TOKEN ISSUANCE IN DUBAI

1. Comprehensive Legal and Regulatory Guide under VARA

Dubai has positioned itself as one of the most forward-thinking jurisdictions globally for digital assets. With the establishment of the Virtual Assets Regulatory Authority (VARA) and the issuance of a detailed suite of regulations and rulebooks, Dubai now offers one of the most comprehensive and enforceable token issuance regimes in the world.

However, with regulatory maturity comes complexity.

Token issuance in Dubai is no longer a lightly regulated activity driven by marketing narratives or technical design alone. Instead, it is a legally classified, disclosure-intensive, and supervision-driven activity that requires careful structuring from inception.

This article provides a complete legal overview of token issuance in Dubai, covering:

• when a token issuance becomes regulated,
• how VARA classifies different token models,
• licensing and distribution requirements,
• whitepaper and disclosure obligations,
• stablecoin and real-world asset (RWA) token rules, and
• the key risks founders and businesses must manage.

It concludes with a practical section on how CRYPTOVERSE supports token issuers navigating this regulatory landscape.

2. The Regulatory Foundation for Token Issuance in Dubai

Token issuance in Dubai is governed by a layered regulatory framework comprising:

• Dubai’s Virtual Assets Law,
• the Virtual Assets and Related Activities Regulations 2023, and
• the Virtual Asset Issuance Rulebook.

Together, these instruments establish a substance-over-form regime, meaning that tokens are regulated based on what they do, what they represent, and how they are issued, rather than how they are labelled.

This marks a decisive shift away from earlier global approaches where “utility tokens”, “governance tokens”, or “community tokens” often escaped formal regulation.

In Dubai, labels do not determine regulatory treatment. Economic reality does.

3. When Does Token Issuance Become a Regulated Activity?

A foundational concept under Dubai’s regime is whether a token is issued “in the course of a business.”

VARA retains broad discretion in determining this, but relevant factors include:

• whether the issuance is repeated or conducted at scale,
• whether there is a commercial or economic element,
• whether the issuer receives value, consideration, or indirect benefit,
• whether the token is linked to a broader platform, ecosystem, or project,
• whether the issuer is a company, foundation, DAO, or structured entity.

Importantly, certain token issuances are deemed regulated by default, regardless of intent. Once a token falls into these categories, regulatory obligations apply automatically.

This approach ensures that token issuers cannot avoid regulation through technical structuring or creative drafting.

4. The Three-Tier Token Classification System

The Virtual Asset Issuance Rulebook divides all token issuances into three regulatory categories, each with different legal consequences.

4.1 Category 1 Virtual Asset Issuance (Highest Regulatory Intensity)

Category 1 covers the most sensitive and systemically significant token types, including:

• fiat-referenced tokens (stablecoins),
• asset-referenced tokens (RWA tokens),
• and any other token types VARA designates as high-risk.

Issuing a Category 1 token is itself a regulated virtual asset activity.

Key Legal Consequences:

• A full VARA licence is mandatory before issuance
• Each individual token issuance requires prior VARA approval
• Issuers must comply with multiple core rulebooks, including governance, AML/CFT, technology, and market conduct
• Ongoing supervision, audits, reporting, and capital requirements apply

Category 1 tokens are treated less like “crypto products” and more like regulated financial instruments or infrastructure.

4.2 Category 2 Virtual Asset Issuance (Moderate Regulatory Intensity)

Category 2 covers tokens that:

• are not stablecoins,
• are not asset-referenced,
• and do not qualify as exempt.

These typically include well-designed utility tokens and governance tokens that do not embed economic value or financial claims.

Key Legal Consequences:

• The issuer does not need a VARA licence
• All placement and distribution must be carried out through a VARA-licensed Broker-Dealer
• A Whitepaper and Risk Disclosure Statement are mandatory
• Marketing and public communications are regulated
• VARA retains full supervisory and enforcement powers

In practice, this means that token distribution becomes a regulated intermediation activity, even if token issuance itself is not licensed.

4.3 Exempt Virtual Assets (Lowest Regulatory Intensity)

Exempt tokens include:

• non-transferable tokens,
• closed-loop redeemable tokens (e.g. loyalty points),
• other low-risk assets designated by VARA.

Key Legal Consequences:

• No prior VARA approval required
• No licence required
• No mandatory whitepaper for exempt tokens

However, issuers remain subject to:

• VARA supervision,
• examination,
• and enforcement.

Exemption does not mean immunity.

5. Prohibited Tokens: Absolute Red Lines

Dubai expressly prohibits the issuance of anonymity-enhanced cryptocurrencies, including privacy coins that prevent transaction tracing or ownership identification.

These assets cannot be issued, marketed, or supported under any structure in Dubai.

This reflects Dubai’s strong alignment with international AML/CFT standards.

6. Whitepapers and Risk Disclosures: The Core Compliance Obligation

With limited exemptions, every token issued in Dubai must be accompanied by:

• a Whitepaper, and
• a Risk Disclosure Statement.

6.1 The Whitepaper

The Whitepaper is not a marketing document. It is a legally binding disclosure instrument.

It must include detailed information on:

• the issuer’s identity, governance, and financial condition,
• the token’s features, rights, and limitations,
• issuance mechanics and supply structure,
• use of proceeds,
• technology and underlying infrastructure,
• legal enforceability of rights,
• conflicts of interest,
• complaints and redress mechanisms,
• applicable law and jurisdiction.

Critically:

• civil liability cannot be excluded, and
• issuers are responsible for accuracy and completeness.

All historical versions must be retained for at least eight years.

6.2 Risk Disclosure Statements

Risk disclosures must:

• be clear and non-technical,
• describe all material risks,
• be kept up to date,
• and be published alongside the Whitepaper.

This ensures that purchasers are able to make informed decisions, a core policy objective of VARA.

7. Stablecoins in Dubai: Fiat-Referenced Virtual Assets (FRVAs)

Stablecoins are regulated under one of the most conservative frameworks globally.

Any token that purports to maintain a stable value relative to fiat currency is automatically classified as a Category 1 issuance.

Key Stablecoin Requirements:

• full VARA licensing,
• 100% reserve backing at all times,
• strict rules on reserve composition,
• monthly independent audits,
• guaranteed redemption at par,
• segregation and insolvency-remote reserve structures,
• enhanced capital requirements.

Importantly:

• AED-pegged stablecoins fall under the Central Bank of the UAE, not VARA.

This bifurcation ensures monetary sovereignty and systemic stability.

8. Real-World Asset (RWA) Tokens and Asset-Referenced Tokens

Tokens backed by:

• real estate,
• commodities,
• financial instruments,
• receivables,
• or income streams

are classified as Asset-Referenced Virtual Assets (ARVAs).

These tokens sit at the intersection of:

• securities law,
• property law,
• trust and custody law,
• and virtual asset regulation.

Key Legal Requirements:

• full VARA licensing,
• proof of legal enforceability of asset rights,
• custody and segregation of reference and reserve assets,
• redemption mechanics (where offered),
• periodic audits and disclosures,
• legal opinions in many cases.

VARA may designate certain issuers as “Significant ARVA Issuers”, triggering heightened supervision and capital thresholds.

9. The Distribution Layer: Why Broker-Dealers Matter

One of the most misunderstood aspects of Dubai’s regime is the role of Broker-Dealers in token launches.

For Category 2 tokens:

• the issuer may not distribute tokens directly,
• all placement must be carried out through a licensed Broker-Dealer,
• The Broker-Dealer assumes responsibility for distribution compliance.

This ensures that:

• token sales are subject to AML/CFT controls,
• marketing is reviewed and regulated,
• client onboarding standards are enforced.

In effect, Dubai regulates token distribution in the same way it regulates financial product placement.

10. Post-Issuance Obligations and Regulatory Risk

Issuing a token is not a one-time compliance exercise.

After issuance:

• VARA may request information, audits, or inspections,
• issuers must update disclosures when material changes occur,
• VARA may suspend or halt issuance,
• enforcement action may be taken for non-compliance.

Crucially, changing a token after launch can change its regulatory category.

Adding revenue rights, redemption features, or value backing post-issuance can immediately trigger licensing obligations.

11. Strategic Lessons for Token Founders and Businesses

The Dubai regime forces issuers to confront a fundamental question early:

Is your token designed to be used, or designed to hold value?

If it holds value, references value, or derives value from assets or income, regulation is inevitable.

Early legal structuring is therefore not optional. It is a strategic necessity.

12. How CRYPTOVERSE Can Help

At CRYPTOVERSE Legal Consultancy, we specialise in end-to-end legal and regulatory support for token issuers in Dubai and across the UAE.

Our Support Includes:

1. Token Classification & Regulatory Mapping

• Assessing your token design against VARA’s Issuance Rulebook
• Identifying regulatory category risks early
• Advising on redesign where necessary to achieve regulatory efficiency

2. Issuance Structuring & Licensing Strategy

• Structuring Category 1 issuance strategies (stablecoins, RWAs)
• Advising on Category 2 distribution via Broker-Dealers
• Supporting VARA licence applications where required

3. Whitepapers & Legal Disclosures

• Drafting VARA-compliant Whitepapers
• Preparing Risk Disclosure Statements
• Aligning technical documentation with legal obligations

4. Broker-Dealer & Distribution Support

• Coordinating with licensed distributors
• Structuring compliant token sale mechanics
• Reviewing marketing and promotional materials

5. Ongoing Compliance & Regulatory Engagement

• Post-issuance compliance advisory
• Regulatory change management
• VARA supervisory support and remediation

Our approach is practical, regulator-aligned, and risk-aware, ensuring that token projects are not only innovative, but also legally sustainable.

Dubai offers one of the most credible and globally respected environments for token issuance, but only for projects that take regulation seriously.

The VARA Virtual Asset Issuance Rulebook replaces uncertainty with clarity, but demands discipline, transparency, and accountability in return.

For businesses willing to engage with the framework properly, Dubai is not just a place to issue tokens, it is a place to build long-term digital asset infrastructure.

Legal Disclaimer

This article is provided for general informational purposes only and does not constitute legal advice. The regulatory treatment of any token issuance depends on its specific structure and must be assessed on a case-by-case basis under applicable VARA regulations and rulebooks.

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