Published: July 02, 2025
Following a draft regulation released in January 2025 titled "Security Tokens and Commodity Token Contracts," the UAE Securities and Commodities Authority (SCA) has now issued comprehensive regulations governing security tokens and commodity contract tokens.
These regulations ensure the inclusion of securities and commodity contracts within the existing virtual asset regulatory framework, covering contracts issued using distributed ledger technology (DLT), such as security tokens and commodity contract tokens.
UAE SCA Clarifies Token Types and Obligations
The SCA defines security tokens and commodity contract tokens as digital representations of assets—such as companies, stocks, and bonds—that carry the same investor protections and regulatory oversight as traditional securities. Examples provided by the SCA during consultations include gold-backed tokens and oil tokens.
Key regulatory principles:
- Technology-neutral approach: The rules apply uniformly regardless of issuance method (paper, electronic records, or DLT).
- DLT compliance: Distributed ledgers must meet requirements like ensuring debtor control, maintaining integrity against unauthorized modifications, and transparently recording rights and obligations.
- Interoperability: Tokenized contracts must allow verification by obligors without third-party interference.
OTC Trading Restricted to Digital Wallets
The new regulations mandate that security and commodity tokens can only be traded over-the-counter (OTC) via:
- Digital wallets provided by licensed service providers.
- Self-custody wallets, provided they are pre-authorized and whitelisted by debtors, market operators, or compliant middleware providers.
A digital wallet service provider refers to a licensed market operator or entity offering custodial services for these tokens by managing cryptographic keys.
Emcoin: Potential First Issuer of Regulated Security and Commodity Tokens
In June 2025, Abu Dhabi-based Emcoin Investment LLC announced it became the first SCA-regulated platform to offer combined cryptocurrency and traditional asset investments (stocks, commodities, and ICOs).
Emcoin’s upcoming platform aims to:
- Bridge digital and traditional finance.
- Enable trading of virtual assets, UAE/global stocks, and commodity purchases with full transparency.
- Provide expert-managed portfolios.
UAE’s Tokenization Progress
The UAE has already pioneered tokenizing real estate for investment. Initiatives like Prypco Mint (a collaboration between Dubai Land Department and VARA-licensed Prypco) have successfully listed and funded two tokenized properties.
FAQs
1. What are security tokens under UAE SCA regulations?
Security tokens are digital asset representations (e.g., stocks, bonds) with the same legal protections as traditional securities, issued via DLT.
2. Can commodity tokens be traded on exchanges?
No. Trading is limited to OTC transactions through approved digital wallets.
3. How does Emcoin’s platform differ from conventional exchanges?
Emcoin integrates crypto and traditional assets (stocks, commodities) under one regulated platform, offering diversified investment options.
4. What safeguards exist for DLT-based contracts?
DLT systems must ensure debtor control, data integrity, and transparent record-keeping to comply with SCA rules.
5. Are self-custody wallets allowed for token trading?
Yes, if pre-authorized and whitelisted by compliant entities.