The Virtual Assets and Regulatory Authority (VARA) of Dubai has issued a warning about the high risks associated with memecoins, emphasizing the need to comply with local regulations.
Investors are advised to exercise caution, given the high volatility and the risk of fraud. In this article, we will see all the details.
Summary
The cryptocurrency regulatory authority of Dubai warns: memecoins must comply with local regulations
The regulation of cryptocurrencies is strengthening globally, and Dubai is no exception.
The Virtual Assets and Regulatory Authority (VARA), the body responsible for the supervision of digital assets in the emirate, recently issued a warning regarding memecoins.
These digital assets, often characterized by a high degree of speculation and volatility, must comply with local regulations if issued in Dubai.
On February 13, VARA emphasized that memecoins are high-risk financial instruments, unregulated and potentially subject to market manipulation.
The regulatory body highlighted how these assets derive their value primarily from the hype generated on social media, marketing strategies, and often misleading promotions.
VARA, in its statement, declared the following:
“Many of these assets lack intrinsic value and derive their prices from social media trends, hype, or misleading promotional strategies.”
Investors have been urged to pay particular attention to projects that promise unrealistic returns, as such statements could be indicative of fraudulent schemes.
The authority has also warned against the rapid collapse in the value of these criptovalute, which can cause significant financial losses in a very short time.
Memecoins will have to comply with regulations
In addition to warning investors, VARA clarified that any memecoin issued within the emirate must comply with the current regulations.
Among the most stringent rules are those governing the promotion, advertising, and solicitation of investments in digital assets. These restrictions have been introduced to protect consumers from potentially deceptive commercial practices.
In 2023, VARA implemented the “Full Market Product Regulations,” which establishes strict guidelines for all participants in the cryptocurrency market in Dubai, except for those operating in the Dubai International Financial Centre (DIFC).
According to these regulations, companies that violate marketing rules may face fines up to 135,000 dollars.
In September 2023, VARA further tightened its regulations, imposing stricter requirements for companies promoting digital assets in the country.
Among these is the obligation to include detailed information in promotional material and obtain regulatory compliance confirmation before launching advertising campaigns.
In addition to the sanctions for non-compliant companies, VARA stated that it could limit without notice access to platforms operating in the memecoin sector without authorization.
Investors have been warned of the possibility that such restrictions may be imposed without notice, with the aim of protecting the financial system and the stability of the crypto market in Dubai.
The authority has reiterated the importance of adopting preventive measures to protect personal financial security, avoiding investing in highly speculative assets without a clear understanding of the risks involved.
The international landscape: the FCA case in the United Kingdom
Dubai is not the only country to have adopted a cautious approach towards memecoins.
The Financial Conduct Authority (FCA) of the United Kingdom has recently issued a warning against the Solana-based memecoin project called Retardio.
Specifically indicating that the investors participating in it will not enjoy the protections offered by the Financial Ombudsman Service and the Financial Services Compensation Scheme of the United Kingdom.
This increasing regulatory attention at a global level demonstrates the willingness of the authorities to prevent abuses and protect investors from fraudulent or highly speculative operations.
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