Shaping the future: Abu Dhabi and Dubai compete to ride tokenisation wave

In a first for the Middle East and North Africa (MENA), the Abu Dhabi Securities Exchange (ADX) has announced the launch of a digitally native bond issued and recorded using blockchain technology. The initiative is the result of a strategic collaboration between ADX, First Abu Dhabi Bank (FAB) and HSBC.

The bond will be issued by FAB, listed on the ADX and made available via HSBC Orion — HSBC’s distributed ledger technology platform. It will be accessible to investors around the world through multiple channels, including accounts held with Hong Kong’s Central Moneymarkets Unit (CMU), Euroclear, Clearstream and custodians linked to these systems.

The announcement highlights several advantages of issuing and recording digital bonds on blockchain including operational efficiency, improved settlement cycles, reduced counterparty risk, enhanced security and improved transparency for institutional investors.

Abdulla Salem Alnuaimi, Group CEO of ADX, described the launch as “a defining moment in our journey to transform capital markets through innovation”. He noted that the initiative lays the groundwork for a broader range of tokenised assets, such as green bonds, sukuk and real estate-linked products, which will strengthen Abu Dhabi’s standing as a "global financial hub":

Meanwhile, the Dubai Financial Services Authority has approved a tokenised money market fund, QCDT, within the Dubai International Finance Centre. QCDT is a joint initiative between the Middle East and Africa’s largest financial institution, Qatar National Bank (QNB), and DMZ Finance. QNB will be the QCDT’s lead originator and investment manager, while DMZ Finance will act as co-originator and provide exclusive tokenisation infrastructure.

QCDT is designed to support a range of institutional use cases across the financial sector. Banks can use it as qualifying collateral, centralised exchanges as mapped collateral and it can also serve as reserve backing for stablecoins or as a foundational layer for Web3 payment systems.

"The tokenization of real-world assets is becoming a fundamental bridge between traditional capital markets and the digital asset economy. DMZ Finance is working closely with regulatory and financial institutions across the Middle East and other emerging markets to promote the compliant development of RWA infrastructure," said Nathan Ma, Co-founder and Chairman of DMZ Finance.

CEO of QNB Singapore, Mr Silas Lee, further stated, “QCDT is not only the first DFSA-approved tokenized money market fund in Dubai but also a pivotal step in QNB’s digital asset journey. It marks a new phase in our strategic roadmap and lays a strong foundation for the future of multi-asset tokenization."

The announcement reflects the growing trend of tokenising real-world assets (RWAs), with the RWA market projected to reach trillions of dollars in value driven by benefits such as fractional ownership, democratised access and faster, more secure settlement. In this context, the phrase RWA is used loosely and can apply to both traditional financial assets and physical assets.

The legal issues presented by tokenising traditional financial assets and physical assets can be quite distinct. In principal, a traditional paper-certificated or dematerialized financial asset should be treated similarly to its tokenised version (e.g. a tokenised bond is fundamentally just a different way of representing an interest in that bond) albeit that the tokenised version may involve unique risk factors and compliance solutions. However, a tokenised version of an underlying asset can present unique consumer protection and market risks (as we discussed in our recent posit on Robinhood's tokenised stock offering) and is liable to characterised as derivative unless the asset is itself issued in tokenised form or stapled to a traditional asset in some way.

On the otherhand, the tokenisation of a physical asset could create a financial asset depending on how the offering is framed and may present unique risks to investors if what is being offered is an interest in an underlying physical asset which is in fact held by someone else.

A number of other jurisdictions have been dipping their toes into tokenisation with Hong Kong providing incentives for tokenised bond issuance and issuing its own digital green bonds. Singapore also approved its first tokenised money market fund in recent weeks. The United States is witnessing a reopening in financial markets innovation under the second Trump Administration with a range of legislative and other proposals under debate.

Written by Steven Pettigrove and Emma Assaf