On January 27, 2026, the Hong Kong Securities and Futures Commission (SFC) and the UAE Capital Markets Authority (UAE) officially signed a Memorandum of Understanding to establish a bilateral consultation and information exchange framework for "regulated digital asset entities." This is the first specific cooperation agreement reached between Hong Kong and overseas regulatory authorities in this area, marking a significant step from general principles to the construction of concrete mechanisms for cross-border regulatory cooperation on digital assets.
For a long time, the RWA (Real Asset Exploitation) field has faced a fundamental contradiction: on-chain assets can circulate freely, but regulatory trust is difficult to replicate across borders. The core value of this collaboration lies in attempting to establish a predictable and auditable dialogue path at the regulatory level, reducing institutional friction for institutional capital participation in cross-border RWA activities. The digital asset innovation roundtable held concurrently on the day of the signing further highlighted the pragmatic approach of both parties in promoting a two-track approach of "regulatory dialogue" and "market practice."
For RWA, a field that urgently needs to connect traditional capital with on-chain efficiency, the signing of this agreement is less about opening a completely new door and more about paving the first predictable institutional path for existing cross-border needs.
The memorandum of understanding on digital asset regulation signed between Hong Kong and the UAE is more than just an agreement; it builds an institutional bridge for regulated entities in both places. The real bottleneck has never been technology, but rather the ability to establish effective dialogue between regulators.
I. Cooperation Doesn't Start from Scratch: A Natural Extension Following Mutual Recognition of Funds
The signing of this memorandum was witnessed by Dr. Wong Tin-yau, Chairman of the Hong Kong Securities and Futures Commission (SFC), and jointly completed by Waleed Saeed Al Awadhi, Chief Executive Officer of the CMA, and Ms. Leung Fung-yee, Chief Executive Officer of the SFC. The solemnity of the ceremony itself hinted at the significance of the document.
Following the signing, Hong Kong Securities and Futures Commission Chief Executive Officer Regina Leung stated that this move aims to "support financial innovation in Hong Kong and the UAE." Notably, she specifically linked the collaboration directly to "promoting the sustainable development of the digital asset ecosystem in both regions." This statement elevates the cooperation from a purely technical or market-level perspective to the level of ecosystem building.
The key to understanding this collaboration lies in examining it within the existing framework of cooperation. In 2025, Hong Kong and the UAE reached an arrangement for mutual recognition of mutual funds, allowing eligible funds to be publicly offered in each other's markets. This regulatory cooperation on digital assets can be seen as a natural extension and deepening of this financial cooperation logic in a new asset class.
This extension is inherently reasonable. As traditional financial products such as funds and bonds gradually explore tokenization, the need for regulatory cooperation will inevitably spill over from the traditional financial framework into the field of digital asset regulation. Regulatory agencies in both regions clearly recognize that without establishing a communication mechanism at the regulatory level in advance, spontaneous market innovation could create an unmanageable cross-border regulatory vacuum.
II. Technology is advancing rapidly, but regulations are lagging behind: RWA's practical challenges in cross-border operations.
The growth momentum of the RWA (Rich Virtual Asset) sector is undeniable. A 2025 report by the Boston Consulting Group predicts that the global tokenized asset market could reach $16 trillion by 2030. Traditional financial giants such as Goldman Sachs and BlackRock have already publicly announced their involvement in related businesses. However, despite this booming overall growth, the proportion of cross-border flows remains consistently low.
Both Hong Kong and the UAE are active advocates of RWA (Real Asset Tokenization). Hong Kong explicitly prioritizes bond tokenization in its "Declaration on Digital Asset Development Policy 2.0" and has completed multiple rounds of issuance trials. The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) are jointly reviewing the legal and procedural obstacles involved in RWA. In the UAE, the Dubai Virtual Assets Regulatory Authority (DERA) has included a dedicated chapter on RWA in its rulebook, and the Abu Dhabi Global Market has launched a regulatory framework supporting asset tokenization.
However, a comprehensive local regulatory framework does not automatically translate into smooth cross-border business. The core contradiction lies in the fact that while assets can be recorded on the blockchain and circulated globally, regulatory responsibility and enforcement powers remain strictly confined to their respective jurisdictions.
The legal director of a digital asset custody firm described the dilemma as follows: "We can technically custody tokenized Hong Kong commercial property shares for Dubai clients, but in the event of a dispute, the determination of legal ownership of the assets, the boundaries of the custodian's liability, and the investor's remedies will involve two legal systems: Hong Kong and the UAE. In the absence of a regulatory cooperation framework, this uncertainty is enough to deter most institutional investors."
In other words, without an MOU, cross-border RWA is not entirely impossible, but it is often limited to pilot projects with special approvals on a case-by-case basis, highly customized, and difficult to replicate, failing to support the large-scale, standardized development required by institutions. This is precisely the institutional hurdle that RWA must overcome to move from proof of concept to mainstream application.
III. What exactly did the memorandum bring? It established a predictable communication mechanism.
So what exactly does this memorandum of understanding bring? It is not an operational manual that directly grants licenses to market entities; its power lies in the creation of processes and mechanisms.
The core of the agreement, according to its text, is the establishment of a "bilateral consultation and information exchange framework." Specifically, when a digital asset platform regulated by the Hong Kong Securities and Futures Commission (SFC) plans to operate in the UAE, the SFC can, based on this memorandum, formally communicate and exchange information with the UAE's CMA regarding regulatory matters related to the platform. The reverse is also true.
This addresses a key pain point: predictability. For compliance-driven financial institutions, unpredictable regulatory risks are often more daunting than clearly defined high standards. The memorandum reduces this uncertainty through institutionalized communication channels.
It is important to understand that this cooperation is a collaboration between federal regulatory bodies in the capital markets. The UAE's signatory is the Federal Capital Markets Authority, and the cooperation focuses on security tokens or digital assets that may be classified as securities. This does not directly equate to or automatically cover the authority of local financial free zone regulators such as Dubai's VARA or Abu Dhabi's ADGM. A complete regulatory landscape in the future may require multiple levels of collaboration between the federal and local governments.
The deeper value of the memorandum lies in the fact that it, for the first time, establishes an official and auditable regulatory collaboration interface between the two locations for the specific group of "regulated digital asset entities." This interface does not alter the respective legal boundaries, but it significantly improves communication efficiency and mutual trust. In the field of financial regulation, a smooth communication mechanism is itself one of the most important infrastructures.
IV. The “Digital Ambitions” of Two Financial Centers: Why Hong Kong and the UAE?
From a geo-financial strategic perspective, this cooperation represents a deep integration between two economies in the East and West that are committed to becoming digital asset hubs.
Hong Kong's goal is clear: to consolidate and enhance its competitiveness as an international financial center in the new asset era. RWA is seen as a key bridge connecting vast traditional assets with emerging digital technologies, a strategic stronghold that must be captured. The UAE, particularly Abu Dhabi and Dubai, ambitiously aspires to become a digital asset gateway from the Middle East and Africa to South Asia. The strategic aspirations of both locations are highly aligned—both need to provide a secure, compliant, and efficient digital asset service environment for international capital.
The "Digital Asset Innovation Roundtable and High-Level Asset Management Seminar" held on the same day as the signing of the cooperation agreement further highlighted the ecosystem-oriented nature of the collaboration. This means that the cooperation extends beyond regulatory documentation to include sharing industry insights, talent development, and joint project incubation. This dual-track approach of "regulation + market" helps cultivate truly viable cross-border businesses.
Globally, the EU is attempting to establish regional standards through the MiCA Act, while the US is wavering between enforcement and legislation. Against this backdrop, the flexible cooperation model between Hong Kong and the UAE, based on bilateral mutual trust, may offer a new and pragmatic paradigm for the "networking" of global digital asset regulation.
V. Institutional Entry: From "Dare to Be" to "Can They?"
For institutional participants in the RWA ecosystem—investment banks, asset management companies, private banks, and compliant trading platforms—the significance of this memorandum can be summarized as a core shift: it partially addresses the question of whether or not they dare to participate at scale.
Previously, institutions faced a series of questions: How will the other party interpret my business model? When compliance issues arise, to whom and in what way should I clarify? Will my audit report and risk control process be accepted by the other party? These questions constituted huge hidden costs.
The consultation and information exchange mechanism established by the memorandum is precisely to systematically answer these questions. It may not lower specific compliance standards, but it can significantly reduce friction and unpredictability in the compliance process. For institutions managing billions of dollars, the value of this predictability sometimes even exceeds that of simple access permits.
We can foresee several business scenarios that may benefit first: First, leveraging existing mutual fund recognition arrangements, "tokenized mutual recognition funds" will emerge, utilizing blockchain technology to improve the efficiency of share trading, valuation, and allocation. Second, customized RWA products targeting specific investor groups, such as designing tokenized Asian infrastructure revenue rights products for Middle Eastern family offices. Third, cross-border collateral management, based on clearer regulatory expectations, will explore using tokenized assets as collateral for cross-market financing.
VI. Three major problems that the memorandum failed to solve
However, it would be a dangerous misunderstanding to interpret this memorandum as a green light signifying "everything is ready." It lays the groundwork, but many practical obstacles still need to be overcome before traffic can begin.
The most immediate concern is the conflict between applicable laws and jurisdiction. While the memorandum facilitates regulatory communication, it does not unify substantive law. Disputes concerning ownership of tokenized assets, smart contract defaults, or bankruptcy liquidation will still need to be resolved under the domestic laws of Hong Kong or the UAE, and through possible judicial assistance. This remains a lengthy and complex process.
Secondly, there is the issue of aligning accounting and auditing standards. How are tokenized assets valued? Should they be recorded on or off the balance sheet? How are profits and losses recognized? Although both accounting standards in both jurisdictions converge with International Financial Reporting Standards (IFRS), there may be differences in specific practices and interpretations, which directly impact an institution's financial statements and risk control measurements.
Third, cross-border coordination of investor suitability management remains challenging. The definitions of qualified investors, risk disclosure requirements, and sales process regulations differ between the two jurisdictions. An RWA product targeting investors in both jurisdictions may require designing two sets of compliance documents and ensuring that sales activities meet the requirements of both jurisdictions simultaneously.
Finally, the issues of technical standards and data privacy cannot be ignored. Regulatory information exchange may involve sensitive business data and customer information. How to meet regulatory requirements while complying with the stringent data privacy regulations of both jurisdictions requires extremely careful planning.
VII. The real test: When will the first success story appear?
This Memorandum of Understanding signed by the Hong Kong Securities and Futures Commission (SFC) and the UAE's CMA is historically significant because it marks a significant step in the development of a substantive mechanism for digital asset (RWA) regulatory cooperation, moving beyond mere statements of principles. It provides the first institutionalized regulatory dialogue template for RWA, a sector heavily reliant on cross-regional trust.
Its value lies not in how much new business it immediately creates, but in significantly reducing the institutional friction coefficient in the expansion of existing businesses. It tells the market: this is a path that can be explored, managed, and replicated.
The real test will come in the next 12 to 24 months. At that time, the key indicator will not be merely the number of cooperation agreements signed, but whether the first scalable, replicable cross-border RWA issuance case with a clear business model has emerged in the market. This case needs to prove that it can effectively utilize the new regulatory collaboration framework to solve the complete closed-loop problem from product design, issuance approval, ongoing supervision to dispute resolution.
For those involved in the RWA, the current task is not only to celebrate the groundbreaking of this "highway," but also to delve into its design blueprint, load-bearing standards, and traffic regulations. At the intersection of institutional and technological innovation, the most valuable asset is often not the fastest speed, but the clearest route and the most reliable safeguards. Regulators in Hong Kong and the UAE are working together to draw the first chapter of this roadmap.
Some of the information comes from the following sources:
• The Hong Kong Securities and Futures Commission (SFC) and the UAE Capital Markets Authority (UAE) signed a Memorandum of Understanding.
• The Hong Kong Securities and Futures Commission and the UAE Capital Markets Authority signed a Memorandum of Understanding to strengthen cross-border digital asset cooperation and create a new milestone.
• The Hong Kong Securities and Futures Commission (SFC) and the United Arab Emirates signed a Memorandum of Understanding to strengthen cooperation on digital assets.
Author: Liang Yu; Editor: Zhao Yidan
