The Securities and Commodities Authority (SCA) of the United Arab Emirates has officially released its comprehensive regulatory framework for security tokens and commodity contract tokens, following the draft titled Security Tokens and Commodity Token Contracts published earlier in 2025. This marks a pivotal advancement in the UAE’s strategy to integrate digital asset innovation within a robust, investor-protected financial ecosystem.
This new regulation ensures that securities and commodity contracts—especially those issued using distributed ledger technology (DLT), such as security tokens and commodity tokenized contracts—are fully incorporated into the country's existing virtual asset regulatory structure. The move reinforces the UAE’s commitment to becoming a global hub for blockchain innovation while maintaining financial integrity and consumer protection.
Clarifying Token Types and Regulatory Obligations
Under the updated rules, the SCA defines security tokens and commodity contract tokens as digital representations of tangible or financial assets—such as company shares, bonds, or physical commodities like gold and oil—that carry rights equivalent to traditional securities. These tokens are now subject to the same investor safeguards, disclosure requirements, and compliance obligations as conventional financial instruments.
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For example, a gold-backed token or an oil-referenced contract token issued via DLT will be treated no differently from a physical certificate of ownership when it comes to legal rights, regulatory oversight, and market conduct standards. This technology-neutral approach ensures consistency across all forms of asset issuance—whether on paper, in electronic databases, or on decentralized ledgers.
The regulation emphasizes that the underlying technology does not alter the nature of the financial obligation. As such, any security or commodity derivative contract—regardless of format—must comply with core legal principles under UAE securities law. This includes transparency, fair treatment of investors, anti-fraud measures, and proper governance.
However, when DLT is used, additional technical criteria must be met to ensure legal enforceability and system reliability:
- The distributed ledger must enable the right holder, not just the issuer, to freely transfer or dispose of their rights.
- It must incorporate robust technical and organizational safeguards to prevent unauthorized tampering or data corruption.
- All critical information—including rights ownership, ledger operations, and registration agreements—must be immutably recorded on-chain or in associated data systems.
- Investors must have direct, unimpeded access to view their holdings, verify transaction history, and confirm data accuracy without reliance on third-party intermediaries.
These requirements ensure that decentralization does not compromise accountability—a key concern for regulators aiming to balance innovation with investor protection.
Over-the-Counter Trading via Authorized Digital Wallets Only
A significant provision in the new framework is the allowance for over-the-counter (OTC) trading of security and commodity tokens—but only through approved digital wallet mechanisms. Transactions must occur either via:
- Digital wallets provided by licensed digital wallet service providers, or
- Self-hosted wallets that are pre-authorized and whitelisted by the issuer, market operator, or a compliant middleware provider.
According to the SCA, a digital wallet is any software or tool designed to manage cryptographic keys (public and private) that control access to digital assets. A digital wallet service provider, meanwhile, is a regulated entity—often operating as an alternative trading system—that offers custody services for tokenized securities and commodities.
This controlled OTC environment enables flexibility for institutional and accredited investors to trade tokenized assets outside formal exchanges while still ensuring compliance with anti-money laundering (AML) and know-your-customer (KYC) protocols. It also paves the way for secondary market liquidity in niche or illiquid assets like real estate or private equity, once tokenized.
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Pioneering Tokenized Investments: EmCoin and Real Estate Tokenization
The regulatory clarity provided by the SCA is already catalyzing innovation. In June, EmCoin Investment LLC, based in Abu Dhabi, announced it had become the first SCA-regulated integrated investment platform in the UAE to offer both crypto and traditional financial assets—including stocks, commodities, and initial coin offerings (ICOs).
EmCoin aims to bridge digital finance with legacy markets by launching a cutting-edge platform where users can trade virtual assets, invest in UAE and global equities, purchase commodities, and access professionally managed portfolios—all within a transparent, regulated environment.
This development aligns with broader national efforts to tokenize real-world assets (RWAs). One notable project is PRYPCO Mint, a joint initiative by the Dubai Land Department (DLD) and PRYPCO, operating under a license from the Virtual Assets Regulatory Authority (VARA). PRYPCO Mint has already facilitated the tokenization of two properties in the UAE, offering fractional ownership opportunities to a wider pool of investors.
Such initiatives demonstrate how regulation can unlock liquidity, democratize access to high-value assets, and attract institutional capital into blockchain-based finance.
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Frequently Asked Questions (FAQ)
Q: What are security tokens and commodity contract tokens?
A: Security tokens represent ownership in traditional financial instruments like stocks or bonds, while commodity contract tokens are linked to physical goods such as gold or oil. Both are issued using blockchain technology and grant holders legal rights similar to their non-digital counterparts.
Q: Are these tokens regulated the same way as traditional securities?
A: Yes. The SCA applies the same regulatory standards—including disclosure, investor protection, and market conduct rules—to tokenized assets as it does to conventional securities, ensuring fairness and transparency regardless of technology used.
Q: Can anyone trade tokenized securities in the UAE?
A: Trading is permitted through licensed platforms or via OTC deals using authorized digital wallets. However, access may be restricted to accredited or institutional investors depending on the asset type and risk profile.
Q: What role does distributed ledger technology play under the new rules?
A: DLT is recognized as a valid method for issuing and transferring tokens, but only if it meets specific requirements around data integrity, user control, and auditability to ensure legal enforceability and regulatory oversight.
Q: How does wallet authorization work for OTC trading?
A: Wallets must be pre-approved by the issuer or a compliant intermediary. This ensures that only verified parties can receive or transfer regulated tokens, supporting AML/KYC compliance and reducing fraud risks.
Q: Is real estate tokenization legal in the UAE?
A: Yes. Projects like PRYPCO Mint have received formal licensing from VARA to tokenize real estate assets, allowing fractional investment in property through blockchain-based tokens.
Core Keywords
- Security tokens
- Commodity contract tokens
- UAE SCA regulations
- Distributed ledger technology (DLT)
- Digital wallet service providers
- Tokenized real estate
- Over-the-counter token trading
- Real-world asset tokenization
With this forward-looking regulatory update, the UAE solidifies its position as a leader in structured digital asset innovation—balancing technological progress with investor safety and financial stability.