Addressing cross-border compliance challenges! Hong Kong and the UAE sign their first digital asset regulatory cooperation agreement

Written by: Liang Yu

Edited by: Zhao Yidan

On January 27, 2026, the Hong Kong Securities and Futures Commission (SFC) and the UAE Capital Markets Authority (CMA) officially signed a Memorandum of Understanding (MoU), establishing a bilateral consultation and information exchange framework for “regulated digital asset entities.” This is the first specialized cooperation agreement between Hong Kong and an overseas regulator in this field, marking a transition from general principles of cross-border digital asset regulation to the development of concrete mechanisms.

For a long time, the RWA (Real-World Asset) sector 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 cooperation lies in attempting to establish a predictable, auditable dialogue pathway at the regulatory level, reducing institutional friction for capital participation in cross-border RWA activities. The digital asset innovation roundtable held simultaneously on the signing day further highlights both parties’ pragmatic approach to advancing “regulatory dialogue” and “market practice” in tandem.

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

The digital asset regulatory cooperation MoU signed between Hong Kong and the UAE is not just a document; it is a bridge built 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 zero: a natural extension after mutual recognition of funds

The signing of this MoU was witnessed by Dr. Wong Tien Yow, Chairman of the Hong Kong SFC, and was jointly completed by Waleed Saeed Al Awadhi, CEO of the CMA, and Ms. Carrie Fong, CEO of the Hong Kong SFC. The solemnity of the ceremony already hints at the significance of the document.

Hong Kong SFC CEO Carrie Fong pointed out after signing that the move aims to “support financial innovation in Hong Kong and the UAE.” Notably, she directly linked the cooperation to “promoting the sustainable development of digital asset ecosystems in both regions.” This statement elevates the cooperation from purely technical or market-level to the level of ecosystem building.

Understanding this cooperation key lies in viewing it within the existing cooperation framework. In 2025, Hong Kong and the UAE reached an arrangement for mutual recognition of public funds, allowing qualified 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 is inherently reasonable. As traditional financial products like funds and bonds gradually explore tokenization, the demand for regulatory cooperation will inevitably spill over from traditional finance into digital asset regulation. Both regulators recognize that without establishing communication mechanisms in advance at the regulatory level, spontaneous market innovation may create unmanaged cross-border regulatory vacuums.

2. Technology races ahead, but制度 lags behind: the real cross-border challenges of RWA

The development momentum of the RWA track is undeniable. According to a report published by Boston Consulting Group in 2025, the global tokenized asset market could reach $16 trillion by 2030. Traditional financial giants like Goldman Sachs and BlackRock have publicly laid out related businesses. However, beneath this booming data, the proportion of cross-border flows remains low.

Hong Kong and the UAE are both active advocates in the RWA field. Hong Kong explicitly listed bond tokenization as a key focus in the “Digital Asset Development Policy Declaration 2.0,” and has completed multiple issuance trials. The Hong Kong Monetary Authority (HKMA) and the SFC are jointly reviewing legal and procedural barriers related to RWA. In the UAE, Dubai Virtual Asset Regulatory Authority (VARA) has dedicated a chapter to RWA in its rulebook, and Abu Dhabi Global Market (ADGM) has introduced a regulatory framework supporting asset tokenization.

However, a complete local regulatory framework does not automatically translate into smooth cross-border business. The core contradiction is: assets can be tokenized and circulated globally on-chain, but regulatory responsibilities and enforcement powers remain strictly confined within judicial jurisdictions.

A legal director of a digital asset custody firm described the dilemma: “We can technically custody tokenized shares of Hong Kong commercial properties for Dubai clients, but if disputes arise, the legal ownership, custodial responsibilities, and investor remedies involve both Hong Kong and UAE legal systems. Without a regulatory cooperation framework, this uncertainty is enough to deter most institutional investors.”

In other words, without an MoU, cross-border RWA transactions are not entirely impossible but are often limited to case-by-case approvals, highly customized, and difficult to replicate pilot projects, unable to support the scale and standardization required by institutions. This is the institutional hurdle that RWA must overcome to move from proof of concept to mainstream application.

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

So, what does this MoU actually deliver? It is not a manual granting direct operational permissions to market participants; its strength lies in the creation of processes and mechanisms.

According to the agreement, 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, based on this MoU, engage in formal communication and information exchange with the UAE CMA regarding regulatory matters related to that platform. Conversely, the same applies in the other direction.

This addresses a key pain point: predictability. For compliance-driven financial institutions, unpredictable regulatory risks are often more daunting than clear high standards. The MoU, through institutionalized communication channels, reduces this uncertainty.

It is important to recognize that this cooperation involves federal-level regulators. The UAE’s signing party is the federal Capital Markets Authority, focusing on securities tokens or digital assets that may be classified as securities. This does not automatically cover the jurisdictional authority of local financial free zones such as Dubai VARA or Abu Dhabi ADGM. A complete future regulatory landscape may require multi-level cooperation between federal and local authorities.

The deep value of the MoU is that it, for the first time between the two regions, installs an official, auditable regulatory cooperation interface for the specific group of “regulated digital asset entities.” This interface does not alter each region’s legal bottom line but greatly improves communication efficiency and mutual trust. In financial regulation, a smooth communication mechanism itself is one of the most critical infrastructures.

4. The “digital ambitions” of two financial centers: why Hong Kong and the UAE?

From a geopolitical financial strategy perspective, this cooperation is a deep integration between two economies committed to becoming digital asset hubs—one in the East and one in the 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 traditional large-scale assets with emerging digital technologies, a strategic high ground that must be seized. The UAE, especially Abu Dhabi and Dubai, aspires to become a gateway for digital assets from the Middle East, Africa, to South Asia. The strategic demands of both regions are highly aligned—they both need to provide a secure, compliant, and efficient environment for international capital to access digital asset services.

The “Digital Asset Innovation Roundtable and Senior Asset Management Seminar” held on the day of signing further emphasizes the ecological orientation of this cooperation. It indicates that the collaboration extends beyond regulatory paperwork to industry awareness sharing, talent development, and joint project incubation. This “regulation + market” dual-track approach helps cultivate truly vibrant cross-border businesses.

Globally, the EU is attempting to establish regional standards through the MiCA regulation, while the US is oscillating between enforcement and legislation. Against this backdrop, Hong Kong and the UAE’s flexible bilateral trust-based cooperation model may offer a new, pragmatic paradigm for “networked” global digital asset regulation.

5. Institutional participation: from “dare to” to “can do”

For institutional participants in the RWA ecosystem—investment banks, asset managers, private banks, compliant trading platforms—this MoU signifies a core transformation: it partly addresses the question of “dare to” participate at scale.

Previously, institutions faced a series of questions: How does the regulator in the other jurisdiction understand my business model? When compliance doubts arise, whom should I clarify with, and how? Will my audit reports and risk control processes be recognized? These questions entail significant hidden costs.

The consultation and information exchange mechanism established by the MoU aims to systematically answer these questions. It may not lower specific compliance standards but can significantly reduce friction and unpredictability in compliance processes. For institutions managing billions in assets, this predictability can sometimes be more valuable than mere market access.

We foresee several prioritized business scenarios: first, leveraging existing mutual recognition arrangements to develop “tokenized mutual recognition funds,” improving share trading, valuation, and distribution efficiency via blockchain; second, creating customized RWA products for specific investor groups, such as tokenized infrastructure revenue rights for Middle Eastern family offices; third, cross-border collateral management, exploring tokenized assets as collateral for cross-market financing under clearer regulatory expectations.

6. Three major unresolved issues of the MoU

However, viewing this MoU as a “green light for everything” is a dangerous misconception. It lays the groundwork but many practical obstacles remain.

First, conflicts in legal application and jurisdiction. The MoU promotes regulatory communication but does not unify substantive law. When ownership disputes over tokenized assets, breaches of smart contracts, or bankruptcy proceedings occur, resolution still depends on Hong Kong or UAE domestic laws and possible judicial assistance. This remains a long and complex process.

Second, the alignment of accounting and auditing standards. How are tokenized assets valued? Are they on-balance sheet or off-balance sheet? How are profits and losses recognized? Although both jurisdictions’ accounting standards are aligned with IFRS, differences in practice and interpretation may directly impact financial statements and risk measurement.

Third, cross-border coordination of investor suitability management. Definitions of qualified investors, risk disclosures, and sales procedures differ between the two regions. A cross-border RWA product targeting both markets may need to design two sets of compliance documents and ensure sales activities meet both jurisdictions’ requirements.

Finally, issues of technical standards and data privacy cannot be ignored. Regulatory information exchange may involve sensitive commercial data and customer information. Balancing regulatory compliance with strict data privacy laws in both regions requires highly meticulous design.

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

This MoU signed by the Hong Kong SFC and the UAE CMA is historically significant because it marks the transition of digital asset regulatory cooperation from a statement of principles to the substantive construction of mechanisms. It provides the first institutionalized regulatory dialogue template for the highly trust-dependent RWA sector.

Its value does not lie in immediately creating many new businesses but in significantly reducing the institutional friction in existing business expansion. It signals to the market: this is a path that can be explored, managed, and replicated.

The true test will come within the next 12 to 24 months. The key indicator will not be how many cooperation documents are signed but whether a scalable, clear business model cross-border RWA issuance case emerges. This case must demonstrate that, utilizing the new regulatory cooperation framework, it can effectively address the entire cycle—from product design, issuance approval, ongoing regulation, to dispute resolution.

For RWA participants, the current task is not only to celebrate the “highway” being laid but also to deeply study the blueprint, load-bearing standards, and traffic rules of this road. At the intersection of institutional and technological innovation, the most valuable aspect is often not the fastest speed but the clearest route and the most reliable guardrails. Hong Kong and UAE regulators are working together to draft the first chapter of this roadmap.

Source of some materials: · “Hong Kong SFC and UAE CMA sign MoU” · “Hong Kong SFC and UAE CMA sign MoU to strengthen cross-border digital asset cooperation and create new milestones” · “Hong Kong SFC and UAE sign MoU to enhance digital asset collaboration”