Dubai's VARA crypto regulator pioneers the space with its ability to effectively communicate guidelines

Crypto regulation has come a long way. No longer is it a pass-off game between various government bodies: Digital assets now have dedicated overseers in a lot of regions.

Dubai's crypto regulator, the Virtual Assets Regulatory Authority (VARA), has been a pioneer in the space, effectively communicating guidelines and regulation to crypto firms, according to a senior official at the authority.

"Set and forget does not work for crypto, it's all about feedback and open channels," said Sean McHugh, senior director of market assurance at VARA in an interview with CoinDesk at the authority's office. "Since we are exclusively focused on crypto, it allows us to get a little deeper into the tech and our rules are written for the modern-era."

Dubai has become a crypto darling, emerging as one of the preferred choice for non-native crypto firms to set up shop and gain access to the region and beyond.

"Dubai is seen as a great jumping off point. We've seen a lot of [crypto] firms from Europe and beyond coming here and the reverse is also true, we see a lot of companies from other side of Asia come here. It's a strategic move and the regulatory clarity helps them," McHugh added.

The Middle Eastern jurisdiction has also been making waves in the realm of real-world assets (RWA) tokenization, with the Dubai Land Department (DLD) recently starting a pilot to register and transfer property deeds on the blockchain. The tokenization initiative is being fostered by VARA and the Dubai Future Foundation (DFF).

The integration of real-estate into blockchain could be huge for the city's massive property market. DLD expects tokenized real-estate to jump to 60 billion dirhams ($16 billion) by 2033, which would account for 7% of Dubai's total property transactions.

McHugh, speaking in the VARA office, noted that real estate is just the beginning.

"It's very popular, not just in Dubai, but beyond. Dubai has the ability to get things done quicker," he said, adding that they are also seeing a lot of precious metal tokenization projects.

"We're closely watching this space and I think we'll see more interesting use cases and obviously we'll be engaging with the industry to get feedback and adjust accordingly. We're not about setting and forgetting, we're about open channels of communication."

McHugh explained that VARA is keeping a close eye on the projects to ensure they meet the necessary regulatory standards and ultimately provide value to investors.

"A big part of my focus on this is customer protection. So, especially when you get to fractionalization it brings in a lot of new capital and retail investors, that need to be protected," he said.

"We ask a lot of questions when it comes to RWA projects, what is the token? what exactly do I own? What does it trade and who is the liquidity provider? Cause for investors (institutional or otherwise) they need a liquidity event to get out. And these are the type of things we drill down with each project."

The Donald Trump administration has also been a vocal proponent of crypto in the U.S. and in the opinion of industry leaders pushed other regions to follow suit. But that's not necessarily the case in the UAE, especially with VARA, which was founded three years ago, long before the U.S. president began speaking out in favor of the industry.

McHugh believes that interagency cooperation will be key for global crypto regulation, but does not see any particular agency leading the charge.

"I don't think we'd see some super regulator, regional or otherwise. I think each agency is focused on its own customers," he said, adding that memoranda of understanding (MoU) and open communication between governing bodies is the way to successfully watch over crypto.