Author: Liang Yu

Editor: Zhao Yidan

On January 27, 2026, the Hong Kong Securities and Futures Commission (SFC) and the UAE Capital Markets Authority officially signed a memorandum of understanding (MOU) to establish a bilateral consultation and information exchange framework for "regulated digital asset entities." This is the first specialized cooperation agreement reached between Hong Kong and overseas regulatory bodies in this field, marking a transition from general principles to the construction of specific mechanisms for cross-border regulatory collaboration in digital assets.

For a long time, the RWA (Real World Asset) sector has faced a fundamental contradiction: on-chain assets can flow freely, but regulatory trust is difficult to replicate across borders. The core value of this cooperation is to attempt to establish a predictable and auditable dialogue path at the regulatory level, reducing institutional friction for capital participation in cross-border RWA activities. The digital asset innovation roundtable held on the same day further highlights the pragmatic approach of both parties to promote "regulatory dialogue" and "market practice" in parallel.

For the RWA sector, which urgently needs to connect traditional capital with on-chain efficiency, the signing of this agreement is less about opening a new door and more about paving the first predictable institutional path for the already existing cross-border demand.

The digital asset regulatory cooperation memorandum signed between Hong Kong and the UAE is not just a piece of paper; it builds an institutional bridge for regulated entities in both regions. The real bottleneck has never been technology, but whether effective dialogue can be established between regulators.

1. Cooperation is not starting from scratch: A natural extension after fund mutual recognition

The signing of this memorandum was witnessed by Dr. Huang Tianyou, Chairman of the Hong Kong SFC, and was jointly completed by Waleed Saeed Al Awadhi, CEO of the CMA, and Ms. Liang Fengyi, CEO of the Hong Kong SFC. The solemnity of the ceremony itself hinted at the significance of the document.

After the signing, Ms. Liang pointed out that this move aims to "support financial innovation in Hong Kong and the UAE." Notably, she directly linked the cooperation 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 to the height of ecosystem construction.

The key to understanding this cooperation lies in examining it within the context of existing collaborations. In 2025, Hong Kong and the UAE reached an arrangement for mutual recognition of public funds, allowing eligible funds to be publicly sold in each other's markets. This digital asset regulatory cooperation can be seen as a natural extension and deepening of this financial cooperation logic into a new asset class.

This extension has inherent rationality. As traditional financial products such as funds and bonds gradually explore tokenization, the demand for regulatory cooperation will inevitably spill over from traditional financial frameworks into the digital asset regulatory field. Regulatory bodies in both regions clearly recognize that if a communication mechanism is not established in advance at the regulatory level, spontaneous market innovation may create an unmanageable cross-border regulatory vacuum.

2. Technology runs fast, but institutions lag behind: The cross-border reality problem of RWA

The development momentum of the RWA sector is undeniable. According to a report released by the Boston Consulting Group in 2025, the global scale of tokenized assets could reach $16 trillion by 2030. Traditional financial giants such as Goldman Sachs and BlackRock have publicly laid out related businesses. However, beneath the thriving overall data, the proportion of cross-border flows remains low.

Both Hong Kong and the UAE are active advocates in the RWA field. Hong Kong has explicitly listed bond tokenization as a priority in its "Digital Asset Development Policy Declaration 2.0" and has completed multiple rounds of issuance trials. The Monetary Authority and the SFC are collaborating to review the legal and procedural obstacles related to RWA. In the UAE, the Dubai Virtual Assets Regulatory Authority has established a dedicated chapter for RWA in its rulebook, and the Abu Dhabi Global Market has also launched a regulatory framework supporting asset tokenization.

However, a complete local regulatory framework does not automatically translate into smooth cross-border business. The core contradiction lies in the fact that while assets can flow globally on-chain, regulatory responsibilities and enforcement powers remain strictly confined within judicial jurisdictions.

A legal director of a digital asset custody institution once described the dilemma: "We can technically custody tokenized shares of Hong Kong commercial properties for Dubai clients, but once a dispute arises, the legal ownership of the asset, the boundaries of the custodian's responsibilities, 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 often can only be limited to individual case approvals, highly customized, and difficult-to-replicate pilot projects, failing to support the scale and standardization required by institutions. This is precisely the institutional hill that RWA must overcome to move from concept validation to mainstream application.

3. What does the memorandum bring? Establishing a predictable communication mechanism

So, what does this memorandum actually bring? It is not an operational manual that grants direct permissions to market participants; its power lies in the establishment of processes and mechanisms.

According to the agreement text, the core is to establish a "bilateral consultation and information exchange framework." Specifically, when a digital asset platform regulated by the Hong Kong SFC plans to operate in the UAE, the Hong Kong SFC can formally communicate and exchange information with the UAE CMA regarding regulatory matters related to that platform based on this memorandum. 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 clear high standards. The memorandum reduces this uncertainty through institutionalized communication channels.

It is important to recognize that this cooperation is between federal regulatory agencies in the capital markets. The UAE signatory is the federal-level Capital Markets Authority, and the cooperation focuses on securities-type tokens or digital asset activities that may be classified as securities. This does not directly equate to or automatically cover the authority of local financial free zone regulatory bodies such as Dubai VARA and Abu Dhabi ADGM. The future complete regulatory landscape may require multiple collaborations at both federal and local levels.

The deeper value of the memorandum lies in the fact that it has installed an official, auditable regulatory cooperation interface for the specific group of "regulated digital asset entities" for the first time between the two regions. This interface does not change the legal bottom line of each side but greatly improves communication efficiency and mutual trust levels. In the field of financial regulation, a smooth communication mechanism itself is one of the most important infrastructures.

4. The "digital ambition" of two financial centers: Why Hong Kong and the UAE?

From a geopolitical financial strategy perspective, this cooperation represents a deep connection between two economies committed to becoming digital asset hubs in the East and West.

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 high ground that must be seized. The UAE, particularly Abu Dhabi and Dubai, ambitiously hopes to become a digital asset gateway from the Middle East, Africa, to South Asia. The strategic demands of both regions are highly aligned—both need to provide a safe, compliant, and efficient digital asset service environment for international capital.

The "Digital Asset Innovation Roundtable and Senior Seminar on Asset Management" held on the same day as the signing further highlights the ecological orientation of the cooperation. This means that the cooperation extends beyond regulatory documentation exchanges to include industry knowledge sharing, talent cultivation, and joint project incubation. This "regulatory + market" dual-track approach helps cultivate truly viable cross-border business.

Globally, the EU is attempting to establish regional standards with the MiCA legislation, while the U.S. is caught between enforcement and legislation. In this context, the flexible cooperation model based on bilateral mutual trust between Hong Kong and the UAE may provide a new, pragmatic paradigm for the "networking" of global digital asset regulation.

5. Institutional entry: From "dare I" to "can I"

For institutional participants in the RWA ecosystem—investment banks, asset management companies, private banks, compliant trading platforms—the significance of this memorandum can be summarized as a core shift: it partially addresses the question of "dare I" participate at scale.

Previously, institutions faced a series of interconnected questions: How will my business model be understood by the other party's regulator? When compliance questions arise, who should I clarify with and in what manner? Will my audit reports and risk control processes be recognized by the other party? These questions constitute a significant hidden cost.

The consultation and information exchange mechanism established by the memorandum is designed 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 in funds, the value of this predictability can sometimes outweigh mere access permissions.

We can foresee several potentially prioritized business scenarios: First, in conjunction with the existing fund mutual recognition arrangement, "tokenized mutual recognition funds" may emerge, utilizing blockchain technology to enhance the efficiency of share trading, valuation, and distribution. Second, customized RWA products targeting specific investor groups, such as tokenized Asian infrastructure revenue rights products designed for Middle Eastern family offices. Third, cross-border collateral management, exploring the use of tokenized assets as collateral for cross-market financing based on clearer regulatory expectations.

6. Three major issues not resolved by the memorandum

However, understanding this memorandum as a green light for "everything is ready" is a dangerous misunderstanding. It lays the groundwork, but operationalizing it still requires overcoming many practical obstacles.

First and foremost is the conflict of applicable laws and judicial jurisdiction. The memorandum facilitates regulatory communication but does not unify substantive law. When ownership disputes involving tokenized assets, smart contract defaults, or bankruptcy liquidations arise, domestic laws of Hong Kong or the UAE must still be applied, and possible judicial assistance routes must be utilized to resolve them. This remains a long and complex process.

Secondly, the alignment of accounting and auditing standards is challenging. How should tokenized assets be valued? Should they be included on-balance sheet or off-balance sheet? How is profit and loss recognized? Although both regions' accounting standards are converging with international financial reporting standards, there may be differences in specific practices and interpretations, which directly affect institutions' financial statements and risk control measurements.

Third, cross-border coordination of investor suitability management remains tricky. The definitions of qualified investors, risk disclosure requirements, and sales process regulations differ between the two regions. An RWA product targeting investors from both regions may need to design two sets of compliance documents and ensure that sales activities meet the requirements of both regions simultaneously.

Finally, issues of technical standards and data privacy cannot be overlooked. Regulatory information exchange may involve sensitive business data and customer information. How to comply with regulatory requirements while adhering to strict data privacy regulations in both regions requires extremely careful design.

7. The real test: When will the first successful case appear?

The memorandum signed by the Hong Kong SFC and the UAE CMA has historical significance in that it marks a transition from principle declarations to the substantive stage of mechanism construction in digital asset regulatory cooperation. It provides the first institutionalized regulatory dialogue template for the RWA sector, which heavily relies on cross-regional trust.

Its value lies not in the immediate creation of new business 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 indicators to observe should not only be how many cooperation documents have been signed but whether the first scalable, replicable cross-border RWA issuance case with a clear business model appears in the market. This case needs to demonstrate that it can effectively solve the complete closed-loop issues from product design, issuance approval, ongoing regulation to dispute resolution using the new regulatory cooperation framework.

For participants in RWA, the current task is not only to celebrate the foundation of the "highway" but also to delve into the design blueprint, load standards, and traffic rules of this road. At the intersection of institutional innovation and technological innovation, the most valuable aspect is often not the fastest speed, but the clearest route and the most reliable guardrails. Regulators in Hong Kong and the UAE are collaboratively drafting the first chapter of this roadmap.

Some sources of information:

· "Hong Kong SFC and UAE Capital Markets Authority Sign Memorandum of Understanding"

· "Hong Kong SFC and UAE Capital Markets Authority Sign MOU to Strengthen Cross-Border Digital Asset Cooperation and Create New Milestones"

· "Hong Kong SFC and UAE Sign MOU to Strengthen Digital Asset Cooperation"

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