MENA Tokenization Regulations: UAE, Saudi Arabia, Bahrain Complete Guide
The Middle East and North Africa (MENA) region has emerged as a global leader in tokenization-friendly regulations. 2025 marked a transformative year—UAE regulators issued comprehensive rulebook updates, Saudi Arabia launched national real estate tokenization infrastructure, and Bahrain expanded its stablecoin framework. Unlike many jurisdictions still debating approaches, MENA countries have created clear, operational frameworks.
UAE: Federal Layer + Free Zones + Dubai (VARA)
The UAE has a multi-layered regulatory structure:
- Federal layer: SCA (Securities and Commodities Authority) regulates virtual asset activities outside financial free zones; CBUAE (Central Bank) regulates payment tokens and payment services using virtual assets
- ADGM (Abu Dhabi): Regulated by FSRA under its own legal framework
- DIFC (Dubai): Regulated by DFSA under its own legal framework
- Dubai (excluding DIFC): Regulated by VARA for virtual assets
Each regime operates independently with its own licensing, rules, and enforcement.
VARA (Dubai Virtual Assets Regulatory Authority)
Established: 2022 Jurisdiction: Emirate of Dubai (including free zones), excluding DIFC Best for: Crypto-native businesses, retail offerings, RWA tokenization
VARA is a dedicated virtual assets regulator established under Dubai Law No. 4 of 2022. In May 2025, VARA released Version 2.0 of all twelve rulebooks with significant enhancements.
Key 2025 Updates:
- New VA Issuance Rulebook: Category 1 (ARVAs—stablecoins, RWA tokens) require full VARA license; Category 2 (utility tokens) no prior approval but must use licensed distributors
- FATF Travel Rule: Mandatory compliance for all cross-border transfers
- DeFi Licensing: February 2025—first DeFi Limited License issued to MANTRA
- ESG Reporting: Now mandatory for all token issuers
- Sponsored VASP: New concept allowing regulated VASPs to sponsor other entities
- Compliance deadline: June 19, 2025 for all licensed VASPs
License Categories:
- Advisory Services
- Broker-Dealer Services
- Custody Services
- Exchange Services
- Lending and Borrowing Services
- VA Management and Investment Services
- VA Transfer and Settlement Services
- VA Issuance (new)
Regulatory Requirements:
- Client money/VAs segregation mandatory—does not form part of VASP estate in insolvency
- Client VA wallets must be labeled "Client VA Wallet" in records
- VARA intervention rights over client assets in case of breach
- Detailed wind-down procedures if discontinuing business
- Anonymity-enhanced cryptocurrencies (Monero, Zcash) completely prohibited
Timeline: 3–6 months for full licensing
Costs (per activity, per Schedule 2):
- Application fee: AED 40,000–100,000 depending on activity
- Annual supervision fee: AED 80,000–200,000 depending on activity
- Fees apply per licensed activity—multiple activities = multiple fees
ADGM (Abu Dhabi Global Market)
Framework: Since 2018 (guidance updated regularly; current version June 2025) Jurisdiction: Abu Dhabi financial free zone Best for: Institutional offerings, fund tokenization, security tokens
ADGM's Financial Services Regulatory Authority (FSRA) has built a mature, institutional-grade framework. As of December 2025, over 20 regulated firms are licensed for virtual asset activities.
Key 2025 Developments:
- December 2024: New Fiat-Referenced Token (FRT) issuance framework launched
- September 2025: Consultation on staking of virtual assets
- October 2025: Consultation on crypto token regime enhancements
- November 2025: RLUSD (Ripple stablecoin) approved as Accepted FRT
- December 2025: Circle received Money Services Provider license
Framework Highlights:
- Security Token Framework: Clear rules under FSMR—tokens with security characteristics treated as securities
- Accepted Virtual Assets (AVAs): FSRA pre-approves tokens based on 7 criteria (maturity, security, traceability, exchange connectivity, DLT type, innovation, functionality)
- Accepted FRTs: Automatically accepted if issued in ADGM; foreign FRTs assessed against criteria
- Prohibited: Algorithmic stablecoins, privacy tokens (Monero, Zcash)
- Fund Manager Licenses: Can manage tokenized funds under existing framework
- RegLab: Regulatory Laboratory for testing innovative models with lighter requirements
- English Common Law: Familiar legal system for international investors
Prospectus Exemptions:
- Professional clients only, OR
- Fewer than 50 individuals in 12 months, OR
- Minimum investment $100,000 per investor
Timeline: 4–8 months
Costs (per FEES Rulebook):
- Application fee: $20,000 per VA regulated activity
- FRT Issuance: $70,000 application + $70,000 annual supervision
- MTF operation: separate fee schedule
- Other licenses vary by activity scope
DIFC (Dubai International Financial Centre)
Jurisdiction: Dubai financial free zone Regulator: Dubai Financial Services Authority (DFSA) Best for: Traditional finance firms adding tokenization, institutional clients
Regulatory Timeline:
- 25 October 2021: Investment Token regime in force
- 1 November 2022: Crypto Token regime in force
- March 2025: Tokenisation Regulatory Sandbox (Innovation Testing Licence cohort) launched
- December 2025: DFSA issued updated Crypto Token rules
- 12 January 2026: Updated Crypto Token rules come into force
DIFC provides a pathway for established financial institutions seeking to integrate digital assets.
Key 2025 Developments:
- March 2025: DFSA Tokenisation Sandbox began engagement with selected firms
- October 2025: DFSA Consultation Paper No. 168—Enhancements to crypto token regulation
- December 2025: Updated rules issued, effective January 2026
- Focus on alignment with global regulatory standards
- Proposed changes to DFSA-led token recognition/suitability requirements
Framework Highlights:
- Investment Token Framework: Security tokens treated as securities under existing DFSA rules
- Crypto Token Framework: Separate regime for non-security crypto tokens
- Existing License Upgrade: Add tokenization to existing DFSA license
- Institutional Focus: Designed for qualified/professional investors
- Strong Reputation: Trusted by global institutions
Timeline: 3–6 months (faster for existing DFSA licensees)
UAE Stablecoin Regulations
The Central Bank of UAE (CBUAE) regulates payment tokens and AED-backed stablecoins:
- Only AED-backed stablecoins permitted for UAE domestic payments (goods/services)
- Foreign stablecoins (USDT, USDC) restricted to virtual asset purchases only
- April 2025: ADQ and First Abu Dhabi Bank preparing dirham-backed stablecoin launch
- Stablecoin issuers must maintain 1:1 reserves, quarterly audits
Saudi Arabia: Emerging Framework
Status: Sandbox active, comprehensive framework in development Regulators: Capital Market Authority (CMA), Saudi Arabian Monetary Authority (SAMA)
Saudi Arabia maintains a cautious but evolving approach. While retail crypto trading remains restricted (declared "not legal tender" in 2018), significant developments occurred in 2025.
November 2025: Stablecoin Initiative
Minister of Municipal Affairs Majed Al-Hogail announced the government is developing regulated stablecoins in partnership with CMA and SAMA, aligned with Vision 2030. This marks a potential shift from the 2018 restrictive stance.
National Real Estate Tokenization Infrastructure
In November 2025, Saudi Arabia launched the world's first national-scale blockchain infrastructure for real estate:
- Real Estate Registry (RER) + Real Estate General Authority (REGA) collaboration
- "Registry-as-truth" model—RER ledger serves as conclusive record of property rights
- Supports property tokenization, fractionalization, and marketplace integration
- Built on SettleMint platform
- Incorporates W3C Verifiable Credentials, eIDAS 2.0, Shariah-compliant structures
- Integration with Saudi identity systems (Absher, Nafath, mada)
Current Regulatory State
| Area | Status |
|---|---|
| Retail Crypto Trading | Restricted—regulators have historically warned about risks; not explicitly banned but discouraged |
| Institutional Tokenization | CMA FinTech Lab / sandbox programs available |
| Security Tokens | Subject to existing securities framework; CMA sandbox required for novel structures |
| Commodity Tokens | SCA draft regulations issued early 2025 |
| Stablecoins | Development announced November 2025 |
| CBDC | Project Aber (with UAE), mBridge pilots ongoing |
CMA FinTech Lab: Active sandbox accepting applications for fintech including tokenization projects. Testing environment with limited scope before full market launch.
Important: Public/retail crypto market remains restricted. Tokenization of securities and digital assets operates primarily through existing CMA frameworks and controlled pilot programs, not a standalone "crypto regime."
Strategic Considerations:
- Partner with CMA FinTech Lab participants or Saudi-licensed entities
- Focus on Vision 2030 alignment (tourism, entertainment, infrastructure, real estate)
- Shariah compliance essential
- 280+ fintech firms expected by end of 2025
Bahrain: Central Bank Framework
Established: 2019 (updated 2023, 2025) Regulator: Central Bank of Bahrain (CBB) Best for: GCC-focused operations, cost-effective licensing, security token offerings
Bahrain was the first MENA country with comprehensive crypto regulations and continues to lead in regulatory clarity.
CBB Crypto-Assets Module (CRA—Volume 6)
The CBB framework uses a category-based licensing system:
| Category | Permitted Activities |
|---|---|
| Category 1 | Full scope: exchange, dealing, advisory, portfolio management, custody |
| Category 2 | Exchange, dealing, advisory, portfolio management (no custody) |
| Category 3 | Advisory, portfolio management |
| Category 4 | Advisory only |
Higher categories permit broader activities; capital requirements scale accordingly.
March 2023 Amendments:
- Expanded scope to include Digital Token Offerings
- Tokens exhibiting security characteristics regulated by CBB
- New definitions: Asset Token, Digital Token, Utility Token, Whitepaper
- Enhanced client asset safeguarding requirements
- Licensees can engage in additional activities with CBB approval
July 2025: Stablecoin Issuance and Offering (SIO) Module
- Permits issuance of fiat-backed stablecoins (BHD, USD)
- Full reserve requirements
- CBB approval required
Requirements
Capital: Based on activity type (typically lower than UAE) Annual Fee: BHD 100 application + 0.25% of operating expenses (BHD 2,000–6,000 range) Processing Time: 60 days for CBB decision Entity Structure: Bahraini JSC or branch of overseas company
Travel Rule: Full compliance mandatory for all crypto-asset transfers (no threshold—all transfers treated as cross-border)
AML/CFT: Built into licensing—comprehensive KYC, ongoing monitoring, suspicious transaction reporting to Financial Intelligence Directorate
Market Activity (2025)
- 50+ financial services firms in talks to establish operations
- 120+ fintech companies active
- March 2025: ATME launched first tokenized gold product (1kg gold per token)
- Licensed exchanges: Rain, CoinMENA, BitOasis serve Saudi residents
Timeline: 3–6 months Cost: Most affordable in GCC
Comparison: Which MENA Jurisdiction?
| Factor | VARA (Dubai) | ADGM | DIFC | Saudi Arabia | Bahrain |
|---|---|---|---|---|---|
| Retail Access | Yes | Limited | Limited* | No | Limited |
| Speed to Market | Medium | Medium | Fast** | Slow | Fast |
| Setup Cost | High | Medium-High | High | TBD | Low |
| Annual Cost | High | Medium | High | TBD | Low |
| International Recognition | Strong | Strong | Strong | Growing | Medium |
| Fund Tokenization | Yes | Best | Yes | Sandbox | Yes |
| Real Estate Tokenization | Yes | Yes | Yes | National infra | Yes |
| Security Tokens | Via DFSA | Yes | Yes | Sandbox | Yes |
| Stablecoins | Category 1 ARVA | FRT License | Limited | Development | SIO Module |
| DeFi | Licensed (2025) | Limited | No | No | No |
*DIFC: Retail possible with strict suitability requirements and additional obligations **For existing DFSA licensees
Note: UAE also has a federal regulatory layer—SCA regulates virtual asset activities outside financial free zones; CBUAE regulates payment tokens and payment services using virtual assets. This table focuses on the primary licensing regimes for tokenization.
Practical Structuring in MENA
Option 1: ADGM Fund + Tokenized Units
International/GCC Investors
↓
ADGM Fund Vehicle
(FSRA-licensed manager)
↓
Tokenized Fund Units
↓
Underlying Assets
Best for: Institutional capital, fund managers targeting Gulf and international investors, security token offerings
Option 2: VARA Dubai + RWA Tokenization
Retail/Qualified Investors
↓
VARA-Licensed VASP
↓
Category 1 ARVA Tokens
(asset-referenced)
↓
Real Estate/Commodities
Best for: Dubai-based assets, retail distribution, real-world asset tokenization
Option 3: Multi-Jurisdiction Structure
US Investors (Reg D/S) → US Entity
↘
MENA Investors → UAE Entity → Asset Holding Company
↗
EU Investors (MiFID II/Prospectus) → EU Entity
Best for: Global capital raise with MENA presence, $10M+ offerings
Option 4: Bahrain Hub for GCC
GCC Investors
↓
Bahrain WLL/SPV
(CBB-licensed if needed)
↓
Multi-Country Assets
Best for: Cost-effective GCC-focused structure, Saudi resident access via licensed platforms
Compliance Essentials for MENA
KYC/AML Requirements
All MENA jurisdictions require robust KYC with increasing harmonization:
- Identity Verification: Government ID, passport, proof of address
- Source of Funds: Documented source of investment capital
- Source of Wealth: For high-value transactions
- PEP Screening: Politically exposed persons check
- Sanctions Screening: OFAC, UN, local sanctions lists (UAE, Saudi, Bahrain)
- Ongoing Monitoring: Transaction monitoring, periodic reviews
- Travel Rule: Full originator/beneficiary data for transfers (especially Bahrain—no threshold)
Shariah Compliance Considerations
For Islamic investors (significant in MENA):
| Requirement | Implementation |
|---|---|
| No Interest (Riba) | Structure returns as profit-sharing, rental income, or capital gains |
| Asset-Backed | Real assets preferred; avoid purely speculative instruments |
| Halal Underlying | No prohibited activities (alcohol, gambling, pork, weapons) |
| Gharar (Uncertainty) | Clear terms, no excessive speculation |
| Scholar Certification | Consider Shariah board review for institutional offerings |
Saudi Arabia's national tokenization infrastructure explicitly incorporates Shariah-compliant asset structures.
Regulatory Coordination
UAE Joint Guidance (2025): VARA, SCA, CBUAE, ADGM, and DFSA issued joint guidance on combating unlicensed virtual asset providers—expect coordinated enforcement.
Getting Started in MENA
Step 1: Jurisdiction Selection
| Your Priority | Recommended Jurisdiction |
|---|---|
| Retail distribution | VARA Dubai |
| Institutional fund | ADGM |
| Existing DFSA license | DIFC |
| Cost-sensitive GCC play | Bahrain |
| Saudi market access | Bahrain (for now) + Saudi sandbox |
| Global structure with MENA | ADGM or DIFC |
Step 2: Local Partnerships
- Legal counsel: MENA-experienced securities lawyers (essential)
- Licensed local partners: Required for most regulated activities
- Banking relationships: Increasingly available—Zand Bank (UAE), major GCC banks
- Shariah advisors: If targeting Islamic investors
Step 3: Regulatory Engagement
- Pre-application meetings: Available at VARA, FSRA, DFSA, CBB
- Sandbox applications: For novel models (especially Saudi CMA, ADGM RegLab)
- Clear documentation: Business plan, compliance framework, technology architecture
Step 4: Structure Setup
| Phase | Timeline |
|---|---|
| Entity formation | 1–4 weeks |
| Bank account opening | 2–8 weeks |
| Regulatory application | Submit after entity setup |
| Regulatory approval | 3–8 months |
| Total | 4–12 months |
Key Takeaways
-
UAE leads globally: Three mature frameworks (VARA, ADGM, DIFC) with 2025 enhancements operational
-
VARA 2.0 is live: New rulebooks, ARVA licensing, DeFi framework, Travel Rule compliance mandatory
-
ADGM for institutions: 20+ licensed firms, FRT framework, stablecoin approvals (RLUSD, USDC)
-
Saudi Arabia accelerating: National real estate tokenization infrastructure launched, stablecoin initiative announced—watch for 2026 framework
-
Bahrain cost-effective: Most affordable licensing, full security token framework, serves as gateway for Saudi residents
-
Shariah compliance matters: Built into Saudi infrastructure, important across GCC for institutional capital
-
AML/Travel Rule critical: Full compliance required—especially Bahrain (no threshold) and VARA (FATF alignment)
Asset Haus operates across MENA jurisdictions with licensed local partners. Book a consultation to discuss your MENA tokenization strategy.