Dubai Regulator VARA Issues New Rules for Real-World Asset Tokenization

Dubai’s Virtual Asset Regulatory Authority (VARA) has released updated guidelines for virtual asset service providers (VASPs) operating in the region, with a focus on real-world asset (RWA) tokenization. The new rules, which came into effect on May 19, provide clarity on the issuance and distribution of RWA tokens, marking a significant step towards the practical implementation of RWA tokenization in Dubai and the broader United Arab Emirates.

According to Irina Heaver, a partner at a law firm based in the United Arab Emirates, the updated rules address previous shortcomings in the regulatory framework for RWA tokens. Heaver compared RWAs to security token offerings (STOs), which failed to gain traction due to a lack of regulatory clarity, viable secondary market trading venues, institutional investor appetite, and liquidity. However, she noted that the situation is different for RWAs, which are seen as the next foundational layer for institutional adoption of blockchain and virtual assets.

VARA’s new rules classify RWA tokens as Asset-Referenced Virtual Assets (ARVA) tokens, which represent direct or indirect ownership of real-world assets. These tokens grant entitlement to receive or share income and purport to maintain a stable value by reference to real-world assets or income. ARVA tokens can also be backed or collateralized by such real-world assets or constitute a derivative, wrapped, duplicated, or fractionalized version of another ARVA.

Issuers of ARVA tokens must meet specific requirements, including obtaining a Category 1 Virtual Asset Issuance license, preparing a comprehensive white paper, and providing a risk disclosure statement. Additionally, issuers must have a paid-up capital of 1.5 million UAE dirhams or 2% of reserve assets held, and are subjected to monthly independent audit obligations and ongoing supervisory oversight.

Heaver emphasized that VARA’s updated guidelines provide a viable and enforceable path for turning the hype of RWA tokenization into reality. This shift from theory to execution is significant as it marks a transition from fiction to framework, providing a clear regulatory path for the industry to follow.