's regulatory standards.

In the UK, a similar approach is followed under the Financial Promotion Order (FPO), which provides four legal routes to market. Two of these involve either a promotion made directly by a person or firm authorized by the Financial Conduct Authority (FCA), or a promotion made by an unauthorized person that has been approved by an FCA-authorized individual or firm.

Anonymity-Enhanced Cryptocurrencies (AECs)

VARA takes a strict stance on the marketing and promotion of Anonymity-Enhanced Cryptocurrencies (AECs). The marketing of any AECs, as well as any VA Activities involving these cryptocurrencies, is entirely prohibited in the UAE.

Key Opinion Leaders

Influencers and key opinion leaders (KOLs) are not granted the same exemptions as journalists or educators under VARA’s regulations. KOLs are defined by competent authorities in the Emirate and must comply fully with VARA’s Marketing Regulations. They are required to follow the same rules and standards as any other entity involved in marketing Virtual Assets or VA Activities, including proper disclosures, risk warnings, and adherence to local requirements. VARA ensures that influencers promoting Virtual Assets are held to strict standards to prevent misleading or irresponsible marketing practices.

Geo Scope: “In or Targeting the UAE”

New Regulations apply to marketing that is “in or targeting the UAE.” The term "UAE" is used because VARA considers any marketing targeting the UAE to inherently include Dubai. VARA assumes it's unlikely that marketing can target the UAE while excluding Dubai, unless it is explicitly specified in all communications, which would be evaluated case by case.

VARA provides a non-exhaustive list of factors it may consider when determining if a campaign qualifies as such. Not all factors need to be present for marketing to be considered "in or targeting the UAE," and the absence of a specific factor does not mean a campaign won’t be classified this way.

Some of the factors VARA may consider include:

• Any part of the campaign occurring within the UAE, such as advertisements on physical structures, local newspapers, mail, online broadcasts, or physical events.
• Campaigns targeting the Gulf Cooperation Council (GCC) are automatically deemed to include the UAE.
• Campaigns selecting the GCC/UAE as a geographic location.
• Press coverage in UAE-specific outlets.
• Use of AED as the currency in marketing materials.
• Marketing using Emirati Arabic dialect, local slang, or phrases (in English or Arabic).
• Use of UAE or Dubai imagery (e.g., UAE flag, Dubai skyline).
• Featuring UAE celebrities or influencers with large followings in the UAE.
• Marketing in public spaces in the UAE.
• Communication channels targeting UAE residents (e.g., social media or chatrooms).
• A promotional strategy specifically aimed at the UAE.
• Any efforts to prevent UAE residents from accessing the materials (e.g., geoblocking).

VARA assesses whether a campaign is "in or targeting the UAE" by evaluating the overall campaign, including the channels used and the content. For example, a search engine ad might be linked to a physical billboard ad if they are part of the same campaign or share similar content or timing.

In the UK, the financial promotions regime under the FPO applies to any firm marketing crypto assets to UK consumers, regardless of where the firm is based. Even companies located outside the UK must comply with the FPO if they promote crypto assets to UK consumers. This wide-reaching territorial scope is designed to protect UK consumers from misleading or harmful promotions, no matter where the promoting firm operates from.

Requirements for Marketing

Part C of the regulations sets out important standards for any marketing related to Virtual Assets or VA Activities targeting the UAE. These standards are designed to ensure that marketing is both clear and fair, helping to protect investors.

Marketing must always be straightforward and not misleading, both in what is being said and how it’s presented. It should be immediately recognizable as promotional material, so that consumers know they are being marketed to. Crucially, marketing should not downplay or hide the risks associated with Virtual Assets. Investors need to know that these assets can lose all their value, are highly volatile, and might not be easy to transfer or sell. Additionally, there is no guarantee of financial protection, and Virtual Assets are vulnerable to fraud, theft, or hacking. This means marketing should never suggest that investments are safe, low risk, or that returns are guaranteed.Investment decisions should not be portrayed as simple or trivial. Marketing must also avoid creating any false sense of urgency or fear of missing out (FOMO) to pressure people into making quick decisions.

Furthermore, marketers must ensure that their promotions only target appropriate audiences, especially if certain assets are meant for specific types of investors. If third-party entities are paid to post or promote marketing content, it must be clearly disclosed that the content is part of a paid arrangement.

The UAE's regulatory requirements for virtual asset marketing are in line with global standards set by the International Organization of Securities Commissions (IOSCO). They are also broadly consistent with the UK's Financial Promotion Order (FPO) regime for qualifying crypto assets and the MiCAR framework, particularly in relation to white papers and marketing communications.

“Clear, Fair and Not Misleading”

Based on the Guidance, when designing marketing materials for Virtual Assets, the following key principles should be followed:

• Plain Language: Use simple, clear language that the target audience can easily understand. This improves transparency and ensures the communication is effective.
• Legibility and Clarity: Written marketing materials should be easy to read, and oral communications should be clearly audible. Any important information, especially about the risks of the product or service, must be communicated clearly.
• Proportionality: The "fair, clear, and not misleading" requirement should be applied based on the communication method, target audience, and the nature of the product. Different audiences may need tailored content, particularly when addressing retail clients who may require more risk-related information.
• Balanced Presentation: Marketing materials should provide a balanced view, giving equal weight to risks and benefits. It’s important not to exaggerate potential returns or omit critical information. Comparisons with competitors must be fair, balanced, and meaningful, avoiding any misleading or biased claims.
• Regulatory Clarity: Marketing must clearly state the regulatory status of the product, service, or platform, both in Dubai and other relevant jurisdictions. It should not mislead the audience regarding a business’s licensing status. For example, VARA’s approval of a Virtual Asset should not be presented as an endorsement of its quality or the issuer.

Incentives

When companies offer any form of incentive, whether it’s monetary or non-monetary, in connection with Virtual Assets or services related to Virtual Asset Activities, they must follow specific guidelines to ensure transparency and fairness.

Firstly, these incentives should not distract or mislead investors from properly understanding the risks associated with the Virtual Asset or service. The focus should remain on the potential risks, not just the rewards. Secondly, incentives must be available for a reasonable period, allowing investors enough time to evaluate the offer properly, in line with the relevant marketing regulations. Lastly, before any incentive is offered, the company must obtain approval from VARA and comply with any conditions or restrictions set by the regulator, both at the time of approval and in the future if new rules are introduced.

The following is a non-exhaustive list of offers that may be considered as monetary or non-monetary incentives in relation to Virtual Assets:

• Incentives for first-time investments in a Virtual Asset or when signing up for a service related to a VA Activity for the first time.
• Rewards for clients who refer others to invest in Virtual Assets or use a service linked to VA Activities.
• Special offers for investing a specific amount in Virtual Assets.
• Gifts or incentives provided after a client invests in a Virtual Asset or signs up for a service related to a VA Activity.
• Gifts or incentives offered for making additional investments while already using a product or service.

The UK has taken a different approach by banning incentives, with an exception for shareholder benefits. This ban is modeled on existing regulations for Contracts for Difference (CFDs), as outlined in COBS 22.5.20. The primary aim is to eliminate external incentives that could unduly influence investment decisions, ensuring that consumers make informed choices without being swayed by rewards that might obscure the risks involved. Banned incentives include both monetary and non-monetary rewards, such as "Refer a Friend" bonuses, where investors are financially rewarded for bringing in new clients, and new joiner bonuses, which are designed to attract first-time investors.

Journalistic Exemption

The Marketing Regulations outline several exemptions where certain activities are not considered "Marketing" under VARA’s rules.

Journalistic content related to Virtual Assets or VA Activities is not considered marketing, provided that it meets specific conditions. Entities posting, publishing, or presenting such content in their role as journalists must be properly licensed by relevant authorities in the UAE. The main purpose of the content should be informational rather than promotional. Even if the article or publication contains promotional material, it should not overshadow the overall intent, which must not be centered around marketing Virtual Assets or VA Activities.

Additionally, any content must be accompanied by a prominent disclaimer if the journalist or their close family members (spouse, children, parents, or others in their household) have any financial interest in the Virtual Asset or VA Activity being discussed. This includes future potential benefits or employment relationships. If the content mentions the purchase of a Virtual Asset, it must also include a clear warning that Virtual Assets can lose their value in part or in full, and are subject to extreme volatility.

Educational Exemption

Educational content that relates to Virtual Assets or VA Activities is also exempt from marketing regulations, provided that its main purpose is to inform and educate rather than promote. This exemption covers entities publishing educational articles, presentations, or tutorials, so long as the material is not designed to advertise or promote specific Virtual Assets or services related to VA Activities in the UAE.

Like the journalistic exemption, if the author or their close family members have any financial interest in the Virtual Asset or VA Activity being discussed, a disclaimer must be provided. If the content mentions purchasing a Virtual Asset, it must also include a risk disclaimer that clearly warns of the potential for loss of value and high volatility.

Personal or Private Communications Exemption

Individuals or entities that engage in personal or private communications about Virtual Assets or VA Activities are not considered to be conducting marketing under these regulations. This could involve one-on-one conversations or private messages that are not meant for public distribution or promotional purposes.

However, VARA retains the discretion to decide what qualifies as personal or private communication. This determination will be made on a case-by-case basis, ensuring that no communication intended for broader or commercial purposes falls under this exemption.

Platforms and Channels

All entities that facilitate marketing related to Virtual Assets (VAs) or VA Activities targeting the UAE, whether through traditional or digital media, are required to take commercially reasonable steps to ensure their activities comply with all relevant laws and regulations. This includes broadcasters, publishers, search engines, social media platforms, and other internet-based services. The marketing of Virtual Assets must adhere not only to UAE-wide regulations but also to the specific rules in the Emirate, including VARA's Marketing Regulations. Compliance is essential to avoid legal and regulatory consequences, and entities must ensure their marketing practices are aligned with these standards.

Operators of app stores or platforms that allow users in the UAE to search for, download, or install applications that facilitate VA Activities are also subject to these regulations. To comply, such applications or software must either be owned or controlled by a VASP that is licensed by VARA to carry out the specific VA Activity or be explicitly approved by VARA. This requirement helps to ensure that only authorized and compliant applications are available to users in the UAE, providing additional layers of protection for consumers interacting with Virtual Assets through mobile or online platforms.

Entities that operate application stores, platforms, or facilitate VA-related marketing must implement necessary technological measures, such as geo-blocking and location-based filtering. These measures are designed to ensure that users in the UAE can only access applications or services that comply with VARA’s regulations. Geo-blocking helps prevent non-compliant applications or marketing materials from being accessible within the UAE, ensuring that only licensed or approved services are available to local users.

Conclusion

In conclusion, VARA’s updated Marketing Regulations reflect a firm commitment to aligning with international standards, including those set by IOSCO. By implementing stringent guidelines on marketing practices, risk disclosure, and the regulatory responsibilities of marketers, these regulations greatly enhance consumer protection and transparency regarding virtual assets. They ensure that investors receive clear and accurate information about potential risks, helping to mitigate misleading promotions. Ultimately, these measures foster greater trust and integrity in the virtual asset market.