Analysis of Dubai's Virtual Asset Regulatory Framework and RWA Compliance Path

Regulatory Framework and Core Institutions

The regulation of virtual assets in Dubai is mainly led by two major institutions:

1. Virtual Assets Regulatory Authority (VARA): Established in March 2022, responsible for regulating cryptocurrency laws in Dubai, and overseeing the issuance, provision, and disclosure of virtual assets and NFTs.

2. Dubai Financial Services Authority (DFSA): As the regulatory body for the Dubai International Financial Centre, its cryptocurrency token framework came into effect in November 2022, aimed at protecting users of financial services related to cryptocurrency tokens.

The two institutions have each established their own regulatory frameworks:

The VARA framework encompasses multiple levels, including laws and regulations, rule manuals, guidelines, and archives.

The DFSA framework encompasses multiple rules and guidelines, providing clear guidance for market participants.

Specific Regulatory Requirements of VARA

1. Pre-issuance Approval

• Mandatory licensing requirements: The issuance of ARVA falls under Category 1 VA Issuance, and the issuer must obtain a VARA license.
• Single asset approval: Each ARVA issuance must obtain VARA approval.
• Reserve asset requirements: Must hold sufficient reserve assets, which should be custodially managed by a licensed custodian and separated from the VASP's own assets.

2. Information Disclosure

• White paper disclosure: A detailed white paper must be released before going public, including general content and RWA specific content.
• Continuous Disclosure: At least once a month, publicly disclose the circulating quantity, value, and reserve asset status of ARVA on the website.

3. Capital Requirements

ARVA requires VASPs to maintain a paid-in capital of no less than AED 1,500,000 or 2% of the average market value of reserve assets over 24 months, whichever is higher.

4. Transfer of Ownership

If ARVA represents direct ownership of RWA, it must ensure that the ownership is legally established and transfers simultaneously with the token transfer, in compliance with relevant legal requirements.

5. Redemption Mechanism

Holders must be allowed to redeem in AED or other equivalent forms as specified in the white paper, and redemption requests must be processed free of charge within a reasonable time frame.

6. Audit and Reporting

• Appoint an independent third-party auditor and notify VARA.
• Conduct independent audits of circulating ARVA and reserve assets every 6 months.
• Senior management must promptly submit proof of audit accuracy to VARA.

7. Multi-rule Compliance

The issuer must also comply with the requirements of various rule manuals regarding company, Compliance and risk management, technology and information, market behavior, etc.

DFSA Regulatory Updates

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

1. Submit a Letter of Intent: Enterprises need to engage in tokenization business, excluding cryptocurrencies and stablecoins. Zero-fee application, initial review by DFSA.

2. Innovation Test License (ITL Tokenisation Cohort): A DFSA license is required, and you must complete the authorization process before joining.

This initiative provides a low-threshold, high-definition, full-chain compliance path for global projects.

Conclusion

Dubai has established a comprehensive regulatory framework for virtual assets through its two major regulatory bodies, VARA and DFSA, particularly focusing on the regulatory requirements for RWA. From pre-issuance approvals to ongoing supervision, from information disclosure to capital requirements, these measures reflect a strong emphasis on market stability and investor protection. At the same time, the innovative sandbox program provides practical opportunities for emerging projects, promoting the compliant development of the industry. This series of measures not only creates a favorable virtual asset ecosystem in Dubai but also offers beneficial references for regulatory practices in other regions around the world.