Fresh digital asset regulations in the UAE are set to encourage further tokenisation and the introduction of more complex cryptocurrency-related products, according to analysts. Tokenisation involves creating and trading digital tokens that are backed by real-world assets like real estate, gold, or art on a blockchain, facilitating direct and verifiable peer-to-peer transactions.

Dubai’s crypto regulator, the Virtual Assets Regulatory Authority (Vara), has mandated that virtual asset service providers (VASPs) comply with a new set of rules by June 19. These regulations aim to enhance market security and align Dubai with global standards on money laundering.

Arushi Goel, head of policy for the Middle East and Africa at cryptocurrency researchers Chainalysis, stated that the amended rulebook offers VASPs a well-defined and regulated pathway to introduce more complex crypto products, such as margin lending for retail investors. This expansion significantly broadens the market opportunities available.

One key aspect of the new regulations is providing further clarity on tokenisation, which has often been ambiguous in many jurisdictions, according to Goel. Companies throughout the UAE are already implementing technologies to tokenise various assets, including real estate and racehorses.

Additionally, the new rules enhance compliance with international sanctions screening and anti-money laundering regulations. Each VASP must now screen clients and transactions against both international and specific federal law lists, in alignment with existing global standards.

The latest changes represent a shift in Dubai’s regulatory framework from basic infrastructure to accommodating a wide range of crypto financial services, including retail-grade products and custody solutions, as noted by Goel.

The UAE, particularly Dubai, aspires to establish itself as a hub for the emerging crypto industry and set up Vara in 2022. Vara is recognized as the world’s first independent regulator for virtual assets, overseeing regulations across Dubai’s free zones and legal mainland, excluding its International Financial Centre.

Johanna Cabildo, CEO of ethical AI training data suppliers D-GN, emphasized that Vara is proactively addressing systemic risks, particularly regarding retail exposure, leverage, and opaque token structures, before they escalate into widespread market failures. The urgency for more regulatory protections has been underscored by incidents like the ByBit hack earlier this year, where hackers allegedly stole $1.4 billion worth of Ethereum from a Dubai-based exchange.

With the introduction of these new regulations, Dubai is moving closer to aligning its standards with those of jurisdictions like Bermuda, Switzerland, and Singapore. Cabildo remarked that while the ByBit incident and other crypto-related events are significant concerns, these regulatory changes are more of a proactive measure to facilitate the next wave of compliant, cross-border capital entering the crypto space.