I would like to welcome Ruben from VARA, the individual who has personally written the RWA tokenization rules. I would like to welcome Talal—thank you very much—from CoinMENA, the regulated broker-dealer, and of course Bilal, who is the head of ecosystems at the DMCC. Basically, what can we do without the ecosystem? What can we do without ecosystem building? Not much. Please welcome them.
So, the backdrop seems to be not backdropping, but that's okay.
You can just keep the Uptown Tower.
Yes. Oh, that's it. Yes, yay.
In 2018, we said everything will be tokenized and traded on-chain. We were not wrong; we were just early. I remember the conversations I had here in DMCC with Ahmed Bin Sulayem, with his team. Paul was there, and I was trying to convince them to tokenize gold. People were looking at me like, "Who is this lady? Why does she keep talking to us about crypto?" And here we are, just five or six years later, we have the regulations, they're working, things are being tokenized, and we have a massive ecosystem. DMCC Crypto Centre has built the largest ecosystem footprint. What are we now, 750 companies?
Close to 800 companies, which is the largest. I mean, have you overtaken the Swiss Crypto Valley yet? Just about.
Just about. The growth that we had over the last three or four years is just absolutely incredible. And the main driver of this is the regulations. In my mind, of course, I'm a lawyer, I'm a little bit biased, but in my mind, it's the clear regulations—something that can be followed by regulated entities like CoinMENA. And it's a fantastic ecosystem because there's nothing we can do without an ecosystem. You're not a warrior if you're by yourself. We need a room full of warriors, which we have here.
Ruben, if we may start with you, please. Talking about the RWA framework that you personally drafted, what was the thinking and strategy around it? What is the policy? What is the Dubai overarching policy? Why do we need it? Nobody else has it. Why do we have it?
Yeah. Well, firstly, thank you to Yuriy and Irina for inviting us to this wonderful event—always very good keynotes and very good presentations. Going to the regulatory framework, we felt the need to have a clear regulatory framework around tokenization, especially tokenization of real-world assets, because we saw the waves of ICOs. We saw the wave of attempted tokenization of assets, and we saw what happened in the past historically. As you know, there's been two or three waves of ICOs, and most of the time it ended in a non-regulated way with a lot of investors losing money. We strongly believe that tokenization is, as you say, inevitable—everything will be tokenized. I genuinely believe that that is the case, and like you, I believed maybe too early when the first waves were coming, but we believe that tokenization can be done properly and should be done properly to enable real adoption and real scale.
So the reason behind the RWA tokenization framework is that institutional adoption will not happen unless there is a clear legal and regulatory framework around it. So it's a combination of a number of factors. We always have consumer protection at the back of our head whenever we think about regulations. There is an element of ensuring that the disclosures in the white papers are sufficient for any investor, depending on the type of investor you are addressing, ensuring that that investor can make an informed decision before buying a token. The disclosure needs to be sufficient. The legal enforceability of those arrangements and those disclosures is another important factor because we've seen in the past it's very easy: you can draft a white paper in five minutes, and now with AI, white papers are generated literally at the click of a button. But if what you write in that white paper is not what goes into the token, and someone cannot hold you responsible for what you write in the white paper, then consumer protection cannot be guaranteed.
At the same time, to enable institutional adoption—we've seen BlackRock tokenization of securities—real tokenization will happen when this type of institution can operate and can adopt tokenized assets that solve existing problems in the traditional finance world: tokenization of government bonds, tokenization of ETFs, tokenization of equities, and so forth. And the next step, which is what we are working towards now, is that tokenizing gas in and of itself is not really going to be sufficient. Actually, you made a point about your experience in exchange market-making and high-frequency trading: tokenizing an asset is very easy. I can tokenize whatever you want—I write 10 lines of code, create a blockchain, but no one is going to use it. It's not going to create liquidity to the underlying asset.
So the real end game is creating enough volume in the tokenization of real-world assets to then have infrastructure coming into the picture. Going back to Anton's slides, the infrastructure piece is very important. I'm not going to mention names, but the names were there and were significant. When the assets are going to end up embedded into the infrastructure and the institutional adoption will come inside infrastructure, then is when we will see the paradigm shift.
So how important of a piece is that from a regulatory perspective? Are you facilitating that in any way, like from the policy point of view?
Yeah, it's critical. In my role as Head of Rails Enablement, I'm always trying to see where the ecosystem needs to evolve and where the regulation needs to follow the enablement of the ecosystem. I am very focused on real-world asset tokenization. In fact, I would say that 50% of my pilots are around tokenization of real-world assets. In terms of numbers, maybe I have some other pilots that are systemically bigger in one pilot, but in aggregation, I've literally seen everything under the sun in terms of tokenizing whatever anyone can think about. I've seen it.
I'm also seeing the attempt to tokenize capital market products, and that is what is going to be very important at this point in time: ETFs, tokenizing stocks, tokenized private stocks. The DLD pilot that you were referring to is one of our pilots at VARA. We want to create a set of modules in terms of real-world assets that are tokenized that will enable the real gravitational pull to move the trading from the real-world asset itself to the tokenized version of the real-world asset. That is what would bring infrastructure and what would bring volume. We're also working on some bigger projects around infrastructure development, and that is very important. Infrastructure is very important, and CoinMENA is part of that infrastructure, being a regulated broker-dealer and working under these rules.
Talal, would you tell us if you believe those rules are workable? They're too strict, because that's what we hear people complaining about 24/7.
This is what we hear complaining 24/7: "This is way too strict, and this is too unworkable." You're trying to get me in trouble.
You seem to be not only working, you seem to be thriving.
There's enough cameras for this to go on the record.
So you are not only working, you're thriving. So what is the secret juice that you have that nobody else seems to be getting?
You need to have the right team in place. And the reality is there is no scenario where you go to a VASP and you ask them, "How's regulation?" and they tell you, "Oh, it's amazing. It's exactly what we wanted." That is the reality of it, because as a business, my goal is profit and shareholder value. Part of that requires me to maintain a good license and ensure that I'm fully compliant with VARA. But if I can compliantly cut a shortcut as a profit-oriented business, it would be naive not to do that. So I think it's very important to be transparent that for CEOs and businesses, their main goal is profit, because we are not charities; we are profit-oriented businesses that serve our shareholders.
At the same time, we need to comply with VARA's regulations. The reality is VARA is strict in some things, but it gives you things that no one else in the world has. You mentioned earlier that no one has really done an RWA framework. Well, the reality is I've tried to register a virtual asset company in the US, Russia, Switzerland, Bahrain, Jordan, and many countries. I've dealt with central banks, commodities centers, securities exchanges—nothing that is specifically virtual assets. If I go to the central bank, the way that the central bank deals with this is they look at us as a bank, exchange house, or PSP, because those are the definitions they've been working with for 50-plus years. So it's refreshing and amazing to see that VARA is doing that, and it is a learning process.
This is the thing that I also really appreciated with VARA: they acknowledge that not 100% of everything is clear. There are things that are going to be figured out as you go. But there are certain things that as a VASP you cannot have leeway in—things related to AML, things related to investor protection. Those are things that they're going to be very strict on. But when it comes to, for example, tokenized assets—some people might say it's a security, some people might say it's an RWA or something that is a quasi-security—there'll be slightly more flexibility on that side. With VARA-regulated companies using reverse solicitation, you're able to serve a bigger audience. So we've definitely completely reshaped our company after being regulated by VARA. It took us from a company that does $10–20 million a month to doing hundreds of millions. That wouldn't have been possible without VARA's regulations.
So you're basically saying being regulated is the advantage you have on the market, and also that increases your volumes.
Yes, of course. When we started, it was a retail company—we started off only as retail. Now 85% of our volume is corporate. No way can I convince these corporates and their CFOs and their risk officers to come and work with a company that is not fully regulated in a reputable jurisdiction like Dubai. I think that's one of the things that people are just starting to understand and grasp: that being regulated is actually an advantage, because the Wild West is something we're not seeing that much anymore.
And another really massive advantage is being part of the ecosystem—being part of the ecosystem where those corporates are, where commodities companies are, and where basically you can gather people like this in an auditorium. So how did you manage to do this, Bilal? How did you build the biggest, most densely populated ecosystem in the world?
I get the easy question, right? Pure luck.
First of all, thank you for choosing DMCC to do this summit, and fantastic organization so far. I would say a combination of three things: early conviction, ecosystem building, and regulatory alignment. To elaborate on these a little bit: DMCC started supporting crypto companies before the sector became mainstream, and we showed the world that we are open to the sector. We saw the opportunity in it, and we didn't just build a licensing framework for those companies, but we actually built a complete ecosystem and started offering services and access to providers to help those companies grow. Fast-forward to today, we are the leading crypto hub with almost 800 companies and thriving, with a lot of nice projects and a lot of exciting things happening.
At the same time, it was also the UAE's advantage. The UAE offers ease of doing business, a tax-friendly environment, and being always forward-thinking and positioned and portrayed as a crypto-friendly jurisdiction. It really helped to have regulators like VARA, who were the first and probably still the only crypto-native and crypto-dedicated regulator that helped us basically craft rules that are fit for the ecosystem and the industry. I think this kind of collaboration is what led us here.
Of course, adding to that, we have a complete business district that has access to commodities, trade, and other sectors, so crypto companies don't just come and work in isolation here. They have access to the real economy. I think that's what RWA is, right? Connecting the digital ecosystem or digital assets to the real-world economy, where the assets are actually residing, and enabling projects to take place.
And we work internationally in 60-plus jurisdictions; I can't think of one place where it actually happens like it does in DMCC. You have real businesses, real commodities, real asset owners, and then you mix it with the crypto crazy people and the AI crazier people, and you get a really interesting mixture for success. What do you think?
Agreed. Reflecting on what Ruben was saying as well, I think maybe regulating the infrastructure or the blockchain layer is the easier part when it comes to RWA. But here you've got a physical asset and a digital asset; you have to regulate them both together. There's a lot of questions that need to be answered around who owns the asset, who has title, where is it stored, how is it managed and insured, how is the redemption process managed, and is there a redemption process? All those questions do not get answered without having the right infrastructure. DMCC has actually built the right infrastructure to accommodate that and make these kinds of nuances easier to navigate, and this is what we can provide to this ecosystem.
One quick intervention, because I sometimes forget to read the title of what we're supposed to talk about. It says, "Rules Before Rails." I actually disagree with that because rules don't come before rails. If you look at Bitcoin, USDT, etc., none of them would have worked if they went to the government and said, "Hey, look, I'm looking to create a private form of money to compete with your money." I don't think they would have allowed it.
You can join the next panel too.
I guess this is before scaling rails, meaning you're not going to have sovereign wealth funds interacting with Bitcoin, USDT, and other types of crypto assets if they don't have regulations in place. So I guess rails come first, rules come, and then they are scaled.
Yeah, the rails are scaled, which is the right approach, of course. Imagine if anybody came for Bitcoin to be permissioned. That reminds me of the 2017, 2018, 2019 wave of bans and prohibitions. Remember how many times Bitcoin, ICOs, and crypto were banned and prohibited? I stopped counting after number 10 or 20, right?
That also tells me, Ruben, that governments generally regulate out of fear or out of the unknown. If I don't know what it is, it's easier for me to ban it: "Here's the ban, don't touch it." It hasn't helped, but that's how they do it. Dubai, by contrast, regulates from opportunity. For me, as an outsider—and also having had the privilege of interviewing VARA at least five times for forums—I believe that VARA and the government of Dubai saw the opportunity and decided, "Let's not let this opportunity go. Let's build rules around it and bring more of that." Can you tell us more from the policy perspective? Why is Dubai acting not like everybody else?
Yeah, I think you summarized it perfectly, especially the divide between the approach of the leadership in this country that has been very enlightened in many decisions in the past, but in particular in the decision around virtual assets and making the UAE and Dubai the global lab for regulated virtual assets.
I remember, even before the 2017–2018 ICO waves, stumbling across the Bitcoin white paper fairly early on, and I remember starting to discuss it internally. I'm an investment banking lawyer by trade, and back in the day, everyone was terrified at best and very vocal and adamant against this new technology without understanding what it could have meant. Part of the reason for that was because regulators globally were seeing this type of asset as a threat to the status quo.
If you think about it, this technology was born to disintermediate financial services institutions from the banking system. It was born out of the Lehman crisis when Satoshi Nakamoto thought about the fact that the banking system doesn't work—you have all these intermediaries, they end up failing, and people lose money. So it was designed to disrupt the status quo.
As a regulator, and that is where the approach of VARA comes in, every regulator in the world has approached virtual assets as an extension of financial services regulation. Literally every single regulator that regulates virtual assets also regulates financial services. There is an implicit conflict of interest there because you're effectively regulating something that undermines your ecosystem. So there's going to be a natural tendency to, a, reject something that is perceived as a threat, and b, it removes control, because as a central bank, you can't control monetary policy if the monetary policy is disseminated in a network of decentralized nodes. You can no longer control your market. The first reaction back in the day was fear: ban everything, don't allow any of this technology to thrive.
Some regulators have moved on, and a lot of regulators have obviously adapted. But the difference was Dubai moved very early on with an approach of seeing the value rather than seeing the threat. The UAE is a global hub when it comes to financial services. Rather than fighting it, leadership was enlightened to understand that this is where financial services are going. Whether you like it or not, it's a matter of time. The rails that we're discussing here will be the financial service rails in two, five, 10 years. So rather than postponing, fighting it, and just trying to avoid the inevitable, the leadership here understood that this is where the future is going, and they positioned themselves at the forefront by making a decision to establish an entity like VARA that can trailblaze.
I obviously care about the financial sector, the ecosystem, and systemic risk, but I'm not here to defend the banking industry. I'm here to enable this new segment, this new sector to thrive and bring the value that it can bring to the global ecosystem.
Talking about all those existing asset classes being tokenized and hitting the rails: Talal, what would happen if that hits the exchanges at that volume? Do we have the rails to handle it, or is there still more work to be done?
I don't know if you've compared the user experience of crypto exchanges versus banks, but I think by itself, I'm more biased towards crypto exchanges, if that distinction wasn't clear. Today you already have that reality: USDT today is a better way of moving dollars than any other way in the world. This is no longer theory. Anyone that has used USDT to move money around can compare it to going from point A to point B on a horse versus in a car—one is clearly superior to the other. From that standpoint, I do think we are ready.
Obviously I'm looking at it from a crypto standpoint, but let's look at the other side, where you have banks like Standard Chartered that have not only gone into crypto assets, they've set up Standard Chartered custody. That means you can actually keep your assets in a bank that has a balance sheet incomparable in size to crypto companies like us. So yes, I do think that the infrastructure is ready.
One of the issues that I have with tokenized assets is it's often a solution looking for a problem. Whereas with USDT, there was a real problem, which is you cannot access dollars in Egypt, Pakistan, India, and these countries, and USDT is digital dollars. So it was a clear solution that found a clear problem. Whereas tokenizing Nvidia shares—all right, cool, I can buy it, inshallah soon on CoinMENA if VARA allows us to. But tokenized Nvidia shares—it's cool to add it for our users and show them a lot more, but it doesn't do the same thing USDT does to an individual in Egypt who can't even access dollars. I think the next wave of RWA growth will need to come when it's actually solving problems that are material, not just a nice-to-have, which is what a tokenized Nvidia share would be at this stage in my mind.
Fair enough. Bilal, from the ecosystem point of view, what are the coolest projects that you see coming into the RWA space? Are they solving a problem or are they nice-to-have, or do you see all of that? What are the most interesting ones you've seen lately that you can talk about?
I can be biased by saying the coolest project is tokenizing the world's largest silver bar, which is a world record winner and is going to happen very soon. We have a webinar talking about it next week for those who want to join.
Back to your point about solving a problem: yes, maybe tokenizing shares is not really solving a big problem because you can buy Nvidia shares on markets. But when you look at physical assets that are large and not as liquid—we have a lot of traders in DMCC sitting on diamonds and other assets who can access liquidity by being able to tokenize those. At the same time, SMEs can probably get more financing by being able to use some of the assets they have, tokenize them, and put them on the market.
This is what we really want to focus on, and the infrastructure that we built at DMCC is purely to enable commodity-backed tokenization. That's building on the MoU that we signed with VARA last year to basically start putting those projects into use and take them from pilots to production-grade projects. What helps in the infrastructure is that we have this system to actually confirm the commodity being there, confirm the title, and confirm the custody, and that gives a lot of trust and security to the tokenization projects.
To close out the panel, I'll be asking the spiciest questions I can, and if you feel shy about answering them, you can pass the mic. We will do a spicy question round.
Reuben, how many lawyers called you and complained about the VARA regulations?
Why? What is the main complaint?
Many, because the regulations are too clear, and they're complaining that they're not able to bill enough! So they're asking me to write unclear regulations and take away billable hours.
No, but I think you touched upon it. Every lawyer, I think, in Dubai now knows that I'm very protective of the rules. In fact, even my colleagues every now and again question, "Why did you do that? It doesn't make sense." They know that the rules are my baby, so not many people come and complain about the rules to me.
And Ruben, you can testify to this: I'm the one who comes and asks, "Can we relax here a little bit? Can we allow that?" Paul will know that I'm always lobbying for the industry.
