Real estate tokenization’s missing layer

Despite the wave of attention RWAs have received over the past couple of years, there’s a sense that everyone is waiting for something to shift. The problem is that many “tokenized” assets are still legal promises dressed up as tokens. Vague token rights, improvised custody and transfer controls, and servicing shortcomings make the whole thing still feel speculative. While the tokenised RWA market sits around $25B (which demonstrates serious growth), it’s still modest in comparison to global markets.

In Dubai, work on this is picking up. The Dubai Land Department has launched Phase II of its Real Estate Tokenization Project, with secondary-market resales scheduled to begin on 20 February 2026. In DIFC, the DFSA’s inaugural tokenization regulatory sandbox drew 96 expressions of interest. In short, the UAE is assembling the regulatory and institutional scaffolding needed to make tokenised real estate scalable – that’s certainly something worth talking about. 

The crypto RWA fallacy

The best RWA pitch in crypto happens to be the simplest: take a deed, a fund share, or a receivable, put it on-chain, and let liquidity do the rest. In practice, that often means shipping a minting interface attached to a legal promise that lives somewhere else. The token trades 24/7, but the underlying rights don’t. 

When markets tighten, everyone rediscovers the same truth: a token is not a title, nor a court order. Instead, it’s a digital representation recorded on a programmable platform – and it’s notoriously difficult to make it legally and operationally identical to what it claims to represent.

This idea shows up in three places. First, think about enforceability. If token holders can’t clearly understand what they own, what jurisdiction governs it, and how a claim is enforced, the idea of ownership is just branding. As a matter of fact, IOSCO warns that investors may not understand the legal aspects of ownership and transfer rights for tokenised assets, and flags legal uncertainty as a central risk holding back adoption. 

Second, consider controlled transfer. Real assets don’t move like meme coins. Eligibility checks, transfer restrictions, and the ability to halt or reverse activity under lawful orders are not optional in institutional markets. OECD research notes that implementing restrictions like forced transfers or trading suspensions can be especially challenging on public, permissionless networks.

Third, there’s servicing. Real estate is an operating system: taxes, insurance, maintenance, tenant issues, distributions, valuations, reporting, audits. Tokenization can streamline records and transactions, but it doesn’t eliminate the admin layer that makes cash flows real and disclosures defensible. Until projects address these issues, RWAs are a bit stuck. 

The UAE’s blueprint

If the UAE wins the real estate tokenization boom, it will be because it treated tokenization as a regulated financial product, a market-structure upgrade, and has built rules and institutions around that assumption.

• In DIFC, the DFSA launched a dedicated tokenization Regulatory Sandbox and drew 96 expressions of interest. This is an early indicator that serious firms are looking for a supervised pathway. 
• In Abu Dhabi, ADGM has been explicit about positioning itself as a comprehensive regulatory home for digital assets, and it went further by introducing a DLT Foundations regime designed for token issuance and on-chain organisational structures.
• In 2025, the DIFC reported 8,844 active companies, demonstrating rapid year-on-year expansion. 
• In Dubai, the Dubai Land Department is running a controlled pilot that explicitly tests governance, investor protection, and operational readiness while enabling secondary-market resale from 20 February 2026.
• The UAE also hosts pools of dry powder that can fund compliant issuance once the infrastructure is credible. Mubadala reported AED 1.2 trillion in assets under management, and Reuters notes Abu Dhabi’s major funds together manage around $1.7 trillion. 

The UAE is building something of a regulatory SDK for RWAs — standardized rules, venues, and counterparties that make tokenized real estate deployable. 

The winning stack

The projects that scale in the UAE are likely to be regulated market infrastructure that happens to use blockchain. Starting with licensing. In DIFC, the DFSA’s tokenization Regulatory Sandbox provides a supervised route where selected firms can test in a controlled environment and, if successful, transition toward full authorisation. 

Next, the packaging has to be familiar. DIFC SPVs (Prescribed Companies) are designed to ring-fence and isolate assets and liabilities (something institutions already understand and can underwrite). Tokenization then simply becomes a distribution and settlement upgrade.

Then comes the hard constraint most crypto-native RWAs avoid – controlled transfer and custody. Institutional markets require governance, safe custody, and clear oversight. ADGM’s FSRA guidance is clear about addressing safe custody, market abuse, and related controls via a thorough regulatory framework. 

Finally, the winning stack anchors to the registry. The Dubai Land Department is currently testing tokenization on title deeds within a regulated model, in collaboration with VARA, and moving into a phase that activates secondary resale under a controlled framework focused on governance and investor rights.

Put together, the archetype that wins looks license-first, SPV-based, compliance-native, and obsessed with issuance plus servicing. 

The implication for crypto

Here’s the part crypto needs to internalize — the trillion-dollar RWA upside will be won by the players that can make token-holder rights unambiguous, transfers compliant, and cash flows serviceable at scale. 

IOSCO makes a good point — investors can end up unsure whether they hold the underlying asset or merely a digital representation, with risks concentrated around legal structure and intermediaries rather than chain throughput.

That’s why the UAE matters to the broader market. The Dubai Land Department is running a controlled tokenization pilot that moves into secondary resale from 20 February 2026, framed around governance, operational readiness, and investor protection. DIFC’s regulator is doing the same at the market-structure level.

For crypto, the chain becomes the settlement, transparency, and automation layer (inside this regulated perimeter). It’s useful precisely because it is programmable, auditable, and interoperable. But pay attention to the jurisdictions and infrastructure providers building enforceable rights – that’s arguably more important right now.