VARA Introduces Three-Tier Token Classification System

Dubai's Virtual Assets Regulatory Authority (VARA) has introduced comprehensive guidance on virtual asset issuance, establishing a three-tier classification system for tokens that clarifies creation, disclosure, and distribution requirements in the emirate. The framework, released this week, marks the first global codification of these processes within a fully licensed regulatory environment, aiming to enhance transparency and compliance for stablecoins, tokenized real-world assets, and other digital instruments.

The guidance interprets VARA's existing Virtual Asset Issuance Rulebook, providing practical direction for issuers, virtual asset service providers, and market participants without introducing new legislation. It divides virtual assets into three categories based on risk profiles and functions. Category 1 applies to fiat-referenced tokens, such as stablecoins, and asset-referenced tokens, including those representing real-world assets like real estate or commodities. These require VARA licensing and adhere to stringent standards, including reserve management, redemption rights, and legal structuring to ensure financial stability and proper asset backing.