RE FZE is an Entity incorporated in a free zone within the Emirate. RE FZE wants to issue a Virtual Asset called RE1 which gives owners a right to income received from a portfolio of real estate properties in Dubai. The income will be in the form of both rental income and a share in the profits received from any sales of the real estate property. RE1 does not give owners any direct right of ownership in the real estate properties themselves, nor does it provide any right of redemption against RE FZE. The value of RE1 can only be realised by its owners through selling their RE1 or in the limited circumstances of a winding down or insolvency of RE FZE.
 

Key considerations: Issuing RE1 would be categorised as a Category 1 VA Issuance under the VA Issuance Rulebook and, as such, RE FZE would require a Category 1 VA Issuance Licence from VARA prior to issuing RE1.
 

The reason for this is that real estate property constitutes an RWA under VARA's definition as it is a ‘physical and/or tangible asset’. Rental income and a share in the profits received from any sales would constitute "Income" under VARA's definition as it is value originating or deriving from an RWA (i.e. the real estate property). RE1 therefore represents, or purports to represent, a direct current and future entitlement to receive or share in Income.
 

As part of RE FZE's application to VARA for a Category 1 VA Issuance Licence, RE FZE will need to clearly describe in the Whitepaper how it will ensure that RE1 maintains the rights and value that it grants, or purports to grant, to owners. This will include, but is not limited to, scenarios in the event that RE FZE is wound down or becomes insolvent.