Real World Assets (RWA) in Web3 face a critical global regulatory challenge: traditional financial hubs often classify them as securities, restricting liquidity and financing. However, Dubai's Virtual Assets Regulatory Authority (VARA) breaks this mold by regulating RWA as a Virtual Asset, creating a dedicated compliance pathway that balances strict standards with the potential for public offering-grade circulation. Drawing from real project experience, this article analyzes why Dubai has become the optimal solution for global RWA compliance, its unique advantages, and potential risks, serving as a key reference for project teams.
Introduction
The emergence of Real World Assets (RWA) in Web3 can be described as a significant development impacting multiple fronts: the asset side, the financing side, and most crucially, the regulatory side. For the past two years, discussions surrounding "tokenizing everything" and "all assets can be RWA" have consistently circled back to a fundamental question: What exactly is this thing from a legal perspective?
Many have sought guidance from traditional financial hubs like Hong Kong, Singapore, and Europe. While this approach is not inherently flawed, projects that have pursued this path often encounter significant obstacles. It is against this backdrop that Dubai is gaining serious attention from frontline projects, exchanges, and institutions. This attention is not due to lenient regulations, but rather because Dubai has established a distinct regulatory framework specifically for assets like RWA at an institutional level.
This article aims to move beyond visions and hype, focusing instead on clarifying observations made during the actual advancement of real projects.
Many RWAs Fail Not Due to Technology, But the Moment They Are Labeled “Securities”
Let's begin with a scenario that most RWA project teams have encountered.
The project team states:
“Ours is a functional RWA, not a security.”
The regulator retorts:
“Then prove it.”
The project team then explains:
“We have underlying assets, cash flow, profit distribution, buyback arrangements, and even price anchoring mechanisms.”
After listening, the regulator often replies with a single sentence:
“If anything, that makes you sound more like a security.”
This is not a jest; it is a recurring conversation that has played out across different jurisdictions in recent years.
Examining the realistic pathways in major global legal regions reveals a common thread: as soon as an RWA begins to "promise returns," regulators' primary instinct is almost always to categorize it within the securities framework.
The United States serves as a prime example. The continued viability of platforms like INX and Securitize is largely due to their initial admission of operating as securities, adhering to the established yet highly costly paths of Reg D, Reg S, and ATS.
Singapore operates similarly. When an RWA exhibits characteristics such as asset mapping, profit distribution, or collective investment, the Monetary Authority of Singapore (MAS) typically integrates it directly into the regulatory framework for Capital Markets Products (CMP).
Hong Kong offers more flexibility, but with a clear stipulation: it is generally limited to professional investors. While fund-type, STO-type, or security-type RWAs are permissible, opening them to retail investors presents significant practical challenges.
The European Union provides a space for functional tokens under MiCA, but once an RWA possesses evident yield attributes, securities laws remain an insurmountable barrier.
Therefore, the conclusion is evident: engaging with RWA in traditional financial jurisdictions essentially means operating within the constraints of the securities regulatory system.
This leads to a series of real-world consequences: retail investors are largely excluded, liquidity is constrained, exchanges adopt a cautious approach, financing targets are highly institutionalized, project timelines are indefinitely extended, and compliance costs escalate dramatically. This explains why numerous so-called RWA projects ultimately function as little more than "on-chain private fund shares," lacking true circulation and being impossible to offer publicly. The issue is not with the blockchain technology itself, but with the underlying regulatory logic.
Dubai’s VARA Did Something Very “Counter-Intuitive to Traditional Finance”
The significant turning point arrived with the establishment of Dubai's VARA. The first crucial action VARA took was not to lower standards, but to redefine the understanding of the problem. Within VARA's system, RWA was not arbitrarily placed within the existing securities law framework. Instead, it was directly categorized under the regulatory umbrella of Virtual Assets. The initial question posed by the regulator is no longer "Are you a security?" but rather, "Are you a virtual asset project that can be regulated by VARA and is subject to continuous auditing?"
This fundamental logical shift is critical. It signifies that, for the first time, RWA might not be compelled to follow the securities route to enter a clear, systematic regulatory framework. Projects can apply for licenses following Virtual Asset Service Provider (VASP) logic, target retail investors under specific compliance prerequisites, and finally establish an institutional basis for "public offering-grade RWA." This represents a rare institutional choice on a global scale.
Why Dubai is the “Optimal Solution,” Not the “Most Lenient Solution”
It is imperative to clarify: perceiving Dubai as "unregulated" is a dangerous miscalculation. In terms of document complexity, Anti-Money Laundering (AML) and Know Your Customer (KYC) intensity, technical compliance, custody requirements, and risk control standards, VARA is no less stringent than Hong Kong or Singapore.
The true distinction lies in a single aspect: Dubai did not attempt to force-fit new assets into the logic of traditional finance. Instead, it designed a separate, operable regulatory structure specifically for RWA.
The traditional path is:
Asset → Security → Licensed → Professional Investors → Limited Circulation.
The VARA path is more akin to:
Asset → Virtual Asset → VARA Compliance → Retail Accessible → Public Offering-Grade Circulation.
This represents a difference at the level of regulatory paradigm, not merely a difference in the degree of strictness.
Why Dubai Will Become the Core Hub for RWA in the Next Few Years
If we disregard slogans and focus solely on real-world driving forces, the answer becomes straightforward. What asset owners truly desire boils down to a few key elements: the ability to raise capital, the capacity for circulation, listing on compliant exchanges, access to retail investors, and legal validity. Globally, very few jurisdictions currently meet all five of these conditions simultaneously, and Dubai stands out as the clearest option.
An increasingly evident trend is also emerging: In the past, Middle Eastern capital was allocated to Western assets. Now, the trend is reversing—more and more RWA projects with European and American backgrounds are actively relocating their compliance hubs to Dubai. This is not simply money chasing projects; it is the regulatory structure itself attracting projects.
In Hong Kong and Singapore, attitudes toward RWA are generally cautious. In the US, the risks associated with security-type RWA are almost explicit. However, in Dubai, as long as operations are conducted within the VARA framework, public offering-grade RWA is at least institutionally permitted for discussion and implementation.
Dubai is Not a Panacea; You Can Still Fail Miserably
Despite these advantages, a reality check is necessary. Dubai is not a tool for evading regulation, nor is it a "get-out-of-jail-free card." In real-world projects, problems most frequently arise from several clichéd yet easily overlooked points: unclear asset ownership, improper design of profit mechanisms, being deemed a collective investment scheme, conducting public offerings without a license, and triggering the securities laws of other countries through cross-border sales. These potential pitfalls do not vanish simply by operating in Dubai.
Therefore, a phrase I repeatedly emphasize in projects is: Dubai's value lies not in escaping regulation, but in providing a more suitable runway for RWA to operate on.
If You Still Want to Do “Global Public Offering-Grade RWA” Now, the Realistic Options Are Few
I will offer a cautious conclusion: Under the premise that the four conditions—"legally accessible to retail, listable on compliant exchanges, capable of true asset mapping, and having global expansion potential"—are met simultaneously, it is currently difficult to find a more realistic RWA compliance solution globally than Dubai's VARA. While not perfect, it is undeniably in the top tier in terms of risk controllability, cost predictability, regulatory matching, and commercial efficiency.
Conclusion
Many individuals still simplify RWA as a mere combination of "Assets + Tokens." However, in the real world, what truly determines a project's success or failure is almost always its legal structure and its ability to comprehend regulatory nuances.
Dubai's greatest value lies not in its tax rates or its perceived freedoms, but in its provision, for the first time, of an institutional answer for RWA that allows it to be open, compliant, institutional, and accessible to retail. This is why I assert: Dubai RWA is not a gimmick, but a reality that is being repeatedly verified.