Digital assets: Tokenization developments in a fast-developing UAE regulatory environment

Executive Introduction

The United Arab Emirates has rapidly emerged as one of the most active jurisdictions globally for tokenisation of real-world assets. An example of this was Dubai’s first tokenised real estate offering involving a pilot program launched in May 2025 by the Dubai Land Department, Virtual Assets Regulatory Authority (VARA)-licensed issuers, and institutional-grade custody providers. The program was fully funded within 24 hours by over 200 investors from more than 40 nationalities. A subsequent offering sold out in under two minutes.

Advisors on tokenisation projects must choose from up to five distinct regulatory frameworks: the Central Bank of the UAE (CBUAE), VARA, the UAE Capital Markets Authority (CMA), formerly known as SCA, and the legal frameworks of the financial free zones Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) under the supervision of the Financial Services Regulatory Authority (FSRA) and the Dubai Financial Services Authority (DFSA) respectively. Each applies different definitions, licensing requirements, and jurisdictional perimeters to tokenised assets. This article sets out the current regulatory landscape, examines the key asset classes being tokenised in the UAE, and offers practical guidance for structuring projects.

 

Legal Framework and Regulatory Position

The Central Bank of the UAE: Payment Tokens

Federal Decree-Law No. 6 of 2025 (UAE Banking Law) gives the CBUAE jurisdiction over payment tokens. Under the UAE Banking Law, a “Virtual Asset” means a digital representation of value or of rights that can be transferred and stored electronically using distributed ledger technology, but excluding currency issued in digital form. A “Payment Token” is defined more narrowly under the CBUAE Payment Token Services Regulation (PTSR) as a virtual asset that maintains a stable value by reference to the fiat currency in which it is denominated or another payment token also denominated in the same fiat currency. Payment tokens, commonly referred to as "stablecoins", are a digital representation of the underlying currency and in practice, they 'tokenise' the underlying currency.

Under the PTSR, Payment Token Service Providers must be licensed or registered with the CBUAE. The categories of regulated providers include Dirham Payment Token Issuers, Payment Token Custodians and Transferors, Payment Token Conversion Providers, and Registered Foreign Payment Token Issuers and Custodians.

As of September 2026, the CBUAE has licensed or approved four Dirham-pegged stablecoins: AE Coin (full issuer licence, selected by the UAE Ministry of Finance as a recognised digital payment method for federal government services), Zand AED (full CBUAE approval), DDSC (formally approved to go live on ADI Chain), and RAKBANK AED (in-principle approval only). Only one Foreign Payment Token—USDU, issued by ADGM-licensed Universal Digital—has been registered with the CBUAE; no global stablecoin issuer (including Tether and Circle) currently holds CBUAE Foreign PT registration.

The following are key restrictions and requirements under the UAE Banking Law:

• Issuance: the UAE Banking Law restricts the issuance of Dirham Payment Tokens to UAE residents (but not their subsequent resale). Foreign payment token issuers, including those regulated by the ADGM and DIFC, may only permit the use of their foreign payment tokens as a means of payment for virtual assets or derivatives thereof, and are subject to registration with the CBUAE;
• Merchant Acceptance: No merchant or other person in the UAE selling goods or services during the course of business may accept a virtual asset towards payment for that sale unless that virtual asset is: (i) a Dirham Payment Token issued by a Licensed Payment Token Issuer being used as a means of payment; or (ii) a Foreign Payment Token issued by a Registered Foreign Payment Token Issuer being used as a means of payment for purchase of a virtual asset or virtual asset derivative.
• Integration with other regulators: the framework expressly integrates VARA- and CMA-regulated Virtual Asset Service Providers, as well as foreign-regulated payment token transferors, custodians and issuers, within the broader payment ecosystem, subject to non-objection and registration requirements under the PTSR.

 

VARA: Virtual Assets for Funding and Investing

VARA regulates virtual assets used for funding and investment purposes in the Emirate of Dubai (excluding the DIFC). Under Cabinet Decision No. 111/2022, a “Virtual Asset” is defined as a digital representation of value that can be digitally traded or transferred and can be used for investment purposes, including Asset-Referenced Tokens.

VARA’s regulatory framework for tokenization is principally contained in the Virtual Asset Issuance Rulebook, which establishes two key annexes:

• Asset-Referenced Virtual Assets (ARVAs). Annex 2 governs the issuance of ARVAs—virtual assets referenced to one or more underlying assets (e.g., real estate, commodities, funds). ARVAs are the primary vehicle for tokenisation of real-world assets under VARA’s framework: the token represents fractional or whole ownership of the underlying asset. Issuers must demonstrate that ownership rights in the reference asset are legally and validly established and that such rights transfer upon transfer of the ARVA. Where the reference asset is subject to legal or regulatory settlement requirements, those requirements must be satisfied to give effect to the transfer.
• Fiat-Referenced Virtual Assets (FRVAs). Annex 1 governs the issuance of FRVAs—virtual assets that maintain a stable value by referencing a fiat currency. FRVAs are, in effect, the tokenisation of fiat currency: the token represents a claim on reserves held by the issuer. Issuance is the exclusive prerogative of a Category 1 VA Issuance Licensee (a VASP). Dirham-denominated FRVAs are not permitted under VARA’s framework (this falls under the remit of the CBUAE). The rules impose strict requirements on stable backing, reserve assets, and redemption rights.

For both FRVAs and ARVAs, any entity wishing to provide additional virtual asset services (e.g., broker-dealer, exchange, custody) in connection with tokenised assets must obtain further VASP licensing from VARA.

 

CMA: Security Tokens and Commodity Tokens

The CMA has federal jurisdiction over the issuance and trading of security tokens and commodity tokens. Under the CMA’s Rulebook, a Security Token or Commodity Token is defined as a security or commodity the rights attaching to which are registered in a distributed ledger in accordance with the relevant registration agreement and may be exercised and transferred through that ledger. The CMA regime sits alongside the CBUAE and VARA (in the Emirate of Dubai only) frameworks. The chosen jurisdiction turns on how the token is classified.

The CMA–VARA strategic partnership announced in 2025 is aimed at unifying crypto regulation across the country and signals a step toward greater coordination. While how it will work in practice is still being defined, VARA-licensed providers can now service the wider UAE (outside the DIFC and ADGM) without a separate federal licence.

 

ADGM and DIFC: Financial Free Zone Frameworks

The ADGM and DIFC are federal financial free zones, each regulated by its own authority (the FSRA and the DFSA, respectively). Both have developed their own taxonomy and approach to virtual assets, with some notable differences:

• The ADGM uses the term “Virtual Assets,” while the DIFC uses “Crypto Tokens.” Both have evolved from regulator-approved to self-approved token models (except for stablecoins, which remain subject to specific approval).
• Stablecoin regulation. The FSRA introduced a dedicated “Fiat Referenced Token” (FRT) framework in December 2024, excluding FRTs denominated in UAE Dirham. The FSRA has accepted a list of FRTs for use within ADGM, including USDC, USDT, EURC, RLUSD, PYUSD, USDP, USD1, and USDL. The DFSA, by contrast, does not regulate “Fiat Crypto Tokens” in a fundamentally different way from other Crypto Tokens, although minor changes have been proposed following a recent DFSA consultation paper (closed October 2025). The DFSA has approved three Fiat Crypto Tokens: EURC, USDC, and RLUSD.
• Tokenization of real-world assets. The DFSA launched a Tokenisation Regulatory Sandbox in 2025 for tokenised investments (equities, bonds, sukuk, fund units, etc.), though the expression of interest window has now closed. Under its current regulatory framework, the DFSA treats tokenized real-world assets as “Security Tokens.” The ADGM takes a different approach, facilitating the issuance of “Specified Investments” on distributed ledger technology under its existing framework as “Digital Securities.” The ADGM framework also accommodates Distributed Ledger Foundations, which may be used in connection with certain tokenisation and digital asset structures.
• Pace of change. Both regulators are engaged in frequent consultations. The ADGM’s latest FRT-related changes took effect on 1 January 2026 following consultation; the DFSA’s most recent consultation paper on the subject closed on 31 October 2025 and currently, a further consultation paper is live at the time of writing this article.

 

Regulatory Developments and Market Activity

Regulatory developments and live market activity give practitioners a good deal to work with.

Dubai Real Estate Tokenization Pilot

The DLD real estate tokenization pilot, conducted with VARA-licensed entities, is the clearest example of tokenization moving from framework to commercial reality. The pilot ran through a full end-to-end tokenization cycle:

• Property approval. The DLD verified the property and its valuation.
• Fractional ownership. The property was split into thousands of digital tokens, enabling fractional investment.
• Investor onboarding. Investors were required to provide UAE identification; payments were made in AED via a licensed digital bank.
• Token minting. The VARA-licensed issuer minted tokens on the XRP Ledger (a public blockchain).
• Title deeds on-chain. Each token was linked to an official property title and synchronized with the DLD registry.
• Custody and compliance. Institutional-grade custody was provided, and the VARA license ensured AML/KYC and regulatory alignment.
• Lifecycle management. Rental income distribution and resale were handled through the issuance platform.

The take-up was strong. The first offering—a two-bedroom apartment in Business Bay—was fully funded within 24 hours, attracting 224 investors from over 40 nationalities with an average investment of approximately AED 10,714. A subsequent offering of a one-bedroom apartment in Kensington Waters, priced at approximately AED 1.5 million, sold out in one minute and 58 seconds, attracting 149 investors from 35 nationalities. A later offering of a two-bedroom apartment in Park Ridge Tower C, Dubai Hills, valued at AED 2.4 million, attracted 326 investors from 51 countries.

More recent tokenisations have extended beyond real estate. Just recently this month, DMCC launched the world’s largest silver bar as the first tokenised commodity asset under the DMCC-VARA tokenisation framework. Tokinvest, a VARA-regulated platform, issued fractional digital interests as an Asset-Referenced Virtual Asset (ARVA) on BNB Chain, with regulated secondary-market trading scheduled to follow the initial issuance. The bar is registered and verified through DMCC Tradeflow, which records possession and ownership of commodities stored in UAE-based facilities.

In addition to silver and real estate being tokenised, it is also now possible for investors to purchase digital tokens in living assets such as racehorses, holding a contractual right to a proportionate share of any winnings. This structure represents a novel application of VARA’s framework to a living asset, illustrating the breadth of real-world asset classes that the UAE’s regulatory infrastructure can accommodate.

VARA’s ARVA rules underpinned the DLD real estate tokenization pilot. The framework’s requirement that issuers demonstrate valid legal ownership of the reference asset, and that transactions in the token result in corresponding legally settled transactions in the reference asset, created the legal link between on-chain token transfers and off-chain title registration.

 

Stablecoin Developments

We understand from recent discussions with the CBUAE that the grace period for non-objection registration by VARA licensees with the CBUAE has been extended by one year for licensees providing payment token services in the context of their wider VARA mandate. This is relevant as we do see the need for increased actors facilitating each of the relevant transaction legs (notably wallet/custody providers, on-ramp and off-ramp facilitators and transferors of the relevant tokens).

Recent institutional developments signal a growing market maturity. Notably, in July 2026, Standard Chartered became the first Global Systemically Important Bank (G-SIB) to offer institutional USDC minting and redemption through its DIFC operations, enabling corporate treasuries and asset managers to access stablecoin infrastructure through a familiar banking relationship. In August 2026, Zand (a CBUAE-licensed digital bank) partnered with Circle to create a dual-currency AED/USD corridor—the first regulated Dirham-USD stablecoin bridge on public blockchains—enabling seamless AED–USD settlement without traditional correspondent banking.

HSBC launched its Tokenised Deposit Service in the UAE on 22 June 2026, offering 24/7 domestic and cross-border transfers in UAE Dirham, EUR, GBP, USD, HKD, and SGD for eligible corporate and institutional clients. While tokenised deposits are legally distinct from stablecoins, as they remain classified as bank deposits with the same legal protections, they represent a parallel digital money rail for institutional settlement and treasury management.

Real-world adoption is also advancing. In July 2026, Emirates became the first major airline in the region to accept digital assets for flight bookings through Crypto.com Pay, accepting Bitcoin, Ethereum, Solana, and select stablecoins with instant conversion to AED at checkout. This signals an advancement in real-world adoption of stablecoins.The CBUAE has now approved three Dirham-pegged stablecoins: AE Coin (issued by Mbank and selected by the UAE Ministry of Finance as a recognised digital payment method for federal government services), Zand AED, and DDSC. RAKBank has also received its in-principle approval from the CBUAE to launch a new dirham denominated stablecoin.

DDSC, the Abu Dhabi-backed Dirham stablecoin developed by IHC, First Abu Dhabi Bank, and Sirius International Holding, has transacted over AED 150 million to date and received non-objection from the CBUAE for use on VARA-regulated exchange platforms in July 2026. ADI Foundation, the entity behind DDSC, has stated partnerships with M-Pesa, BlackRock, Mastercard, and Franklin Templeton aimed at connecting UAE Dirham stablecoin infrastructure to African mobile money ecosystems, though no live cross-border payment corridor has been publicly confirmed as of September 2026.

 

Practical Structuring Considerations

Determining the regulatory starting point

Regulatory classification is the single biggest practical challenge for tokenization projects in the UAE. Crypto innovation spans the boundaries between money, securities, and commodities, and creates entirely new asset classes, presenting fresh opportunities for structuring that regulators and practitioners are actively developing.

Regulatory change in the UAE is moving fast, but the key taxonomy—the classification of individual crypto asset classes—is crystallizing. That classification is shaping the division of responsibilities among regulators and providing increasing clarity and certainty for market participants. Coordination efforts between UAE regulators have increased, including the CMA–VARA strategic partnership, which is expected to help reduce the risk of fragmented supervision.

The classification of a token as a “Payment Token” (CBUAE), a “Virtual Asset” (VARA and CMA), a “Security Token” (CMA), a “Virtual Asset” (ADGM), or a “Crypto Token” (DIFC) determines the entire regulatory pathway, including licensing, disclosure, custody, and distribution requirements. A thorough classification analysis should hence be done at the outset of any project, asking the following key questions:

1. What is the nature of the underlying asset (fiat currency, commodity, security, real estate, fund interest)?
2. What rights and/or value are being granted to token holders (ownership, contractual claim, redemption right)?
3. In which UAE jurisdiction will the issuance and trading take place (onshore Dubai, ADGM, DIFC, or federal)?
4. Does the token engage the jurisdiction of more than one regulator (e.g., a stablecoin issued in the ADGM that is also used as a Means of Payment)?

 

Structuring Tokenization Projects

Practitioners advising on tokenization issuances should at a minimum start by considering the following practical points:

• Choice of jurisdiction. The choice between mainland UAE, Dubai (VARA), the ADGM (FSRA), or the DIFC (DFSA) will depend on the nature of the asset being tokenized, the desired investor base, the licensing pathway, and the long-term operational model. Each jurisdiction offers different advantages: VARA has demonstrated its framework in the real estate tokenization pilot; the ADGM offers a dedicated FRT framework (with the first licensees having been added to the financial services register) and a mature specified investments regime; the DIFC provides a sandbox approach for novel asset classes and a well-established crowdfunding regime by way of alternative to tokenisation as such.
• Custody and settlement. The interface between on-chain token transfers and off-chain legal rights remains a critical structuring consideration. VARA’s ARVA framework requires that transactions in the reference asset are legally settled, completed, and/or transferred whenever a token transfer occurs. Issuers must implement mitigating measures to ensure correspondence between on-chain and off-chain records.
• Whitepaper and disclosure obligations. Both VARA (for FRVAs and ARVAs) and most other frameworks require preparation of a whitepaper and risk disclosure statement, with ongoing disclosure obligations. These should be prepared with the same rigor as a traditional securities prospectus.
• Cross-border distribution. Tokenized assets issued in the UAE may attract investors from multiple jurisdictions. Issuers and their advisors must consider whether the distribution of tokens constitutes an offer of securities or financial products in destination jurisdictions, and whether passport, equivalence, or reverse solicitation frameworks apply.
• Secondary market liquidity. Proof of ownership, secondary liquidity, and the availability of regulated trading venues are areas where the regulatory framework continues to evolve. Practitioners should advise clients on the developing secondary market trading for tokenized assets and the regulatory requirements for operating an exchange or trading facility.

 

Conclusion

The UAE has established itself as one of the most active jurisdictions for tokenization, backed by a regulatory infrastructure that is maturing rapidly. The DLD real estate tokenization pilot demonstrated an end-to-end model combining land registry recognition, licensed issuance, and institutional custody. The CBUAE’s payment token framework now includes four licensed or approved Dirham stablecoins, with AE Coin selected as a recognised payment method for federal government services. G-SIBs including Standard Chartered and HSBC have entered the market, and the Zand-Circle partnership has created the first regulated Dirham-USD stablecoin bridge. Real-world adoption is following, with Emirates accepting digital asset payments and DDSC transacting over AED 150 million in institutional settlements.

Practitioners advising on tokenization projects in the UAE benefit from a multi-regulator landscape where classification and jurisdictional boundaries determine the appropriate regulatory pathway. Key practical considerations include the growing infrastructure for CBUAE-registered payment tokens, the distinction between stablecoins and tokenised deposits, and the interface between on-chain token transfers and off-chain legal rights. Early engagement with the relevant regulator remains valuable. The taxonomy is crystallising, the CMA-VARA partnership is enhancing coordination, and institutional infrastructure is now in place. The UAE’s five regulatory frameworks offer multiple pathways to market, and experienced legal guidance can help identify the optimal route for each project.