RWA, the "nuclear bomb of Web3", has stirred global regulatory sandboxes. While traditional financial hubs struggle with securities-based constraints, Dubai’s VARA framework offers a game-changing regulatory logic—classifying RWAs as virtual assets instead of securities, enabling retail access, public offerings and cross-border compliance. This article deciphers why Dubai is the optimal RWA compliance solution worldwide, not the most lenient one.
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RWA, the “nuclear bomb of Web3”, has stirred global regulatory sandboxes. While traditional financial hubs struggle with securities-based constraints, Dubai’s VARA framework offers a game-changing regulatory logic—classifying RWAs as virtual assets instead of securities, enabling retail access, public offerings and cross-border compliance.
RWA, dubbed the “nuclear bomb of Web3,” has detonated regulatory sandboxes across the globe. While the world’s attention is fixated on established financial hubs like Hong Kong and Singapore, a less-noticed “dark horse” has quietly delivered a “dimension-reducing strike”—that is Dubai.
This is no mere regulatory game, but an ultimate challenge to the global financial compliance system. Dubai has truly “run wild” in the RWA race.
Not because it offers “lenient regulations,” but because—
It is one of the very few places in the world that has built a complete regulatory framework for RWAs, one that is “implementable, open to public offerings, cross-border compatible, and institutionalizable.”
In this article, I won’t dwell on concepts or visions. Instead, I’ll focus on three core questions:
- Why do most global RWA projects end up “hitting a dead end”?
- Under Dubai’s VARA regulatory framework, how are RWAs “systematically approved”?
- From a legal structure perspective, why is Dubai the “current optimal solution” rather than the “most lenient one”?
If you fall into any of the following categories, you must read this carefully:
- You hold physical assets and want to tokenize them
- You aim to launch RWAs “marketable to retail investors”
- You seek financing, exchange listings, or global expansion
- You have already struggled with “securities-type RWAs”
Let me paint a scenario you’re surely familiar with:
- Project party: “Ours is a functional RWA, not a security!”
- Regulator: “Prove it.”
- Project party: “We offer returns, dividends, buybacks, and stable cash flow…”
- Regulator: “Then it looks even more like a security.”
This is no joke—it’s the real regulatory tug-of-war that has played out globally over the past three years.
Look at the practical pathways worldwide:
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United States: Platforms like INX and Securitize can operate because they explicitly acknowledge “we are securities” and follow routes such as Reg D, Reg S, and ATS.
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Singapore: Once most RWAs involve returns, profit distribution, or asset mapping, MAS (Monetary Authority of Singapore) immediately classifies them as Capital Markets Products.
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Hong Kong: There are pathways for fund-type, securities-type, and STO (Security Token Offering)-type RWAs, but with a catch—they are mostly only open to Professional Investors (PIs).
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EU MiCA: Functional tokens can survive, but any RWA tied to returns is immediately brought under securities law.
The conclusion is clear:
Launching RWAs in “traditional financial jurisdictions” essentially means “navigating within securities regulatory systems.”
What does this imply?
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Retail investors: Mostly out of the question
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Liquidity: Extremely low
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Exchanges: Hesitant to list
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Financing: Only accessible to institutional investors
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Project cycles: Extremely long
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Compliance costs: Prohibitively high
This explains the “real status of many RWA projects”:
They call themselves RWAs, but in reality, they are just blockchain-based private fund shares—with no secondary market liquidity and no possibility of public offerings.
This is not a technical issue, but a problem rooted in underlying regulatory logic.
The true turning point came with the launch of Dubai’s VARA (Virtual Assets Regulatory Authority).
It did something highly “counter to financial tradition”: Instead of forcing RWAs into the mold of “securities law,” it embraced them under “virtual asset regulation” independently.
Within VARA’s framework:
- RWA Tokens are directly classified as Virtual Assets.
- The first question asked is no longer: “Are you a security?”
- Instead, it’s: “Are you a regulated VARA-compliant virtual asset?”
The significance of this shift cannot be overstated:
- For the first time, RWAs do not have to follow the securities route.
- They can first apply for licenses under the VASP (Virtual Asset Service Provider) logic.
- They can target retail investors.
- They can be legally listed on compliant exchanges.
- They can leverage token logic to enhance liquidity.
This is an extremely rare institutional design on a global scale.
Many people mistakenly believe:
- Dubai = No regulation
- VARA = Loose license approval
This is a serious miscalculation.
The truth is:
- The complexity of VARA’s license documentation
- The rigor of AML/KYC requirements
- Technical compliance standards
- Custody mandates
- Risk control obligations
Are in no way lower than those in Hong Kong or Singapore.
The only real difference lies in this:
Dubai is not “relaxing regulation,” but “adopting an entirely new regulatory logic.”
Assets → Securities → Licensing → PIs → Circulation within closed circles
Assets → Virtual Assets → VARA Compliance → Retail Accessible → Public Offering-level Circulation
This is a paradigm shift.
Let’s focus on “practical drivers” rather than slogans:
- Access to financing
- Liquidity support
- Exchange listings
- Retail investor access
- Legal validity
Currently, Dubai is almost the only place that meets all five criteria simultaneously.
A fascinating trend has emerged:
- Previously: Middle Eastern capital → Invested in Western assets
- Now: Western RWA projects → Migrate to Dubai for compliance
It’s no longer capital chasing projects, but regulatory structures attracting projects.
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Hong Kong: Extremely cautious about RWAs
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Singapore: Mostly avoids retail-focused RWAs
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United States: Will sue if you illegally list securities-type RWAs
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Dubai: “Allows public offering-level RWAs” as long as you operate within the VARA framework
For exchanges, this is a make-or-break choice.
That said, I must offer a reality check: Dubai RWAs are not a “universal pass”—missteps can still lead to failure. Here are some high-frequency pitfalls:
- Disguising “de facto securities-type assets” as “functional ones”
- Unclear ownership of underlying assets
- Profit distribution mechanisms classified as Collective Investment Schemes (CIS)
- Conducting public offerings without obtaining a license first
- Cross-border sales triggering securities laws in other countries
This is why I repeatedly emphasize in practical projects: Dubai is not a tool to evade regulation, but a “different regulatory track better suited for RWAs.”
I say this cautiously:
Under the premise that the four conditions—”legally accessible to retail investors + listable on compliant exchanges + capable of real asset mapping + operable globally”—are met simultaneously, there is currently no better RWA compliance solution in the world than Dubai’s VARA framework.
It’s not perfect, but it is certainly the option with:
- The most controllable risks
- The most predictable costs
- The most compatible regulation
- The highest commercial efficiency
Many people think: RWA = Token + Asset.
But I can say with absolute certainty: The real barrier to RWAs lies not in on-chain technology, but in “the ability to design legal and regulatory structures.”
Dubai’s greatest value lies not in tax benefits or freedom, but in this: It has provided RWAs with an institutional answer—one that is “open, compliant, institutionalizable, and accessible to retail investors”—for the first time.
This is why I used such a bold headline: Dubai’s RWAs are truly “running wild.”
Mankun currently provides one-stop legal services for RWA projects, covering legal structure design, token classification analysis, and multi-jurisdictional compliance implementation (including Dubai VARA, Hong Kong, Singapore, BVI, and Cayman). For related inquiries, please feel free to contact us.
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