In-Depth Analysis of Dubai’s Virtual Asset Regulatory Framework: A Panoramic View of RWA Compliance Pathways

I. Regulatory Framework and Core Institutions for Virtual Assets

1. Main regulatory authority

The Dubai Virtual Assets Regulatory Authority (VARA) and the Dubai Financial Services Authority (DFSA) are the two main regulatory bodies in the field of virtual assets in Dubai.

VARA was established in March 2022 and is responsible for regulating cryptocurrency-related laws in Dubai, as well as overseeing the issuance, provision, and disclosure of virtual assets and NFTs. The DFSA is the regulatory authority for the Dubai International Financial Centre (DIFC), and its cryptocurrency token regime came into effect on November 1, 2022, aimed at protecting users of financial services related to cryptocurrency tokens.

These two institutions are responsible for different types of licenses and business scopes.

2. Regulatory Framework

The regulatory framework of VARA includes:

• Laws and Regulations: including laws, cabinet resolutions, administrative orders, etc.
• Rule Manual: Mandatory Rule Manual, VA Activity Rule Manual, etc.
• Guidance Document: Such as the 2024 Guidelines for the Regulation of Virtual Asset Marketing and Related Activities
• Relevant documents: such as Executive Orders No. 01/2022 and No. 02/2022

DFSA also has its unique regulatory framework.

2. Specific Regulatory Requirements of VARA

1. Pre-issuance approval

1.1 License Requirements

Asset-backed virtual assets (ARVA) issuance falls under the highest regulatory category, and the issuer must obtain a VA issuance license from VARA.

1.2 Single Asset Approval

Virtual Asset Service Providers (VASP) licensed by VARA must obtain VARA’s approval before issuing each ARVA.

1.3 Reserve Asset Requirements

• Must hold sufficient reserve assets
• Reserve assets must be held by a licensed custodian, independent of the VASP’s own assets.
• Reserve assets may not be re-pledged or encumbered.
• Ensure that reserve assets are legally separated from other assets

2. Information Disclosure Requirements

2.1 White Paper Disclosure

When issuing ARVA, in addition to meeting the general virtual asset disclosure requirements, additional disclosure requirements must also be met, including:

• The value, rights, and value maintenance policy of ARVA
• Detailed information of reference assets
• Information related to reserve assets
• ARVA Supply Management Details
• Information related to holder redemption rights
• Asset Custody Arrangement
• Risk management measures, etc.

2.2 Continuous Disclosure Requirements

At least disclose on the website every month:

• The quantity and value of publicly circulating ARVA
• The value and composition of reserve assets
• Confirm whether ARVA has a statement of sufficient reserve assets support.

3. Capital Requirements

VASP authorized to issue ARVA shall maintain a paid-in capital not less than the higher of the following two amounts:

• 1,500,000 Dirhams
• 2% of the average market value of reserve assets over the past 24 months

4. Legality Requirements for Ownership Transfer

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

• Ownership is legally established, and the ownership of physical assets is transferred simultaneously during the token transfer.
• Comply with the legal settlement requirements for physical asset transactions

5. Redemption Mechanism Requirements

• Holders must be allowed to redeem in Dirhams or other equivalent forms disclosed in the white paper.
• Redemption requests must be processed within a reasonable time frame and no additional fees will be charged.

6. Audit and Reporting

• Appoint an independent third-party auditor and notify VARA in a timely manner.
• Senior management must provide proof of the accuracy of independent audits to VARA.
• Conduct independent audits of the circulating ARVA and reserve assets every 6 months.

7. Multiple Compliance Rules

The issuer must also comply with the relevant requirements of the four core rule manuals, including company rules, Compliance and risk management rules, technology and information rules, and market conduct rules.

3. DFSA Regulatory Dynamics

The DFSA published the “Tokenization Regulatory Sandbox Guidelines” on March 17, 2025, incorporating RWA tokenization into the mainstream financial regulatory framework. The participation process for the sandbox program is divided into two phases:

1. Submission of Letter of Intent Stage

   • Eligibility: Enterprises engaged in tokenization business
   • Application Period: 2025.3.17–2025.4.24
   • DFSA Assessment: Preliminary review of business compliance, arrange a meeting for discussion after approval.

2. Innovation Testing License Phase

   • Need to obtain DFSA license
   • You must complete the authorization process to join the program.

4. Dubai Real Estate RWA Case

Dubai has successful real estate RWA cases, demonstrating the practical application prospects in this field.