Executive Summary
- The South African business should initially pursue an outright bullion sale to a genuine independent issuer, provided that issuer has the required permissions and approval for the actual product. This recommendation depends on the supplier remaining within its agreed bullion and service roles. Product control, promises to holders or token distribution can change its legal position. (VARA, VA Issuance Rulebook, I.C–D and Schedule 2; Company Rulebook, IV.A.5.)
- A token redeemable by reference to gold value engages VARA's asset-referenced virtual asset definition, subject to resolving the federal securities boundary. Category 1 issuance requires the issuer's licence and approval of the particular token. A gold-linked financial contract or structured certificate may fall under the Capital Market Authority's legislation. (VA Issuance Rulebook, Schedule 2 and Annex 2, I.B.2; Federal Decree-Law No. 33 of 2025, arts 1–2.)
- VARA operates across Dubai except the DIFC. Federal requirements remain material, including the statutory conditions for virtual-asset registration and admission to trading. A gold reference also gives no general permission to operate a payment product. The proposed first product should exclude merchant-payment features. (Dubai Law No. 4 of 2022, art 3; Federal Decree-Law No. 33 of 2025, art 39(2); Federal Decree-Law No. 6 of 2025, arts 61–62.)
- Lawful ownership of bullion does not establish permission to conduct every sale or export. South African classification depends on the gold's purity, form and manufacture. Export controls extend to gold in any form, and the sale proceeds, offshore investment and service fees require their own treatment. (Precious Metals Act 37 of 2005, ss 1, 4–5 and 12; Exchange Control Regulations, 1961, regs 3, 6 and 10.)
- The proposed reserve should comprise approved, identifiable gold held by a custodian qualified to hold physical bullion. VARA requires legally effective reserve protection, supported by a practising lawyer's opinion. Allocation records alone do not give token holders ownership of the bars or priority in insolvency. (VA Issuance Rulebook, Annex 2, III.B–C.)
- Because the product grants redemption rights, holders must receive an option for equal value in UAE dirhams. Other disclosed forms may be added, but physical-only redemption would not meet the ordinary rule. The recommended first design provides dirham redemption, with a disclosed valuation method and timetable, and no redemption-processing fee. (VA Issuance Rulebook, Annex 2, II.A.1(k) and III.E.1–5.)
- Supplier warranties and insurance support recovery after a loss; they do not replace missing reserve assets. The issuer remains responsible for reserve sufficiency, redemption and required reporting. Contracts must give it the information and remedies needed to correct shortfalls, including during supplier or custodian failure. (VA Issuance Rulebook, Annex 2, III.C–E; Compliance and Risk Management Rulebook, I.I.2; Company Rulebook, IV.D and VII.)
The product and the entity responsible for issuance
The proposed product gives holders exposure to gold value through an enforceable redemption obligation. The gold is the reference asset: the asset used to determine what the token represents. The reserve consists of assets held to support that obligation. Those concepts remain separate even when the reference and reserve are the same kind of gold.
For the initial design, the supplier should sell approved bullion for money through the banking system and deliver it from South Africa to Dubai. The issuer would arrange allocated custody, issue the token and owe redemption to its holders. The recommended redemption form is UAE dirhams, calculated by reference to the specified quantity and quality of gold. Interest, leverage and merchant-payment functionality should remain outside this initial design. These are proposed design choices, rather than facts about an existing product.
VARA's definition of an asset-referenced virtual asset, or ARVA, includes several alternative tests. They cover purported ownership of a real-world asset, reference to its value and entitlement to value derived from or backed by it. Physical gold is a real-world asset. The proposed gold-value claim therefore engages the definition even without a direct ownership right in individual bars. Settlement in dirhams does not change the reference asset into fiat currency. (VA Issuance Rulebook, Schedule 2, definitions of ARVA, RWA and FRVA.)
VARA's issuance guidance illustrates a gold-value token with minting and redemption linked to a quantity of gold. It classifies that example as Category 1 issuance and discusses reserves and dirham redemption. The example is non-binding guidance; it does not approve this product, its supplier or its custody structure. The binding requirements remain the issuance rules and applicable approvals. (VARA, Guidance on the Virtual Asset Issuance Rulebook, 9 April 2026, II.A, Example 1, p 62; Virtual Assets and Related Activities Regulations 2023, I.B.2 and I.B.4.)
The issuer is the entity responsible for issuance. The commercial arrangement must identify who determines the product's features, accepts obligations to holders and controls issuance and redemption. A South African seller does not become an issuer merely by supplying gold. Its position changes if it makes the holder promise, directs minting as its own product or uses another entity's permission while retaining the regulated role. (VA Issuance Rulebook, Schedule 2; Guidance on the Virtual Asset Issuance Rulebook, guidance topic 1.)
The independent issuer must have authority to reject ineligible gold, stop unsupported issuance and require corrective action. It must control the disclosures and holder terms for which it is responsible. Supplier branding can identify the source of bullion, but customer materials must identify the issuer and the party owing redemption. If the supplier also performs an outsourced function, the issuer retains full regulatory accountability. (Company Rulebook, IV.A.5; VA Issuance Rulebook, III.B and Schedule 1, B.)
Dubai territory and the federal product boundary
The intended operating territory falls within VARA's Dubai jurisdiction, which excludes the DIFC. A DIFC establishment or permission therefore does not establish permission for this proposed Dubai activity. The relevant entity, place of business and targeted customers must match the intended territorial route. (Dubai Law No. 4 of 2022 Regulating Virtual Assets in the Emirate of Dubai, arts 3 and 15–16.)
The federal Capital Market Authority, or CMA, succeeded the Securities and Commodities Authority from 1 January 2026. The new federal capital-market legislation excludes digital securities from its virtual-asset definition. Its securities definition extends to financial contracts, structured products and specified rights or derivatives relating to tradable products. Cabinet Resolution No. 111 of 2022 also separates digital securities and commodity contracts from its general virtual-asset route. (Federal Decree-Law No. 32 of 2025, arts 2, 27(3) and 30; Federal Decree-Law No. 33 of 2025, arts 1–2 and 85; Cabinet Resolution No. 111 of 2022, art 3.)
The strongest competing classification is a transferable gold-linked financial contract, structured certificate or commodity derivative. A cash redemption obligation does not resolve that issue merely because VARA has published a gold illustration. The issuer must obtain a classification accepted for the actual rights and payoff before relying on Category 1 issuance. A change to yield, leverage, pooled investment rights or derivative exposure requires renewed analysis of that boundary. The recommended plain gold-value design reduces the features requiring separate analysis, but it creates no securities exemption. (Federal Decree-Law No. 33 of 2025, art 1; VA Issuance Rulebook, I.C.2–3; Guidance on the Virtual Asset Issuance Rulebook, II, pp 61–62.)
Federal trading conditions require separate attention. Article 39(2) prohibits trading virtual assets in the State unless they are admitted to the official list of a virtual-asset platform operator licensed by the CMA, and the virtual assets are registered with the CMA. The legislation preserves the existing virtual-asset and delegation resolutions to the extent consistent with the new laws. The parties must establish how the particular token and intended Dubai venue meet the applicable registration and admission conditions before trading. A VARA issuer licence, token approval and exchange relationship must not be treated as interchangeable evidence of those conditions. (Federal Decree-Law No. 33 of 2025, art 39(2); Federal Decree-Law No. 32 of 2025, art 27(3).)
Merchant acceptance would add a different regulated function. The Central Bank's current statute includes payment services using virtual assets and other specified payment and digital-money activities within licensed financial activities. Its powers apply regardless of the technology used. A gold-value token redeemable in money therefore needs a separate Central Bank analysis before anyone adds a means-of-payment feature. The Payment Token Services Regulation prohibits UAE business sellers from accepting virtual assets in payment except dirham payment tokens issued by licensed issuers, or foreign payment tokens issued by registered issuers and used to buy virtual assets or their derivatives. Redemption by reference to gold value does not itself satisfy those conditions. The first product should restrict its commercial design to the approved gold exposure and redemption rights. (Federal Decree-Law No. 6 of 2025, arts 61(1)(f)–(h), 62 and 183; Payment Token Services Regulation, arts 1(51) and 2(7).)
The approvals behind each issuer route
A group-established Dubai issuer must obtain Category 1 VA Issuance permission and VARA's prior approval for each ARVA. The compulsory company, compliance, technology and market-conduct requirements apply alongside the issuance rules. Where requirements overlap, the rulebook applies the higher compliance standard. Owning the reserve gold supplies none of these permissions. (VA Issuance Rulebook, I.D.1–6 and Annex 2, I.B.2.)
An existing independent issuer requires the same product-specific analysis. Its licence must cover the actual activity, and its approval must cover the token and reserve assets. Custody must satisfy the rules and approval conditions. VARA can impose conditions concerning business segregation, underlying assets and associated permissions. A licence for brokerage, exchange or token custody does not establish Category 1 issuance permission. (Virtual Assets and Related Activities Regulations 2023, III.A.1 and IV.B.1; VA Issuance Rulebook, Annex 2, I.A.3–4, I.B.2–4 and III.C.2.)
Before public offering or marketing, the issuer must prepare and publish the whitepaper and a separate risk disclosure statement. Category 1 requires approval of the whitepaper as part of the applicable approval process. The documents must explain the gold reference, reserve arrangements, enforceable holder rights and redemption mechanics. They must also identify governing law, the competent court and rights on insolvency. Material changes require the applicable updates, notifications and approvals. (VA Issuance Rulebook, III.A–C, Schedule 1, B, and Annex 2, II.A; Guidance on the Virtual Asset Issuance Rulebook, guidance topic 4.)
Distribution depends on actual conduct. Soliciting or accepting orders, handling subscription payments, placing tokens for an issuer and arranging transactions can fall within Broker-Dealer Services. An exchange or a custodian of customers' tokens performs distinct activities requiring the relevant permission. Issuance approval does not itself authorise a separate platform, distributor or wallet provider. Equally, the supplier's sale of physical gold does not by itself constitute token distribution. (Virtual Assets and Related Activities Regulations 2023, Schedule 1, definitions of Broker-Dealer Services, Exchange Services and Custody Services.)
Where a licensed broker performs Licensed Distribution Services, the broker's distribution rules apply alongside the issuer's approvals. They require submissions covering the whitepaper, risk statement, compliance declaration and due diligence. Placement must await the applicable 15 Working Day period and resolution of any VARA comments or objections to its satisfaction. That period starts on the first Working Day after submission; its expiry does not replace token approval. The parties must map their actual activities before assigning these responsibilities. (Broker-Dealer Services Rulebook, IV.A and IV.D.1–7.)
The supplier agreement should prohibit the South African business from taking token orders, receiving subscriptions or making redemption promises unless separately authorised. Co-branded material must pass through the issuer's approval process and satisfy VARA's marketing requirements. Marketing an ARVA as a stablecoin or as stable by reference to an asset also engages the licensed-issuer, approved-product, single-reference-asset and reserve conditions in rule III.F.1. Supplier branding does not authorise the supplier to make those representations in its own regulated capacity. The issuer's ARVA marketing must state that the asset is outside investor-protection and deposit-guarantee schemes. Claims that token holders own gold must match legally effective rights. (VARA, Regulations on the Marketing of Virtual Assets and Related Activities 2024, I.B–C; VA Issuance Rulebook, Annex 2, III.B and III.F.)
The South African gold and its lawful export
The supplier must classify the actual gold before agreeing the delivery route. "Bullion" is a commercial description. The Precious Metals Act defines refined precious metal by a purity threshold of at least 99.9%. Its unwrought definition covers specified unrefined material and material refined below that threshold, with a manufacturing test and an express exclusion for minted bars. Semi-fabricated precious metal has a separate definition based on specified forms. A high-purity cast bar cannot automatically be treated as unwrought merely because it is called bullion. (Precious Metals Act 37 of 2005, s 1.)
The assay, form, manufacturing history and any minted-bar certification must therefore accompany the supply specification. Sections 4 and 5 regulate acquisition, possession and disposal of unwrought and semi-fabricated metal, including activity as agent. The permitted capacity depends on the actor and activity: a relevant licence, authorisation, producer entitlement, permit or certificate must cover the transaction. The hypothetical company's lawful ownership does not establish permission to conduct every proposed business activity. (Precious Metals Act, ss 4–5 and 7–9.)
The supplier must also establish the applicable gold-dealing permission and compliance with, or exemption from, Exchange Control Regulation 5. Those rules use their own gold definition, so the Precious Metals Act classification does not settle the exchange-control position. (Exchange Control Regulations, regs 1–2 and 5.)
Provenance records must connect the supplier's title to a lawfully authorised source. The Act requires specified vendor-authority checks and transaction records, and criminalises purchase without satisfying oneself of the vendor's authority. Transport of the relevant categories also requires prescribed documentation. The supply warranties should be backed by purchase records, assays and the applicable permission documents. (Precious Metals Act, ss 13–15 and 20(1)(b).)
Physical export is a separate approval event. Section 12 requires National Treasury approval, with the Minister's concurrence, for unwrought or semi-fabricated gold exports. Exchange Control Regulation 3(1)(a) extends to gold in any form. The current authorised-dealer manual directs applications to export gold to the South African Diamond and Precious Metals Regulator. A possible distinction in the Precious Metals Act's categories therefore creates no general freedom to ship high-purity bars. (Precious Metals Act, s 12(1); Exchange Control Regulations, 1961, reg 3(1)(a); SARB, Currency and Exchanges Manual for Authorised Dealers, C(B)(i).)
The applicable export consent must also address the local-beneficiation condition in the Precious Metals Regulations. The applicant must satisfy the Minister that relevant local demand has been provided for, with reasonable grounds that this will continue during the consent period. The exporter must retain each export bill of entry and supporting documents for the prescribed period, alongside any longer applicable retention duty. These requirements belong in shipment conditions and the records clause. (Precious Metals Regulations, reg 23(3)(a) and reg 24(2), as substituted by GN R387 of 4 April 2008, amendments 7–8.)
Shipment should follow the applicable exporter registration, customs declaration and release process. The exporter must retain the invoice, transport and consent records needed to reconcile the goods with the receipt of payment. Dubai import clearance requires the relevant declaration and supporting commercial documents before the custodian accepts the bars into the approved reserve. Delivery terms must identify the importer of record and the point at which title, transit risk and insurance responsibility change. (SARB, Currency and Exchanges Manual, B.18(A); SARS, Goods Declaration and Exporter Registration guidance; Dubai Customs, Service Guide 2025, pp 33 and 72.)
Delivery terms also determine the VAT evidence required. The contract should identify who consigns or delivers the gold to the Dubai recipient or its appointed custodian and require access to export, delivery and payment records. A foreign buyer's address does not by itself establish entitlement to zero rating; delivery to a purchaser in South Africa engages a different indirect-export analysis. (Value-Added Tax Act 89 of 1991, s 1(1), definition of 'exported', para (a), ss 11(1)(a)(i) and 11(3); SARS Interpretation Note 30 (Issue 3), paras 4 and 6–7.)
Sale proceeds, offshore gold and cross-border services
An outright sale for money gives the supplier a more defined exchange-control transaction than an open-ended contribution of gold. The authorised dealer must assess the actual price, payment period and receipt route. The current manual contains the general six-month export sale and receipt requirements, with conditional authority for longer credit. It also addresses offering foreign proceeds to an authorised dealer or retaining them under the customer foreign-currency account rules. Payment need not invariably be converted into rand. (Exchange Control Regulations, regs 6 and 10; SARB, Currency and Exchanges Manual, B.18(B)(i) and E(B)(ii)(a)(aa).)
Gold held abroad without a completed sale creates a different issue. A consignment, loan or continuing offshore stockholding must be presented according to its substance. Permission to export a bar does not itself authorise every retained foreign asset or later disposal. The contracts and bank submission must state who owns the gold after shipment, whether payment is due and when proceeds return. (Exchange Control Regulations, regs 3, 6–7, 10 and 11; SARB, Currency and Exchanges Manual, B.18 and C.)
Establishing a group issuer adds outward-investment requirements. Equity, shareholder loans, guarantees and contributions of gold must be assessed under the corporate foreign-direct-investment route. The manual expressly requires approval and reporting for relevant new investment even when no funds move outward. Calling a gold contribution "supply" does not convert it into a paid export sale. (Exchange Control Regulations, reg 10(1)(c); SARB, Currency and Exchanges Manual, B.2(C), particularly B.2(C)(i)(e)(gg).)
Payments by the South African business to non-resident service providers must satisfy the applicable agreement, invoice and reporting conditions. Receipts for the supplier's own services require their corresponding reporting treatment. Export receipts should not be silently reduced by service charges or redirected into the foreign issuer's capital. The agreed banking treatment must cover any netting, credit or related-party funding. Unwrought precious metal also cannot be delivered in payment of a debt or services under the Act's prohibition. The recommended design therefore uses separately documented money payments. (Exchange Control Regulations, reg 6; SARB, Currency and Exchanges Manual, B.3(C) and B.18(B); Precious Metals Act, s 4(4).)
The supplier's financial-crime duties remain its own. A dealer meeting the Financial Intelligence Centre Act's high-value-goods test becomes an accountable institution. Item 20 requires the specified R100,000 goods-value and payment thresholds, including apparently linked operations. The transaction's actual value determines that application. Relevant duties include registration, customer and beneficial-owner checks, ongoing scrutiny, records and a risk-management programme. Suspicious-transaction reporting also applies more broadly to persons carrying on or working in a business. (Financial Intelligence Centre Act 38 of 2001, ss 21–24, 29, 42 and 43B; Schedule 1, item 20, inserted by GN 2800 of 29 November 2022.)
Screening must address the actual counterparties, beneficial owners, source of gold and transaction purpose. Neither country name supplies counterparty clearance. If the South African team later advises on tokens or provides intermediary services, the crypto-asset declaration under the Financial Advisory and Intermediary Services Act requires a separate permissions assessment. Client crypto services can also engage the Financial Intelligence Centre Act's separate crypto-provider category. (Financial Intelligence Centre Act, ss 26A–26C and 28A, Schedule 1, item 22; Declaration of a Crypto Asset as a Financial Product, GN 1350 of 19 October 2022.)
Allocated reserves and the custodian's legal role
Allocated custody should identify specific accepted bars, their fine-gold content and the person holding legal title. The custody contract must state the account capacity and separate those assets from the custodian's own property. A licence to safeguard virtual assets does not establish qualification to vault physical bullion. VARA requires reserve assets to be held with entities validly licensed and qualified to hold those assets. (VA Issuance Rulebook, Annex 2, III.C.2(a); Virtual Assets and Related Activities Regulations 2023, Schedule 1, Custody Services.)
The reserve must be sufficient and acceptable to secure the represented rights and value, including redemption liquidity risk. VARA's ARVA rules do not prescribe a single numerical gold reserve ratio for every product. The approved quantity, quality and liquidity arrangements must support the actual obligation. A rise in the market price of remaining bars cannot replace missing units where the obligation references a specified gold quantity. (VA Issuance Rulebook, Annex 2, III.A and III.C.1.)
VARA requires reserve assets to be segregated from the issuer's own funds and, to the furthest extent applicable law permits, its estate. The rules also require protection against recourse by issuer, custodian and other creditors. Rehypothecation is prohibited; pledges and encumbrances that prevent redemption are restricted. A duly registered practising lawyer must give the required opinion on compliance with these protections. Labels in the account name and a supplier's clean-title warranty cannot supply that legal effect on their own. (VA Issuance Rulebook, Annex 2, III.C.2–4.)
The approved documents must identify the legal owner, any representative enforcing reserve rights, the persons entitled to benefit and the mechanism operating on issuer failure. They must explain whether holders have only a claim against the issuer during ordinary operation and what enforceable reserve recourse becomes available if it cannot redeem. An issuer's unrestricted ownership of its own assets cannot be treated as estate separation merely because its books call them reserves. A structure that cannot establish the required protection should not proceed to issuance. (VA Issuance Rulebook, Annex 2, III.C.3–4 and III.E.2; Schedule 1, B.C.)
For bars in Dubai, the UAE's movable-property rules govern ownership questions by reference to the relevant situs and event. Contractual choice of law does not itself establish a proprietary right effective against third parties. The Civil Transactions Law distinguishes personal claims from real rights, and regulates deposits for safekeeping and return. The custody agreement should prohibit use, lending and unauthorised substitution or subcustody, with release instructions consistent with the approved reserve structure. (Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law, attached Law, arts 18–19, 108–110, 904 and 906–912.)
Direct gold ownership would be a different promise. If the token purports to convey a direct or fractional proprietary interest, VARA requires that right to be legally valid. Transfers of the token must correspond to transfers of the underlying right, including applicable title formalities. The recommended initial product should describe a redemption claim and its actual reserve protection accurately, without claiming direct bar ownership. A later proprietary design needs the corresponding property and transfer arrangements before those words appear in the whitepaper. (VA Issuance Rulebook, Annex 2, III.B.1–2.)
Gold retained in South Africa and instrument reserves
The ARVA reserve provisions do not impose a universal Dubai-only custody rule. Keeping gold in South Africa changes the proposed structure. VARA must accept the assets and custody arrangements, and the issuer must establish legally effective segregation and timely access to redemption value. The property and insolvency analysis would then need to address South African holdings, including how ownership or reserve rights become effective there. (VA Issuance Rulebook, Annex 2, I.B.2–4 and III.C.1–4.)
Selling an interest while the bars remain in South Africa does not itself constitute a physical customs export. The supplier must still assess controlled dealing, non-resident rights, consideration and exchange-control consequences. That variation cannot support a claim that token transfers automatically convey South African gold ownership. The recommended first route places approved reserves in Dubai after the applicable physical-export process, reducing the number of property systems governing ongoing reserve custody. (Precious Metals Act, ss 1 and 4–5; Exchange Control Regulations, regs 3, 6 and 10; VA Issuance Rulebook, Annex 2, III.B–C.)
Reserves containing instruments require another approval analysis. VARA's gold guidance mentions regulated gold derivatives as potentially acceptable assets. The binding rule still requires sufficient, acceptable reserves and assessment of their risks. An instrument can add counterparty, margin, settlement and price-mismatch exposure, even when it references gold. The issuer must demonstrate eligibility and liquidity, disclose the composition and reassess the product's securities boundary. It must not describe an instrument-backed reserve as allocated physical bullion. (Guidance on the Virtual Asset Issuance Rulebook, II.A, Example 1; VA Issuance Rulebook, Annex 2, I.A.4, II.A and III.C.1–2.)
Redemption value and liquidity under stress
The stated product grants redemption rights, so the ARVA redemption requirements apply. Holders must have the right to receive equal value in dirhams, with any additional disclosed forms offered by the issuer. Rights must operate against the issuer, or otherwise in respect of reserve assets if it cannot process and complete redemption. A physical-only or foreign-currency-only promise would fail the ordinary dirham requirement. (VA Issuance Rulebook, Annex 2, III.E.1–2.)
For this product, dirham redemption should be the initial contractual choice. Physical delivery can be added only after the issuer addresses delivery eligibility, bar sizes, transport, import or export requirements and cost allocation. It would supplement the dirham option. The prohibition on fees for processing or completing redemption means the issuer cannot assume that a delivery charge escapes the rule merely by being given another name. (VA Issuance Rulebook, Annex 2, III.E.1 and III.E.4.)
The terms should define the referenced gold quantity and fineness, price source, valuation time and any currency conversion into dirhams. They should explain how the issuer handles market closure, erroneous prices and a failed payment. Those are contractual design decisions needed to make equal value operable; the ARVA rule does not prescribe one universal benchmark. The issuer should fund transaction costs separately so that they do not become an undisclosed deduction from redemption value. (VA Issuance Rulebook, Annex 2, III.A, III.E.1 and III.E.4–5; II.A.1(k).)
Rule III.E.3 requires redemption requests for equal value of real-world assets to be processed and completed within a reasonable period, subject to successful onboarding and other legal conditions. The issuer must disclose its redemption procedures and timeline. For dirham payment, it must also have prompt access to reserves and the ability to convert them into dirhams. The timetable must reflect those duties, rather than importing a fixed next-day rule from another token category. (VA Issuance Rulebook, Annex 2, III.E.3, II.A.1(k) and III.C.2(d).)
The issuer should agree settlement accounts, liquidity providers and escalation procedures before issuance. Its process must reconcile the holder's entitlement with token cancellation and payment, including failed settlement. These are operating controls supporting the disclosed promise. Holding enough gold by weight does not establish that the issuer can sell or release it promptly during a disruption. (VA Issuance Rulebook, Annex 2, III.C.1–2 and III.E.5.)
Ordinary cash stress supplies no general suspension permission under the ARVA redemption rules. Mandatory legal restrictions, including applicable freezes or regulator directions, must be obeyed. A contractual discretion to suspend merely because liquidation is inconvenient would undermine the promised right and the liquidity obligation. Termination provisions must preserve the applicable redemption process and the issuer's wind-down duties. (VA Issuance Rulebook, Annex 2, III.C.1–2 and III.E; Company Rulebook, VII.A and VIII.B.)
Custodian insolvency and a reserve discrepancy
Suppose the custodian enters insolvency while holders seek redemption. Identifiable bars held for another owner may be recoverable under the UAE Financial Restructuring and Bankruptcy Law. Articles 228 and 236 provide recovery procedures for qualifying third-party property, including proof of ownership and court involvement. The legal owner or properly empowered representative must establish its standing; a token holder cannot assume that its token balance establishes ownership of a particular bar. The applicable insolvency regime must match the custodian's legal status. (Federal Decree-Law No. 51 of 2023, arts 3, 228 and 236.)
Recovery also has limits. Where the debtor pledged third-party assets to a lender unaware of its lack of ownership, article 228(3) prevents recovery until the secured debt is repaid. Physical allocation therefore needs enforceable restrictions on pledges, information about liens and a custody structure that prevents unauthorised use. Even a valid recovery claim can require proceedings before the metal becomes available for sale. The issuer's liquidity plan must address that delay. (Federal Decree-Law No. 51 of 2023, art 228(3)–(5); VA Issuance Rulebook, Annex 2, III.C.2–4.)
Issuer insolvency presents a separate question. Recovery of issuer-owned bars from a failed custodian does not establish the holders' priority against the issuer. The reserve opinion and operative documents must establish the required separation and the holder's fallback recourse. If the only enforceable right is an unsecured claim for payment, the holder may have to prove that claim in insolvency. Neither the words "gold backed" nor a contractual promise of priority can create a proprietary right unsupported by applicable law. (VA Issuance Rulebook, Annex 2, III.C.3–4 and III.E.2; Civil Transactions Law, arts 108–110.)
If the bars are missing, the owner may instead hold claims against the custodian, supplier or insurer. Their value and recoverability differ from possession of gold. The issuer should immediately reconcile circulating units with accepted reserve quantity, value and encumbrances, prevent further unsupported minting and invoke agreed shortfall remedies. The issuer must immediately report a discovered breach relating to its virtual-asset activity to VARA under the compliance rules. Replacement assets must themselves meet the approval conditions. (VA Issuance Rulebook, Annex 2, III.C; Compliance and Risk Management Rulebook, I.I.2.)
The issuer must publish circulation and reserve information at least monthly, including a statement whether the tokens are sufficiently backed. ARVA rules also require an independent supply-and-reserve audit every six months and annual financial audit, with the prescribed attestations. Those intervals do not permit a known shortfall to remain uncorrected between audits. The recommended operating agreement requires daily bullion reconciliation and event-driven checks after every mint, redemption or reserve movement. These contractual controls supplement the applicable regulatory duties. (VA Issuance Rulebook, Annex 2, II.B.1–2 and III.D.1–3.)
Contracts and the choice of issuer
The supply agreement should make lawful title, authority to sell, provenance, assay and freedom from encumbrances conditions of acceptance. It should identify each delivery, the title and risk transfer point, rejection rights and the supplier's replacement or cash-cure obligations. The contracts should require insurance for agreed custody and transit exposures, identify insured parties and beneficiaries, and set a claims process. An indemnity or expected insurance payment should enter the reserve calculation only when the resulting asset is received and qualifies under the approval. (Precious Metals Act, ss 4–5, 12–15 and 20; VA Issuance Rulebook, Annex 2, I.A.4 and III.C.)
The custody and reserve agreements should identify ownership, account segregation, permitted release instructions and restrictions on liens, set-off and subcustody. They should provide bar-level statements, physical verification, audit access and prompt incident notices. The issuer needs enforceable access to records and assets during insolvency and on termination. Where a service constitutes outsourcing, VARA requires a binding written agreement with specified responsibilities, continuity, data-access and termination provisions. Material outsourcing adds mandatory inspection, audit, insurance and transition provisions. Outsourcing an issuer function to South Africa also requires prior notification to VARA and the applicable cross-border controls. A purchase of goods must be distinguished from delegation of an issuer function when applying these requirements. (Company Rulebook, IV.A, IV.D.1 and IV.D.3–4, IV.F.1–6 and IV.G; VA Issuance Rulebook, Annex 2, III.C–D.)
The holder terms, whitepaper and distribution contracts must agree on the issuer, gold reference, valuation, eligible holders and redemption process. They must allocate customer onboarding, marketing approval, order handling and complaints to the actors actually performing them. Each regulated actor retains its own financial-crime duties. Data-sharing and incident clauses should allow necessary checks and escalation without implying that a supplier's screening discharges the issuer's obligations. (VA Issuance Rulebook, III.B–C and Annex 2, II.A and III.E; Compliance and Risk Management Rulebook, Part III; Broker-Dealer Services Rulebook, Part IV.)
The Dubai issuer must apply the current federal financial-crime requirements to its customers and transactions. They include customer and beneficial-owner verification, ongoing scrutiny, suspicious-transaction reporting and applicable targeted-financial-sanctions measures. Reliance on another party's due diligence leaves the relying firm responsible. The operating agreements must permit the issuer to obtain the necessary records and act on a legal freeze, while distinguishing those restrictions from ordinary redemption liquidity stress. (Federal Decree-Law No. 10 of 2025, arts 18–19; Cabinet Resolution No. 134 of 2025, arts 6–10, 20 and 36.)
An independent issuer is the preferred first route because the South African business can confine its principal role to lawful bullion supply. The issuer must already possess, or obtain, the actual issuance capability and product approvals. The supplier depends on that issuer's acceptance criteria, reserve controls, redemption performance and continuity arrangements. It should select the counterparty by examining those permissions and operative documents, with contractual exit and replacement procedures that preserve holder protection. (VA Issuance Rulebook, I.D and Annex 2, I.B and III.C–E; Company Rulebook, IV.D and VII.)
A group issuer becomes preferable when the business needs direct control of the product and can support the corresponding duties. It must fund its own operating capability, capital and liquidity, manage conflicts with the bullion supplier and maintain required reporting. Its outward-investment permissions also need to cover the group funding. Licentium's Dubai permissions and capital analysis explains the broader establishment issues. (VA Issuance Rulebook, I.D and Annex 2, III.C.5 and III.G; SARB, Currency and Exchanges Manual, B.2(C).)
For the recommended independent-issuer route, the parties should settle product classification and permissions before committing to token issuance. They should then approve the supply specification, obtain the required South African permissions and banking treatment, and complete export and Dubai import clearance. Before minting, the issuer must obtain custody confirmation of accepted assets, the required lawyer's opinion and evidence of protected reserves under its approval conditions. Distribution and any trading should begin only after their separate requirements are met. Redemption must operate through the disclosed valuation and settlement process from the first issued unit. (VA Issuance Rulebook, Annex 2, I.B.2, III.C.2(c), III.C.3–4 and III.E; Precious Metals Act, s 12; Federal Decree-Law No. 33 of 2025, art 39(2).)
If no candidate can demonstrate the accepted classification, necessary approvals, protected reserves and enforceable redemption arrangements, the parties should defer the token launch. The supplier can continue a lawfully authorised ordinary bullion trade within its permissions. Taking control of issuance, adding distribution, retaining reserves in South Africa or introducing payments requires a corresponding change in permissions or product design before that activity begins. (Virtual Assets and Related Activities Regulations 2023, III.A and Schedule 1; VA Issuance Rulebook, I.C.3 and Annex 2, I.B and III.C–E.)