Analysis of Dubai's Virtual Asset Regulatory Framework: A Comprehensive Examination of RWA Compliance Pathways

1. Regulatory Landscape of Virtual Assets and Core Institutions

1. Leading regulatory authority

The Dubai Virtual Assets Regulatory Authority (VARA) and the Dubai Financial Services Authority (DFSA) are the two core institutions for the regulation of virtual assets in Dubai.

VARA was established in March 2022, primarily responsible for regulating cryptocurrency laws in Dubai and overseeing the issuance, provision, and disclosure of virtual assets and NFTs. The DFSA is the regulatory authority of the Dubai International Financial Centre (DIFC), and its crypto token regime came into effect on November 1, 2022.

These two institutions are responsible for different types of licenses and business scopes, together building a complete regulatory system for virtual assets in Dubai.

2. Regulatory Framework

The VARA regulatory framework includes laws, regulations, rule manuals, guidance, and related documents. The DFSA has established its own regulatory framework, covering regulations in multiple areas.

2. Specific Regulatory Requirements of VARA

1. Issuer's pre-approval before issuance

VARA has strict requirements for the issuance of asset-backed virtual assets (ARVA):

• The issuer must obtain a virtual asset issuance license from VARA.
• Approval from VARA is required before each issuance of ARVA.
• Reserve assets must be fully held, custodied by a licensed custodian, and independent of the issuer's own assets.

2. Information Disclosure Requirements

ARVA issuers must meet the general virtual asset disclosure requirements and additionally disclose:

• The value, rights, and value maintenance policy of ARVA
• Detailed information on reference assets and reserve assets
• ARVA supply management and holder redemption rights, etc.

In addition, it is necessary to regularly disclose the circulating quantity and value of ARVA, as well as the status of reserve assets.

3. Capital Requirements

Virtual Asset Service Providers (VASP) licensed to issue ARVA must maintain a minimum paid-up capital of 2.5 million dirhams or the higher of an average market value of reserve assets at 2%.

4. Legitimacy requirements for ownership transfer

If ARVA represents direct ownership of real-world assets (RWA), the issuer must ensure that ownership is legally established and that RWA ownership is transferred simultaneously during the token transfer.

5. Redemption mechanism requirements

ARVA must allow holders to redeem in dirhams or other disclosed equivalent forms, and redemption requests must be processed for free within a reasonable timeframe.

6. Audit and Reporting

VASP is required to appoint an independent third-party auditor to conduct audits of the circulating ARVA and reserve assets every six months and submit proof of audit accuracy to VARA.

7. Multiple Rules Compliance

Issuers must also comply with the requirements of various rule manuals related to corporate governance, Compliance and risk management, technology and information, and market conduct.

3. DFSA Regulatory Dynamics

The DFSA released the "Tokenized Regulatory Sandbox Guidelines" on March 17, 2025, providing a low-threshold, high-clarity compliance pathway for RWA tokenization projects. The participation process is divided into two stages:

1. Submit a Letter of Intent: Enterprises must engage in tokenization business, excluding cryptocurrencies and stablecoins.
2. Innovation Testing License: A DFSA license must be obtained and the authorization process completed to join this program.

4. Dubai Real Estate RWA Case

Multiple real estate RWA projects have already been implemented in Dubai, showcasing the development potential and practical applications in this field. These cases provide valuable reference experiences for other regions and highlight Dubai's foresight and innovation in virtual asset regulation.