On Thursday, the Dubai Virtual Assets Regulatory Authority issued detailed guidelines that clarify how token issuers in the emirate should structure, disclose, and distribute virtual assets. These guidelines also further regulate the issuance processes for stablecoins and tokens linked to physical assets.

This document does not establish new laws but rather interprets the existing issuance rules set by the Dubai Virtual Assets Regulatory Authority. It outlines three different issuance pathways and defines the responsibilities of all parties involved in each pathway.

This framework does not treat all tokens as having the same risks; instead, it clearly distinguishes between the first category of issuance methods including virtual assets pegged to legal tender and those pegged to physical assets, the second category of issuance methods that require intermediaries licensed by the Dubai Virtual Assets Regulatory Authority for distribution, and virtual assets with more limited functions that are exempt from regulation.

The Dubai Virtual Assets Regulatory Authority believes that this specialized issuance mechanism for virtual assets is fundamentally different from approaches that apply traditional securities or payment regulations to token issuance whether it involves stablecoins pegged to legal tender or token structures linked to physical assets.

The guidelines also specify that licensed distribution entities in the second category of issuance are responsible for conducting due diligence and continuously monitoring compliance. This move further demonstrates Dubai’s commitment to establishing regulatory rules specifically tailored for virtual assets, rather than attempting to incorporate token issuance into the general framework of securities or payment regulations.

In fact, these guidelines were released just a week after the Dubai Virtual Assets Regulatory Authority expanded the scope of its exchange rules to include exchange-traded crypto derivatives.

Although this document is classified as a guide, Ruben Bombardi, the chief legal advisor to the Dubai Virtual Assets Regulatory Authority, told Cointelegraph that this specialized issuance mechanism provides issuers with practical benefits that traditional securities regulations do not offer, such as clearer regulatory guidelines, since many virtual assets do not fit into existing classification frameworks.

For investors and users, this mechanism helps them make informed decisions by increasing the transparency of asset characteristics and risks. Bombardi noted that this issuance approach better meets practical needs and provides a uniform reference standard for the issuance, disclosure, and distribution of virtual assets within Dubai’s licensed framework.

He also highlighted several advantages of Dubai’s regulatory system compared to others internationally, including specific regulatory measures for virtual assets linked to physical assets, clear requirements for reserve assets, redemption rights, and legal structures, and a strong emphasis on information disclosure, requiring relevant whitepapers and risk disclosure documents to be clear, accurate, and easy to understand.

He added that the Dubai Virtual Assets Regulatory Authority expects this mechanism to attract the interest of regulatory authorities and standard-setters in other countries and regions, but its primary goal at present is to provide practical guidance for market participants in Dubai.