Dubai Regulators Introduce New Crypto Guidelines

Dubai’s regulator of virtual assets, the Virtual Asset Regulatory Authority (VARA), has recently set out new rules on marketing and advertising virtual assets.

The local regulators published a press release on Gulf News on Thursday, introducing new regulatory guidelines targeting crypto marketing activities.

Dubai Looks to Increase Regulations

Under the new regulations, all local virtual asset service providers (VASPs) and advertising platforms with virtual assets content, are required to make sure their ads are in compliance with the rules and clarify any promotional intent to customers.

False, misleading, and manipulated promotional approaches are violations of the rules.

All forms of outreach, communications and advertising, dissemination of information, building awareness, customer engagement, investor solicitation, and others concentrating on Dubai customers, fall beneath the VARA’s guidelines.

To wit,

“These regulations specifically address marketing and communications activities, ahead of operationalizing the MVP licensees so that any mass-market information dissemination, and consumer solicitation are designed to safeguard community interests.”

A Trend is Growing

After stepping up with its plan to roll out the country’s first virtual asset regulations in March, Dubai continued to take the lead in the global regulatory landscape by announcing the VARA’s guidelines.

In the meantime, the Abu Dhabi government is working on new policies for blockchain and virtual assets in accordance with the country’s overall economic strategy.

Founded in March 2022, VARA is an independent agency under the Dubai World Trade Center Authority. The body will oversee the regulation that is put in place, as well as the governance and licensing of cryptocurrencies, NFTs, and other digital assets.

VARA’s main responsibilities include regulating the issuance of new cryptocurrency tokens, monitoring and controlling the trading of virtual assets, ensuring that high standards of protection are in place, monitoring transactions, and more.

Digital asset transfer, management services, exchange services, crypto asset platform operation, and crypto asset custody are also within the scope of VARA.

Entities that look forward to engaging in crypto-related activities in Dubai must obtain the permission of Dubai VARA. Sam Bankman-Fried’s FTX crypto exchange was among the first VARA-licensed companies with its local subsidiary FZE.

The laissez-faire approach to the crypto industry has fostered some forms of innovation, but it has also formed opportunities for identity fraud, widespread malpractice, and market manipulation.

The industry’s uncontrollably rapid growth has pushed global governments to pursue new rules that address these problems while enforcing stronger consumer protections.

Too Many Laws?

China early imposed more restrictions on cryptocurrencies in 2021. Chinese tightening enforcement essentially turned all crypto transactions and activities illegal.

The government is focused on promoting the digital yuan and experiments with the national digital asset have been on the scene for a long time.

After China officially banned cryptocurrency trading and mining, the U.S. became the number one destination for Bitcoin mining facilities and officially became the leading country in Bitcoin mining thanks to its more open infrastructure.

However, the increased large-scale mining of cryptocurrencies has also significantly raised concerns about the environmental and financial risks of this asset class in the US.

Unlike China, the United States is more cautious in terms of regulations. Rather than banning cryptocurrencies, the U.S. authorities are more crypto-friendly but at the same time, they seek to regulate the industry.

Earlier this month, the UK Financial Conduct Authority (FCA) sent enforcement notices to companies that carry on promotions of high-risk investments.

The British watchdog, however, did not directly target cryptoasset promotions but given that crypto remains high risk, a legal framework is likely underway.

While many countries are wary of cryptocurrencies, El Salvador and Brazil became the first countries in the world to recognize Bitcoin as a legal tender. In other countries, currently, the use of cryptocurrencies as a means of payment is not recognized and protected by law.

Major institutions are also not allowed to use cryptocurrencies as a currency or means of payment when providing services to customers. However, the future policy could lead to some significant changes in the legal value of this currency in the global financial map.