Amidst the global trend of regulating virtual assets, Dubai has emerged as a crucial hub for Real-World Assets (RWA) due to its forward-looking strategies. This article delves deeply into Dubai’s RWA regulatory framework, covering the regulatory frameworks of VARA and DFSA, types of licenses and business scopes, the approval process for ARVA issuance, requirements for reserve assets, disclosure details, and DFSA’s newly launched tokenization regulatory sandbox program. It provides a comprehensive overview of Dubai’s compliance requirements for the tokenization of tangible assets such as real estate.

Important Definitions

• RWA (Real-World Assets): As defined in the official ARVA documentation, RWA refers to any type or combination of:

  • Interest in any financial instrument, scheme, or arrangement;

  • Physical and/or tangible asset; or

  • Intangible asset, rights, or interests, other than the Virtual Asset itself or items that exist only in digital form.

• VASP (Virtual Asset Service Provider): Virtual Asset Service Provider.

• VARA (Dubai Virtual Assets Regulatory Authority): Dubai Virtual Assets Regulatory Authority.

• ARVA (Asset-Referenced Virtual Assets): Asset-Referenced Virtual Assets.

• Dubai Virtual Assets Regulatory Authority (VARA): Established in March 2022, VARA is the regulatory body overseeing Dubai’s cryptocurrency laws. It supervises the issuance, provision, and disclosure of virtual assets and NFTs, and collaborates with other federal agencies, including the Central Bank of the UAE, to develop codes of conduct, general policies, and strategic plans.

• Dubai Financial Services Authority (DFSA): The regulatory authority for the Dubai International Financial Centre (DIFC). The DFSA’s crypto token regime came into effect on November 1, 2022, providing comprehensive requirements aimed at protecting users and potential users of financial services related to crypto tokens.

• VARA Framework:

  • Legislation: Laws, cabinet resolutions, regulations, administrative orders and resolutions, federal anti-money laundering/anti-terrorist financing laws.

  • Rulebook: Mandatory rulebooks for VA activities and other regulatory manuals.

  • Guidance: Regulatory guidelines for virtual asset marketing and related activities issued in 2024.

  • Archives: Administrative Order No. 01/2022, Administrative Order No. 02/2022.

• DFSA Framework: Refer to the detailed regulatory structure provided by DFSA for tokenization and related activities within the DIFC.

ARVA issuance falls under Category 1 VA Issuance (the highest regulatory category), and issuers must obtain a VA issuance license from VARA. For detailed information on the VARA licensing process, refer to the article here.

All VASPs licensed by VARA for Category 1 VA issuance must obtain VARA’s approval before issuing each ARVA. VARA may impose conditions on any approval granted to VASPs for ARVA issuance.

• Sufficient reserve assets must be held to cover the rights and value represented by ARVA.

• Reserve assets must be held by a licensed custodian and kept separate from the VASP’s own assets.

• Reserve assets must not be re-hypothecated or encumbered with any liens.

• Legally, reserve assets must be segregated from the issuer’s property and any other virtual asset reserve assets.

A whitepaper must be published before offering virtual assets to the public, disclosing relevant content. In addition to meeting general virtual asset disclosure requirements, ARVA must also meet additional disclosure requirements as follows:

• General Disclosure Content:

  • Information about the issuer.

  • Information about the virtual asset.

  • Information about the rights and obligations attached to the virtual asset.

  • Information about the underlying technology.

  • Information about the licensed distributor.

  • Information about any initial offering of the virtual asset to the public.

• Additional RWA Disclosure Requirements:

  • ARVA value, rights, and value maintenance policies.

  • Types and composition of reference assets, selection criteria, variability, ownership association, stable anchoring, legal compliance, and risks.

  • Existence, types, and composition of reserve assets, selection criteria, variability, and investment policies.

  • ARVA supply management, including creation and destruction, and their impact on reserves.

  • Holder redemption rights, including redemption details, compliance with rules, procedures, and timelines.

  • Asset custody, including custody arrangements and liquidity assurance.

  • Risk management, including risk assessment and control measures.

At least monthly, and in a clear, accurate, and transparent manner on their website, the following must be disclosed:

• The quantity and value of ARVA in public circulation;

• The value and composition of reserve assets (if applicable);

• A statement confirming that the ARVA is fully supported by sufficient reserve assets at the time of disclosure.

Licensed VASPs issuing ARVA must maintain paid-up capital of at least the higher of the following:

• AED 1,500,000 (approximately CNY 2,925,000);

• 2% of the average market value of reserve assets over the past 24 months.

If ARVA represents direct ownership of RWA, the issuer must ensure:

• Ownership is legally established, and the transfer of tokens results in the simultaneous transfer of RWA ownership;

• Compliance with legal settlement requirements for RWA transactions.

• Holders must be allowed to redeem ARVA for AED or other forms of equivalent value disclosed in the whitepaper;

• Redemption requests must be processed within a reasonable timeframe and without any fees.

• Licensed VASPs issuing ARVA must appoint an independent third-party auditor and promptly notify VARA of the auditor’s full name and contact details upon appointment;

• Senior management of VASPs holding ARVA issuance licenses must submit a certification of accuracy for each independent audit to VARA as soon as possible after completion;

• Independent audits of circulating ARVA and reserve assets must be conducted every six months.

Issuers must also comply with the requirements of four core rulebooks:

• Company Rulebook

• Compliance and Risk Management Rulebook

• Technology and Information Rulebook

• Market Conduct Rulebook

On March 17, 2025, the Dubai Financial Services Authority (DFSA) officially released the Tokenisation Regulatory Sandbox Guidelines. This marks Dubai’s integration of RWA tokenization into the mainstream financial regulatory system, offering a low-threshold, high-clarity, and full-chain compliance path for global projects.

The sandbox participation process is divided into two phases and four core steps, as detailed below:

• Eligibility: Companies must be engaged in tokenization activities (issuance, trading, holding, or settlement of RWA, stocks, bonds, etc.), excluding cryptocurrencies and stablecoins. Existing DFSA-licensed firms can also apply to expand their business scope.

• Application Materials and Timeline: Submit a zero-cost Letter of Intent during the window period of March 17, 2025, to April 24, 2025. Late submissions will have to wait for the next round.

• DFSA Assessment: Preliminary review of business compliance (whether within the DIFC licensing scope). If approved, a meeting will be arranged to discuss business model details.

To join the ITL Tokenisation Cohort, companies require a DFSA license. Interested firms must apply and complete the authorization process to join the program.