- UAE creates a legal framework to support tokenized real-world assets and blockchain growth.
- New regulations classify equity, bond, and commodity tokens, expanding investment opportunities.
- Clear rules aim to boost investor confidence and cement UAE’s role as a global fintech leader.
The United Arab Emirates (UAE) is creating a legal framework for the tokenization of real-world assets (RWA). The country’s Securities and Commodities Authority (SCA) recently published two regulation drafts, including one about Security Tokens and Commodity Tokens Contracts.
The goal of the new regulation is to establish a legal framework for issuing and trading tokenized assets in the UAE.
In the draft’s preamble (which you can read in this pdf), distributed ledger technology was described as “one of the most prominent technological innovations that redefined the concepts of issuance, trading, and investment in financial markets.”
The document states that security and commodity tokens represent a “qualitative shift” in how securities and commodity contracts are issued, and traded.
Further in the document, the SCA broke securities down to equity tokens (ownership rights in specific companies), bond tokens (which can be traded for debt), commodity tokens (assets whose value is based on the value of certain physical commodities like gold, oil, metal, or agricultural products), gold tokens (the tokenization of gold), and oil tokens (a token that allows investors to get exposure to oil without dealing with the logistics).
UAE’s RWA Framework
This regulation could significantly impact the country’s capital markets. By establishing a regulatory framework, the UAE integrates blockchain technology into its financial system, fostering innovation and positioning itself as a leader in financial technology.
This move will probably enhance investor confidence by providing clear rules and standards, making the market more attractive to both domestic and international participants.
The expanded market will give investors new opportunities, while at the same time potentially transforming how investments are traded and managed. Furthermore, the regulation strengthens the UAE’s global reputation as a forward-thinking financial hub. Since the US President Donald Trump just signed an executive order to support the growth of cryptocurrencies, it’s safe to assume that the blockchain race of nation-states is on.
Regardless of who ends up being the go-to region for crypto – the biggest winners will be crypto enthusiasts, who will see the technology integrated into the wider market.
It’s also important to note that new rules may also bring additional compliance requirements for issuers and traders, making things more complicated for some market participants.
The draft is currently in the consultation stage, and the country’s securities watchdog invited interested parties to participate in crafting the document. The deadline is February 14, 2025.
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