SPV, Trust, or Direct Ownership? Choosing the Right Legal Structure for RWA Tokenisation in Dubai

When sponsors explore Real World Asset tokenisation in Dubai, the first instinct is often technological. Which blockchain? What token standard? How will smart contracts manage distributions?

From a regulatory standpoint, these questions are secondary.

Under the Virtual Assets Regulatory Authority framework, the decisive factor is legal structure. The way the underlying asset is held, segregated, and legally enforceable will determine licensing scope, capital requirements, insolvency exposure, and supervisory risk.

This article examines the three most common legal architectures for RWA tokenisation in Dubai under VARA’s Category 1 Asset Referenced Virtual Asset framework:

• SPV share tokenisation
• Trust-based beneficial ownership
• Direct ownership or income-only contractual models

We analyse regulatory implications, insolvency considerations, and practical structuring outcomes.

1. Why Legal Structure Determines Regulatory Risk

Under VARA’s Virtual Asset Issuance Rulebook, any virtual asset that represents ownership of, or entitlement to value derived from, a real-world asset qualifies as an Asset Referenced Virtual Asset.

This classification is based on economic reality.

If the token reflects property, gold, receivables, equity, or income streams, it will typically require Category 1 Issuance authorisation.

However, the way that asset is legally held determines:

• Whether investors are equity holders or unsecured creditors
• Whether insolvency ring-fencing is effective
• Whether the structure resembles a collective investment scheme
• How reserve and custody obligations apply
• The complexity of licensing permissions required

Choosing the wrong structure at inception can materially increase regulatory burden.

2. SPV Share Tokenisation: The Institutional Model

2.1 Structure Overview

In this model:

• A Dubai-incorporated SPV holds legal title to the asset
• Investors subscribe for tokens representing shares in the SPV
• Rental income or proceeds flow to the SPV
• Dividends are declared and distributed

This structure is most commonly used for real estate tokenisation.

2.2 Regulatory Advantages

The SPV model aligns well with corporate law principles and VARA’s expectations because:

• Legal ownership is clear
• Investor rights are defined through company law
• Insolvency separation can be engineered
• Governance is structured

This model is particularly attractive to institutional investors and family offices.

2.3 Regulatory Scrutiny Points

VARA will examine:

• Whether the SPV is properly ring-fenced from the operating entity
• Whether any mortgages or encumbrances exist
• How liquidation proceeds are distributed
• Whether minority shareholder protections are adequate
• Whether dividend declarations are discretionary

Improperly structured SPVs can inadvertently resemble pooled investment schemes.

2.4 When the SPV Model Is Appropriate

The SPV model is typically preferred for:

• Real estate tokenisation
• Private equity-backed assets
• Long-term income-generating assets

It offers the clearest governance framework and strongest insolvency positioning.

3. Trust-Based Beneficial Ownership

3.1 Structure Overview

In a trust model:

• A trustee holds legal title
• Token holders hold beneficial interests
• The trustee manages the asset in accordance with the trust deed

This model is sometimes used in cross-border commodity or IP royalty structures.

3.2 Regulatory Considerations

Trust structures introduce complexity because:

• Enforcement rights depend on trust law
• Beneficial interests must be clearly documented
• Trustee fiduciary duties must be defined
• Insolvency implications vary depending on jurisdiction

VARA will expect:

• Clear legal opinions on enforceability
• Transparent disclosure of beneficiary rights
• Defined conflict of interest management

3.3 Collective Investment Scheme Risk

If the trustee exercises discretionary management powers, and token holders rely on managerial performance for profit, the structure may resemble a collective investment scheme.

This risk must be assessed at the structuring stage.

3.4 When the Trust Model Is Appropriate

The trust model may be appropriate where:

• Assets are located in multiple jurisdictions
• Legal title restrictions exist
• Shariah structuring is required
• Certain IP or royalty rights are involved

However, it requires advanced drafting and legal oversight.

4. Direct Ownership or Income Only Structures

4.1 Direct Ownership Model

In this approach:

• The issuer holds the asset directly
• Token holders are granted contractual claims

This structure is simpler but significantly riskier from a regulatory perspective.

If the issuer becomes insolvent, token holders may be unsecured creditors.

Insolvency risk must be clearly disclosed.

4.2 Income Only Model

In an income-only model:

• Token holders do not own the asset
• They receive a share of income

This model is frequently proposed for rental streams or receivable pools.

However, it carries elevated regulatory risk because:

• Investors rely entirely on issuer performance
• Profit expectation is central
• Managerial discretion may be extensive

If pooling exists, this structure may approach fund-like characteristics.

4.3 Securities Recharacterisation Risk

Income only structures are particularly vulnerable to:

• Securities reclassification
• Cross-border offering restrictions
• Increased supervisory scrutiny

They must be carefully engineered to avoid unintended regulatory consequences.

5. Insolvency and Asset Segregation Comparison

From a regulatory engineering perspective, SPV-based structures typically provide the strongest defensibility.

6. Capital and Licensing Implications

All three structures generally require Category 1 Issuance authorisation.

Minimum requirements include:

• Application fee of AED 100,000
• Annual supervision fee of AED 200,000
• Minimum paid-up capital of AED 1,500,000

If distribution, custody, or exchange functionality is added, additional permissions increase capital thresholds and governance complexity.

Legal structure selection can influence whether additional permissions are necessary.

7. Governance and Control Considerations

Regardless of structure, VARA requires:

• Two Responsible Individuals
• Compliance Officer
• MLRO
• CISO/DPO
• Risk oversight
• Internal audit arrangements

However, structures involving discretionary management or custody intensify governance expectations.

Institutional sponsors should align governance design with structural risk.

8. Real World Scenario Comparison

Scenario A: Residential Property Tokenisation

A developer tokenises a completed apartment building.

SPV share model:

• Clear title
• Dividend distribution
• Defined liquidation waterfall

Regulatory risk: manageable.

Income-only model:

• No equity
• Pure rental entitlement
• High reliance on issuer

Regulatory risk: elevated.

The difference lies in legal enforceability.

Scenario B: Gold Backed Token

Allocated custody via SPV:

• Serial-numbered bars
• Segregated storage
• Direct claim

Stronger regulatory footing.

Pooled unallocated gold:

• Proportionate claim
• Potential insolvency ambiguity

Higher supervisory scrutiny.

9. Choosing the Right Structure: Key Questions

Before selecting a structure, sponsors should ask:

• Do investors expect equity rights or income only?
• Will assets be leveraged?
• Is cross-border distribution planned?
• Is secondary trading intended?
• How will insolvency be managed?
• Are Shariah principles relevant?

These questions drive structural design.

10. Strategic Recommendation

For most real estate and tangible asset projects in Dubai, the SPV share model offers:

• Clearer legal rights
• Stronger insolvency ring-fencing
• Greater institutional credibility
• Lower supervisory friction

Trust and income models may be viable, but require deeper regulatory engineering.

Conclusion: Structure Is Strategy

In RWA tokenisation, structure is not a technical detail. It is the foundation of regulatory viability.

Choosing between SPV, trust, or direct models affects:

• Licensing pathway
• Capital requirements
• Insolvency exposure
• Investor protection
• Regulatory comfort

Sponsors who treat structure as strategic infrastructure achieve smoother licensing outcomes and stronger institutional confidence.

Work With CRYPTOVERSE Legal Consultancy

CRYPTOVERSE Legal Consultancy advises founders, developers, family offices, and institutional investors on selecting and engineering optimal legal structures for RWA tokenisation under VARA.

Our services include:

• ARVA classification analysis
• Structural comparison and insolvency planning
• SPV and trust drafting
• Category 1 Issuance licensing management
• Governance and capital planning
• Regulatory engagement and Q&A strategy

If you are evaluating SPV, trust, or income models for your Dubai tokenisation project, engage CRYPTOVERSE Legal Consultancy at the structuring stage.

Contact us to design your RWA structure correctly and secure VARA authorisation with confidence.

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