What are the rules and regulations for Digital Gold in UAE?

 Introduction: What is Digital Gold

• “Digital gold” generally refers to a token or digital representation of gold ownership, often backed by physical gold reserves. Ownership may be fractional, and users can trade or redeem for physical gold.

• Tokenisation of gold may also come under virtual assets / digital assets regulation, depending on its structure (e.g. whether it is treated like a commodity, security, utility token, or something else).

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Regulatory Landscape in UAE: Key Authorities & Laws

Before diving into digital gold specifically, it's important to understand the regulatory framework for virtual / digital assets in the UAE, since digital gold usually falls under or alongside these regimes.

Regulatory Entity / Zone	Key Legislation / Regime	What it regulates
Federal level – SCA, Central Bank, Ministry of Economy etc.	Federal laws such as Federal Decree‑Law No. 20 of 2018 on AML/CFT; laws concerning virtual assets; stored value facility regulation; etc.	Licensing, AML/KYC, classification of virtual assets; defining what is or isn’t allowed.
Dubai (outside DIFC)	Law No. 4 of 2022 Concerning the Regulation of Virtual Assets in the Emirate of Dubai; the Virtual Assets Regulatory Authority (VARA); associated rulebooks and regulations.
Free Zones / Financial Free Zones	ADGM (FSRA), DIFC (DFSA), etc., with their own digital asset laws / token regimes.

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Rules & Regulations Specific to Digital or Tokenised Gold

While “digital gold” per se is a newer and less uniformly regulated product, several regulatory/market developments in the UAE are directly relevant. Here are the key rules, obligations, and current practices:

1. Licensing & Classification

   • Any entity offering virtual assets (including digital gold, tokenised gold, or gold tokens) is likely to be considered a Virtual Asset Service Provider (VASP) under UAE law, and must obtain appropriate licensing. This is true whether the product is a commodity token, security token, or utility token depending on its structure. 

   • In Dubai, VARA handles licensing/regulation for virtual assets (excluding DIFC). Under its regulations, any issuer/platform dealing in digital assets must be licensed, whether for token issuance, trading, custody, etc. 

2. Backed Physical Gold & Purity

   • Digital gold is required to be fully backed by physical gold reserves. Standards of purity (e.g. 999 fineness) are used. Investors expect that each digital unit corresponds to a specific, identifiable bar or fraction thereof. 

   • Storage, verification, auditing of the physical reserves are important: the gold reserves must be stored securely, often in certified vaults/refineries. Identity of bars (bar numbers) may need disclosure. 

3. Consumer Protection / Code of Conduct

   • UAE plans (or has introduced) a Code of Conduct for gold savings schemes, fractional ownership/trading, and online platforms dealing in gold investment. This is to ensure transparency in pricing, fees, redemption, purity, etc. 

   • Platforms must disclose clearly whether the digital gold is redeemable physically, how storage costs are handled, what fees apply, how settlement works.

4. AML / KYC / Anti‑Money Laundering Regulations

   • Because gold trade (physical and digital) has historically been a high risk for money laundering and financing of terrorism, the UAE has strict due diligence rules for both suppliers/refiners and for transactions. Entities must verify customers and suppliers, monitor transactions, keep records, etc. 

   • Federal Decree‑Law No. 20 of 2018 (AML/CFT) applies, along with its executive regulations. Digital asset service providers must comply. 

5. Taxation & VAT

   • For physical gold (bars/coins of high purity, e.g. 99% or more), some favorable tax treatments exist: in many cases, no VAT or lower VAT is applied. 

   • It’s less clear in every case how digital gold is treated for VAT / corporate tax. The corporate tax regime in the UAE (9% for businesses above a certain threshold) likely applies if digital gold is part of a business activity. For individuals, gains might in many cases be tax‑free but this depends on whether the digital gold is considered a commodity, financial instrument, or security. 

6. Classification: Is Digital Gold a Commodity, Virtual Asset, Security, etc.?

   • Whether digital gold is regulated like a commodity or security depends on how the tokenization is structured—whether owners have rights akin to ownership in a security, profit sharing, etc. Many digital gold offerings clarify they are not securities. For example, some terms state that digital gold tokens are not intended as securities under UAE (or other) securities laws. 

   • If it is treated as a virtual asset, then all the rules for virtual assets under VARA / SCA / FSRA etc. apply.

7. Redemption Rights & Settlement

   • Investors should have rights to redeem digital gold for physical gold or for cash equivalent. How and when this occurs (fees, delivery, minimums) need to be clearly defined. Also, the timeframes for settlement matter.

8. Transparency & Audits

   • Physical reserve audits are important. The issuer should provide regular proof that the physical backing exists and matches the digital tokens in circulation.

9. Shariah Compliance (for Islamic investors)

   • Because UAE is majority Muslim and many investors look for Shariah‑compliant products, digital gold/tokenised gold offerings often seek Shariah certification or ensure compliance (AAOIFI standards etc.) 

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Gaps, Developments & Considerations

• The regulatory framework is rapidly evolving. Some rules are still being clarified (e.g., classification of digital gold, whether treated under securities law under certain circumstances).

• Initiatives like the Code of Conduct for gold investment schemes (online platforms, savings schemes) are relatively new. Users and businesses should keep updated. 

• Regulatory oversight may vary depending on which Emirate (Dubai vs Abu Dhabi vs other emirates), free zone or onshore status, and whether it falls under federal authority or local authority (VARA, SCA, DFSA, FSRA etc.).

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Implications for Businesses & Investors

• Businesses offering digital gold must ensure they are licensed, compliant with AML/KYC, hold the physical gold, provide transparent disclosures (purity, fees, redemption).

• Investors should verify these before buying: is the token fully backed? Can you redeem? What are the costs? Is the platform regulated? Does it have Shariah certification if needed?

• Beware of risks: custody risk (where is the gold stored?), counterparty risk, price risk, regulatory risk (changes in law), liquidity issues.

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Conclusion

Digital gold in the UAE is permitted under a regulatory framework that is increasingly clear, particularly under the virtual assets regulation regimes (VARA, SCA, ADGM etc.). However, it’s not entirely unregulated—businesses must comply with licensing, AML/KYC, backing with physical gold, and consumer protection rules. There are specific rules concerning purity, audits, disclosures, tax, and classification.