UAE has become one of the leading countries in fostering and adopting virtual assets and has become internationally recognised as the crypto-hub.
Ashish BangaSenior Associate,Banking & Finance
Faisal Al AshkarAssociate,Banking & Finance
The UAE has undoubtedly become one of the leading countries in fostering and adopting virtual assets and has become internationally recognised as the crypto-hub. We have seen significant steps towards the development and growth of virtual asset adoption through the introduction of several laws, regulations and guidance to recognise and regulate the use of virtual asset. Such regulations and guidelines being issued by: (a) the UAE Central Bank, the Securities Commodities Authority (“SCA”) and Dubai Virtual Asset Regulatory Authority in the mainland UAE; (b) the Financial Services Regulatory Authority (“FSRA”) in Abu Dhabi Global Market; and (c) Dubai Financial Services Authority (“DFSA”) in Dubai International Financial Centre.
As a result, the UAE has attracted some of the largest virtual asset companies, including Kraken Binance, FTX, Bybit, BitOasis, SEBA Bank and Crypto.com, to establish their base and brand in the region.
The emergence of these virtual asset companies in the UAE and their need to market the products and services they offer resulted in relevant stakeholders exploring promotion opportunities including branding and sponsorship opportunities at technology conferences and sporting events. Since UAE is home to some of the largest events in the region, sponsorship is one of the obvious choices for virtual asset companies to grow their brand in the region. Recent examples include sponsorships at Expo 2022, Binance Blockchain Week Dubai 2022 and Abu Dhabi Grand Prix.
Virtual asset companies are strategically carving their way into the global market and sponsorships are one of many ways that such companies are using to grow their brand. However, as the virtual asset industry is relatively new and the local authorities continue to adapt to the evolving sector, the legal landscape may be unclear to many and it is important that virtual asset companies grasp the legal and regulatory requirements applicable in the UAE to safely conduct their sponsorship activities in the UAE.
In practice, virtual asset companies and the relevant event organisers are entering into agreements that set out the terms of the sponsorship arrangement. Such agreements govern the relationship between the virtual asset company and the event organisers; however, both parties must ensure that they have considered the applicable laws and regulations that apply to advertising and sponsorship activities within the relevant jurisdiction.
The laws in the UAE do not differentiate between sponsorship and advertising as sponsorships are viewed as a method of advertising. As such, virtual asset companies must adhere: (a) with the laws and regulations issued by the Ministry of Culture and Youth through its Media Regulatory Office; and (b) to the Federal Law No. 15 of 1980 concerning press publications(the “Federal Advertising Rules”).
Depending on the Emirate or the financial free zone in which the sponsorship activities are taking place, virtual asset companies must comply with the guidelines issued by the relevant authority relating to advertisement and sponsorship promotions.
In respect of Dubai, there are a number of guidelines recently issued by the Virtual Asset Regulatory Authority (“VARA”), the regulatory authority responsible for licensing and regulating the virtual asset sector across the Emirate of Dubai. Such guidelines apply to both, the companies incorporated / established in Dubai and foreign companies planning to sponsor events in Dubai.
VARA has recently issued Administrative Order No. 01/2022 on the regulations of marketing, advertising and promotions relating to virtual assets (the “VARA Marketing Regulations”). These must be considered in addition to the Federal Advertising Rules and such guidelines as may be issued by the relevant authority, from time to time, prior to undertaking advertising and sponsoring events, involving marketing and promotion of virtual assets.
The virtual asset related activities in the UAE mainland (excluding financial free zones such as ADGM and DIFC) are primarily regulated pursuant to:
the UAE Securities and Commodities Authority’s (SCA) Board of Directors Decision No. (23/Chairman) of 2020 (“Crypto Regulations”). The Crypto Regulations regulate both the local promoters and foreign promoters that aim to market and promote virtual asset, including services in relation thereto, to UAE clients. Accordingly, it is important to consider these regulations (to the extent they apply) prior to undertaking any advertisements or sponsorships in addition to the Federal Advertising Rules and guidelines, as mentioned to in the foregoing paragraphs;
Dubai Law No. 4 of 2022 regulation virtual assets in the Emirate of Dubai (the “VARA Regulation”). The VARA Regulation must be considered in addition to the aforementioned Federal Advertising Rules, and the VARA Marketing Regulation. The VARA Regulation requires that any person conducting any virtual asset activities in or from Dubai, obtain a permit from VARA. The activities that are captured under the VARA Regulation include the offering and trading of virtual assets in Dubai.
The virtual assets sector is ever evolving and the laws and regulations applicable to virtual asset related activities in the UAE continue to adapt to this growing sector. In order to effectively sponsor events in the UAE it is important that the companies undertaking sponsorships ensure that they adhere to the developing legal landscape surrounding this space to access new markets and increase their brand recognition in the region.
For further information,please contact Ashish Banga or Faisal Al Ashkar.
Published in October 2022
