Skip to content 
Non-Fungible Tokens (NFTs) have dominated headlines for the past few years, from high-profile sales like Beeple’s digital art at Christie’s to the meteoric rise of the Bored Ape Yacht Club. And even though early experiments with this emergent non-fungible space date back to 2017, through projects like Cryptokitties, the wider NFT market exploded in 2021, hitting previously unthinkable transaction volumes. Interest has also surged in the United Arab Emirates, with NFTs exhibitions hosted by the Dubai International Financial Centre and Emirates Post issuing an NFT stamp series to commemorate the nation’s 50th anniversary.
Most of the public discourse over these tokens concerns artwork and collectibles. But the technology has potential applications that go far beyond digital images, ranging from tokenised sports highlights and music rights to in-game items and real-world assets. In this article, we will describe what Non-Fungible Tokens are, how they can be created and traded, and explore how law, regulation and intellectual property concerns may influence them in the UAE. We also consider the main steps to introducing Non-Fungible Token into an existing business in the UAE, from figuring out blockchain and storage solution, to interacting with specialized marketplaces.
Defining the basics of Non-Fungible Tokens in the UAE
The most peculiar characteristic of Non-Fungible Tokens is that they are unique. Fungible assets (like most cryptocurrencies and fiat currency) are mutually interchangeable on a one-for-one basis. No US dollar is different from another US dollar, and 1 ether is effectively equivalent to 1 ether. NFTs, however, are digital tokens that represent a unique, identifiable item. However, its impossible to just swap them on equal terms with another NFT. Under the hood, an NFT comes into formation through protocols embedded in a blockchain. These protocols usually involve a piece of code called a smart contract. Each NFT’s metadata, its identifying information and references to the underlying file or asset, links to a cryptographic address. The Ethereum blockchain is the most well-known host for NFTs, using standards such as ERC-721 or ERC-1155. Other blockchains, such as Flow, have also gained popularity, particularly for brand-related collectibles like NBA Top Shot.
The meaning of a token in this context
A token, in broad blockchain usage, is a digital representation of some element of value, rights, or obligations, recorded, stored, and transferred via distributed ledger technology. Cryptographic keys, the user’s public and private key pair, control the address at which the token is stored. But from a legal standpoint, controlling the token may not equate to strict ownership of the item it references. Rather, it confers control, letting the holder transfer or sell that digital claim or demonstrate authenticity.
For NFTs, controlling the token means controlling the official cryptographic link that identifies the item as original, unique, or validated on that blockchain. Depending on how the NFT is structured, a token holder may also gain specific rights, such as commercial usage or profits from resale. However, these must be determined by the relevant contractual or code-based provisions.
Types of NFTs and what they represent
While the public often thinks of NFTs as digital art or limited-edition profile pictures, they can fit two main categories:
Digitally-native assets
Entirely digital in origin, with no real-world counterpart. This group includes collectible avatars like CryptoPunks or in-game items that exist within a metaverse or gaming environment. The value emerges from perceived scarcity, brand recognition, or community hype. Many early NFT hits, such as Bored Ape Yacht Club, fall under this category.
Tokens tied to real-world assets
Here, an NFT references a tangible item such as an artwork, a house, a vehicle, or even a commodity like a diamond. The on-chain token can confirm authenticity or partial ownership. Nonetheless, bridging the gap between on-chain representation and off-chain legal rights can be complex. Additional contracts or custody arrangements are often essential to ensure that the NFT truly conveys some enforceable claim to the underlying object.
Our working hours: Monday to Friday, 9 AM – 6 PM GMT+4
Critical steps for businesses entering NFTs
The NFT wave has drawn established brands, celebrities, and new entrepreneurs eager to create or market digital tokens. However, building a successful offering involves more than merely uploading files to a platform. Some of the main points include:
Use case identification
Clarify why you wish to issue NFTs. Are they purely collectibles, part of a loyalty system, or do they serve as membership passes granting exclusive benefits? Sports leagues, for instance, tokenise memorable moments or images to monetise fan interest. Luxury retailers might use them to track authenticity.
Choosing a blockchain
Ethereum is the leader but comes with higher transaction fees (commonly called “gas costs”). Alternative platforms, like Flow, Polygon, or Binance Smart Chain, offer cheaper, faster transactions, albeit with smaller ecosystem support. Factors include user familiarity, the availability of NFT-focused tooling, and the audience’s comfort with a particular chain.
Minting and storage
When an NFT is minted, the creator deploys a smart contract specifying metadata such as name, description, and potential supply. The actual digital file can be stored “on-chain,” though that is expensive and resource-intensive. Most creators use partial solutions, placing crucial references on-chain while the main file is stored via decentralised or centralised file systems. In that scenario, the NFT only “points” to the media content, so long-term reliability depends on stable hosting.
Security and distribution
Once created, NFTs must be held in digital wallets. These can be non-custodial, letting the user control private keys, or custodial, where a marketplace or third party stores the tokens. The distribution itself typically uses specialised marketplaces. Some are open, letting anyone list NFTs, while others require whitelisting or curation. Payment methods vary, from cryptocurrency only to credit-card acceptance for mainstream convenience.
Ongoing engagement
Some NFTs rely primarily on short-term hype, but others foster community. The tokens can form a gateway to perks, real-world events, or gamified experiences. For instance, certain brand-based NFTs grant the holder access to limited-edition merchandise or the right to vote on brand decisions. Data gleaned from these interactions can be valuable but must be handled with caution regarding privacy and local data laws.
Intellectual property concerns
One of the thorniest areas in NFT usage is IP. Buying an NFT of an image does not automatically transfer ownership of the underlying artwork’s copyright or trademark. Unless specifically coded into the smart contract or spelled out in related terms of service, the buyer may only gain the right to display or resell that token. The original artist or brand often retains deeper rights, deciding if owners can create derivative works or commercial spinoffs.
Large companies increasingly expand their trademarks to cover digital assets. This can help them defend their brand from unauthorised NFT-based uses. For smaller creators, clarity about what an NFT holder can or cannot do is crucial.
"Some companies adopt an open model, letting owners freely commercialise the image, while others restrict usage. The conventional approach is “naked NFTs,” meaning that IP rights remain fully with the original creator, unless contractually assigned."
Approaches to NFT regulation in the UAE
The United Arab Emirates does not yet maintain a single, cohesive set of laws dedicated to NFTs. Instead, free zones such as DIFC and ADGM have published guidelines for digital assets more broadly, focusing on aspects like whether the token behaves as a security or payment instrument:
DIFC
Overseen by the Dubai Financial Services Authority, security tokens are subject to well-defined rules. Utility tokens that function as intangible rights or membership keys remain mostly outside regulation. The DFSA can evaluate a token based on substance, not marketing spin. If an NFT or token confers the same rights as equities or debt, it becomes a security token. A standard NFT with no built-in profits or revenue-sharing is typically not regulated in the same way, though it may still face AML obligations. The DIFC has a positive history with crypto and digital assets.
ADGM
Under the Financial Services Regulatory Authority’s virtual assets framework, a “virtual asset” is a digital representation of value serving as a medium of exchange, a store of value, or a unit of account. NFTs representing art or a unique collectible typically do not align with this definition, so the FSRA does not treat them as regulated financial instruments. Nonetheless, if an NFT includes revenue-sharing or investor-like features, it might be reclassified as a security or derivative.
Securities and Commodities Authority
On the mainland, the SCA has crypto-asset regulations mainly geared toward security tokens or commodities. Peer-to-peer marketplaces that trade purely collectible NFTs may not fall neatly under SCA rules. Still, participants must respect AML rules if they facilitate transactions in or from the UAE.
In practice, the classification depends on the rights the NFT bestows. If it is simply a digital collectible, it generally remains outside heavy regulation. If it conveys partial ownership in a real estate asset or a share in future earnings, it may cross over into regulated territory. Projects must examine the real function of their tokens rather than rely on labels.
NFT marketplaces and distribution methods
Just as e-commerce platforms differ in approach, so do NFT marketplaces. Some allow anyone to list tokens, using external wallets. Others only accept curated creators or keep custody of user tokens. A few major categories:
- Open marketplaces: Non-custodial, open to all. OpenSea is a leading example, enabling credit card payments (through third-party solutions) and direct crypto trades.
- Crypto-native curated marketplaces: They approve creators who want to drop limited NFT collections. SuperRare or Foundation typically follow this approach, emphasising exclusivity.
- Closed ecosystems: Some large brands host their own site, taking full custody of user NFTs. The platform can manage tokens behind the scenes, letting casual users pay with normal cards without dealing with crypto wallets.
- White-labeled solutions: Third-party providers supply infrastructure for businesses wanting to run an NFT store under their own brand.
Selecting the right marketplace depends on the target audience, expected transaction volumes, and whether you prefer non-custodial or custodial setups. For high-value art, curated platforms can provide a sense of prestige or due diligence. For mass-market items, a closed but user-friendly platform might be more suitable.
Get the most relevant information about business life in Dubai
Potential business models around NFTs
Although many associate NFTs with flipping digital art, various business avenues exist:
- Collecting and trading: Individuals build personal NFT portfolios, but companies can emerge to handle appraisal, vaulting, or curation.
- Marketplaces: Launching a platform that enables creators to mint and sell. Many require advanced security to handle user funds, robust AML checks if tokens cross payment thresholds, and possibly user identity verification.
- Infrastructure: Offering backend tech for minting or bridging to real-world asset registries.
- Advisory and consulting: Helping brands conceptualise NFT strategies, from loyalty tokens to membership passes that yield both physical and digital benefits.
- Custodial services: Providing safe NFT storage for high-value holders, along with insurance or guaranteed recovery if private keys are compromised.
AML aspects and local compliance
Despite falling outside typical securities rules, many NFT transactions are large enough to trigger concerns about money laundering or terrorist financing. An NFT can be transferred quickly across borders, with minimal friction if not properly monitored. The UAE’s regulators strongly emphasize that any platform or dealer facilitating trades might be subject to AML obligations. This can mean verifying identities of buyers and sellers, blocking suspicious transactions, and reporting unusual patterns to authorities.
Some marketplaces incorporate real-name verification or blockchain analysis tools that flag addresses linked to known illicit activities. Others rely on user self-disclosure, which might suffice for smaller-scale trades.
"Entities that ignore AML steps risk legal ramifications, particularly if the tokens hold significant monetary value."
Ownership disclaimers and linking real assets
Where an NFT references a real-world item, like a piece of physical artwork or collectible, there must be a parallel contract or arrangement specifying the NFT holder’s rights. For instance, does the NFT holder truly own the physical object, or is it stored at a warehouse with a custodian? If they want to claim the item, how do they do so, and what fees apply? This part of the arrangement often sits outside the blockchain, handled by standard legal instruments. The NFT can serve as proof of authenticity or membership in a fractional ownership group, but local property laws still govern how tangible items are transferred.
In the UAE, bridging the gap can be trickier because local land registries or official bodies might not seamlessly recognize NFT-based claims. If token creators want to link an NFT to a real asset, they must typically sign legal documents ensuring that possession or ownership changes once the token trades. Without these measures, the NFT might remain a mere representation.
Metaverse expansions
NFT usage often blurs with the concept of the metaverse, a virtual space or collection of digital realms where participants can own and trade tokenised items. The UAE has shown interest in advanced digital experiences, with ministries using VR or blockchain-based solutions. Future expansions may see official Emirati buildings or cultural sites mirrored as NFT-based virtual properties, giving users a partial claim or the ability to host events. Gamified applications, loyalty programs, and brand tie-ins could flourish in an environment that merges real-world significance with digital exclusivity.
Keeping an eye on the future
Although the hype cycle around NFTs has seen peaks and troughs, many experts believe these tokens will remain relevant, branching into new industries. Non-Fungible Tokens could track supply chains, represent membership in decentralized organisations, or authenticate academic credentials.
Industry observers note that next steps could involve stablecoins or national digital currencies enabling simpler NFT purchases, more direct integration with real estate tokens for partial ownership, or even legal frameworks that standardise cross-border usage of token-based assets. Meanwhile, the gulf between unregulated collectible NFTs and heavily scrutinized security tokens fosters a wide territory for creativity, as long as participants remain mindful of IP rights and potential investor protection rules.
-
Businesses must decide on the NFT’s function, pick a suitable blockchain, handle custody, distribute through the right marketplace, and maintain engagement through community features or utility.
-
Linking NFTs to off-chain assets demands contracts for enforceability. Liquidity also remains uncertain if there are not enough active traders, and compliance with AML rules can raise operational costs.
-
As regulators refine their stance, NFTs could expand in areas like real estate, gaming, brand loyalty, and digital collectibles, positioning the region as a key innovator in blockchain-based commerce.
