Abstract
Saudi Arabia has achieved a global milestone in real estate tokenisation by executing the world’s first sovereign-native tokenised property title deed transfer, directly integrating the national Real Estate Registry (RER) with blockchain settlement infrastructure . Unlike other jurisdictions where tokens represent indirect interests through Special Purpose Vehicles (SPVs), the Saudi model enables tokens to function as legally recognised digital title, with the government authoring the technical token standards themselves—a world first . This paper analyses the Kingdom’s regulatory framework for real estate tokenisation, examining the roles of key authorities including the Capital Market Authority (CMA), the Real Estate General Authority (REGA), and the Saudi Central Bank (SAMA). It evaluates the landmark February 2026 transaction between the National Housing Company and the Real Estate Development Fund, which demonstrated 66-second settlement with compliance rules encoded directly into transaction logic . The paper concludes by assessing the open-source SQMU standard against Saudi Arabia’s regulatory requirements and proposes implementation strategies for compliant deployment within the Kingdom’s sovereign digital infrastructure.
I. Introduction
The global landscape of real estate tokenisation has been characterised by a fundamental limitation: tokens have historically represented indirect economic interests in property-owning vehicles rather than legal title itself. Platforms worldwide issue tokens backed by shares in Special Purpose Vehicles (SPVs), creating a separation between digital records and statutory ownership . The official land registry lists the SPV, not the token holder, as the legal owner. This “digital wrapper” approach leaves tokenised assets in a legal grey zone, where courts may not recognise token transfers as conveying property rights.
Saudi Arabia has eliminated this abstraction entirely. In February 2026, the Kingdom executed the world’s first sovereign-native tokenised property title deed transfer, settling a transaction between the National Housing Company (NHC) and the Real Estate Development Fund (REDF) in 66 seconds . The transaction integrated the national Real Estate Registry (RER) directly with blockchain infrastructure, embedding national property law and registry rules into the digital settlement layer itself .
This milestone places Saudi Arabia at the forefront of real estate tokenisation globally. While jurisdictions such as Singapore, the United Kingdom, and the European Union have introduced digital asset frameworks, Saudi Arabia is the first nation to implement executable technical code directly within its sovereign property registry . The government did not merely regulate private platforms; it authored the technical token standards themselves—a structural difference that investors and developers must understand .
This paper analyses the Saudi regulatory framework for real estate tokenisation, examining the authorities, laws, and compliance requirements that govern this emerging sector. It then evaluates how the open-source SQMU standard—with its measurement-based supply (1 SQMU = 1 verified m²) and ERC-1155 dual-layer architecture—can be implemented compliantly within the Kingdom’s sovereign digital infrastructure. The thesis is clear: SQMU is not a competitor to Saudi regulation but a technology layer that can integrate with and enhance the Kingdom’s registry-as-truth model while deferring to licensed entities and regulatory oversight at all times.
II. The Saudi Regulatory Framework for Tokenised Real Estate
2.1 Regulatory Authorities
Saudi Arabia’s approach to real estate tokenisation involves multiple regulatory bodies with distinct but complementary mandates. Understanding their roles is essential for compliant implementation.
Capital Market Authority (CMA)
The CMA is the primary regulator for securities and capital markets in the Kingdom. Its approach to tokenisation is foundational: the CMA does not regulate “tokens” by name but rather regulates securities offerings and investment contracts . Any token that offers profit, yield, ownership exposure, or investment returns falls within the CMA’s jurisdiction, regardless of the technology used to represent it.
This technology-neutral stance means that real estate tokens are evaluated based on their economic substance rather than their digital form. If investors expect returns from property appreciation or rental income, the token is treated as a security and must comply with CMA offering rules . The CMA’s framework applies to both domestic offerings and any tokens marketed to persons within the Kingdom.
Real Estate General Authority (REGA)
REGA oversees the Kingdom’s real estate sector and administers the Real Estate Registry (RER). Under the February 2026 transaction, REGA’s PropTech Sandbox provided the regulatory environment for the pilot, demonstrating the Authority’s commitment to fostering innovation while maintaining regulatory oversight . REGA is responsible for ensuring that tokenised property transactions align with national real estate policies and that the RER remains the definitive source of truth for property ownership .
Saudi Central Bank (SAMA)
SAMA regulates payment systems, banking, and monetary policy in the Kingdom. For tokenised real estate, SAMA’s jurisdiction is engaged when transactions involve digital payment instruments or stablecoins. The Central Bank’s requirements for data residency, security controls, and compliance with national payment systems must be satisfied by any tokenisation platform operating in the Kingdom . SAMA also oversees anti-money laundering and counter-terrorist financing (AML/CFT) compliance for financial transactions.
Ministry of Municipalities and Housing
The Ministry, led by His Excellency Majed Al-Hogail, provides strategic direction for the real estate sector and champions digital transformation initiatives aligned with Vision 2030. The Ministry’s patronage of the February 2026 transaction signals strong governmental support for tokenisation as a tool to enhance market liquidity, attract foreign direct investment, and accelerate development financing .
2.2 Primary Legislation and Rules
Securities Law and Token Classification
The CMA’s regulatory framework for tokenised assets is built on five foundational decisions that determine the entire compliance strategy :
- Legal Instrument Classification: Before any technical development, sponsors must formally classify what the token represents legally. Real estate tokens typically constitute equity securities, fund units, or income notes. This classification determines all subsequent regulatory requirements.
- Offering Pathway: Sponsors must choose between private placement (institutional investors) and public offering (retail investors). Private placements are faster, cheaper, and require lighter disclosure—typically weeks to market. Public offerings require a full prospectus, comprehensive documentation, regulator review, and significantly higher costs. For most security token offerings in Saudi Arabia, starting institutional and scaling later is the prudent path .
- Asset Ownership Structure: Blockchain records do not equate to legal ownership in Saudi courts. Courts enforce title, contracts, and legal rights—not wallet addresses. Therefore, regulators require a bankruptcy-remote Special Purpose Vehicle (SPV) that legally holds the underlying asset and issues the securities. This structure ensures investor protection and ownership clarity .
- Investor Eligibility: Marketing rules in Saudi Arabia are strict. Sponsors cannot simply advertise online, tweet offerings, or accept random investors. Depending on the structure, offerings may be restricted to qualified investors only, with whitelisted participants, suitability checks, and risk acknowledgements required . Token systems must enforce these investor restrictions through code, not just legal agreements.
- Tokenisation Sequencing: Critically, tokenisation is the last step, not the first. The correct sequence is: classify → structure → document → file with regulator → then tokenise. Teams that start with blockchain architecture and later attempt to make it compliant face expensive delays and potential rebuilding .
Real Estate Law and the Registry-as-Truth Model
Saudi Arabia’s real estate tokenisation framework is distinguished by what droppRWA terms the “Registry-as-Truth” model. In this approach, national property law and registry regulations are embedded directly inside the settlement infrastructure itself . When a digital token moves on the system, the legal title moves simultaneously. There is no gap between the digital record and the legal reality.
This model eliminates the SPV abstraction layer required in most other jurisdictions. The token holder is not holding a digital receipt from a private company but rather a legally recognised, regulator-defined digital title . The government authored the technical standard, translated it into executable code, and embedded it at the protocol level. This creates institutional-grade assets with absolute legal certainty.
The February 2026 transaction demonstrated this model in production: a digital token representing the property title deed was linked directly to the RER’s official registry, alongside a separate token representing transferable ownership interest . Compliance rules were encoded into the ownership transfer logic itself, and settlement was executed securely through stable delivery-versus-payment (DvP) mechanisms .
Foreign Ownership Rules
In January 2026, Saudi Arabia launched a new foreign ownership system, marking a structural shift in real estate demand from temporary residency models to sustainable asset ownership within the national economy . This transition enables foreign investors, residents, and global talent to own property, contributing to wealth localisation and converting cash flows into fixed national assets that support non-oil GDP .
For tokenised real estate, this means that compliant platforms must enforce foreign ownership restrictions through smart contract whitelists and transfer controls. The token system must prevent transfers that would violate nationality-based ownership limitations, just as traditional title registries do.
Payment and Stablecoin Regulations
While the February 2026 transaction likely settled in fiat currency (Saudi Riyal), the regulatory framework for digital payments is evolving. SAMA maintains strict oversight of payment systems, and any tokenisation platform that accepts cryptocurrency or issues stablecoins must comply with Central Bank requirements. Open World’s establishment of an RWA Tokenization Center of Excellence in Al Khobar includes planned work on regulated stablecoins, indicating that SAMA is developing frameworks for compliant digital payment instruments .
AML/KYC and Investor Protection
Saudi Arabia maintains rigorous AML/CFT requirements aligned with Financial Action Task Force (FATF) standards. Tokenisation platforms must implement customer due diligence, transaction monitoring, and suspicious activity reporting. The CMA’s framework requires that investor eligibility be enforced through whitelisted participants and suitability checks . Importantly, these requirements must be coded into the token system itself—permissionless tokens that allow anonymous transfers are unlikely to satisfy Saudi regulatory expectations.
2.3 Recent Regulatory Developments
February 2026: First Sovereign-Native Tokenised Property Transfer
The landmark transaction between NHC and REDF represents the most significant development in Saudi real estate tokenisation to date. Key features include :
- Integration with Real Estate Registry: The digital token was linked directly to the RER’s official registry
- Government-Authored Standards: Saudi Arabia authored the technical token standards—a world first
- 66-Second Settlement: The transaction settled in seconds, compared to days for traditional transfers
- Encoded Compliance: Regulatory requirements were embedded in the transaction logic
- DvP Settlement: Delivery-versus-payment mechanism ensured simultaneous transfer of token and funds
Minister Majed Al-Hogail emphasised that this achievement reflects Saudi Arabia’s strategy to build a digital-first real estate sector, integrating PropTech and AI across planning and delivery in line with Vision 2030 .
January 2026: RWA Tokenization Center of Excellence
Open World announced the establishment of Saudi Arabia’s first RWA Tokenization Center of Excellence in Al Khobar, operating as a fully licensed in-Kingdom entity . The Center will enable compliant tokenisation of real estate, energy infrastructure, carbon credits, and sovereign bonds under Saudi regulatory frameworks. Initial pilot projects are targeted for mid-2026 launch, with a strong emphasis on data residency, local security controls, and national economic considerations.
CMA Guidance and Enforcement
The CMA has signalled that regulatory credibility outweighs “innovation theatre” in the Saudi market . Sponsors are expected to:
- Begin with formal classification analysis
- Structure offerings through proper legal vehicles
- Prepare regulator-ready documentation
- Engage with regulators early
- Integrate compliance into token systems, not just legal agreements
The CMA does not regulate tokens by name but regulates securities and investment contracts, including any token that offers profit, yield, or ownership exposure . This principle guides all enforcement and approval decisions.
III. Legal Interpretation and Compliance Requirements
3.1 Token Classification
Under CMA rules, the classification of a real estate token depends on its economic substance rather than its label. If investors expect profit, yield, or ownership exposure, the token is regulated as a security . This includes:
- Equity Tokens: Representing ownership shares in a property-holding entity
- Debt Tokens: Representing financing arrangements secured by property
- Income Tokens: Representing rights to rental or revenue streams
- Fund Units: Representing participation in collective investment schemes
Sponsors must prepare a formal classification memo before any technical development, defining the legal character of the instrument . This classification determines all subsequent requirements: offering rules, disclosures, investor eligibility, and licensing.
3.2 Real Estate Law and Title Transfer
Saudi Arabia’s Registry-as-Truth model fundamentally changes the legal analysis for tokenised real estate. Unlike jurisdictions where tokens represent SPV shares, Saudi tokens can represent direct title to property when issued through the sovereign infrastructure .
However, this does not mean that any token on any blockchain constitutes legal title. The critical requirements are:
- Integration with RER: The token must be linked to the official Real Estate Registry
- Government-Authored Standards: The token standard must be authorised by Saudi authorities
- Licensed Infrastructure: The platform must operate under regulatory oversight
- Encoded Compliance: Transfer rules must reflect Saudi property law
For tokens issued outside this sovereign infrastructure, the traditional SPV model remains necessary. An SPV—a bankruptcy-remote entity that holds the underlying asset and issues securities—provides the legal clarity that regulators and courts require .
3.3 Payment and Stablecoin Regulations
SAMA maintains exclusive authority over payment systems in the Kingdom. Tokenisation platforms that involve:
- Acceptance of cryptocurrency for token purchases
- Issuance of stablecoins (fiat-referenced tokens)
- Cross-border payment flows
must comply with SAMA licensing requirements and regulatory oversight. Open World’s planned work on regulated stablecoins suggests that SAMA is developing frameworks for compliant digital payment instruments, but no such instruments are currently approved for general use .
The safest approach for initial tokenisation projects is settlement in Saudi Riyal through licensed banking channels, as demonstrated in the February 2026 transaction.
3.4 AML/KYC and Investor Protection
Saudi Arabia’s AML/CFT framework requires tokenisation platforms to implement:
- Customer Due Diligence: Verification of investor identity and source of funds
- Transaction Monitoring: Ongoing surveillance of token transfers for suspicious activity
- Suspicious Transaction Reporting: Filing reports with the Financial Intelligence Unit
- Record Keeping: Maintaining comprehensive audit trails
Additionally, investor protection rules require:
- Whitelisted Participants: Only approved wallets may hold or transfer tokens
- Suitability Checks: Ensuring investments are appropriate for each investor
- Risk Acknowledgements: Documented investor understanding of risks
- Disclosure: Comprehensive offering documents explaining token structure and risks
3.5 Licensing and Intermediary Obligations
Entities involved in tokenised real estate offerings must hold appropriate licenses or partner with licensed intermediaries. Requirements may include:
- CMA Licenses: For securities offerings, dealing, or advisory services
- SAMA Authorisation: For payment services or stablecoin issuance
- REGA Approvals: For real estate-related activities
- SPV Registration: For property-holding entities
The CMA’s framework emphasises that tokenisation does not replace regulation—it makes regulation easier through transparency and automated compliance . Licensed intermediaries remain essential for investor protection and market integrity.
IV. The SQMU Standard: Architecture and Regulatory Fit
4.1 Overview of SQMU
The SQMU (Square Metre Unit) standard is an open-source protocol for real estate tokenisation built on four core design principles:
- Measurement-Based Supply: 1 SQMU token = 1 verified square metre of a specific property. Total supply is fixed at deployment based on certified area and cannot be inflated without corresponding legal modifications to the underlying property.
- ERC-1155 Dual Representation: Each property receives a unique non-fungible token ID, while ownership units are represented as fungible tokens under that ID. This captures both the unique identity of each property and the divisibility of ownership.
- Lifecycle Alignment: The standard encodes the property lifecycle (Acquire → Hold → Rent → Finance → Transfer → Retire) into smart contract logic, enabling automated compliance at each stage.
- Built-in Compliance Tools: Whitelist contracts, transfer restrictions, and audit trails enable regulatory enforcement at the protocol level.
4.2 Alignment with Saudi Regulatory Requirements
4.3 Implementation Strategies for Compliance
To implement SQMU compliantly in Saudi Arabia, developers should follow these strategies:
For Sovereign-Integrated Deployments (RER-Linked)
Where direct integration with the Real Estate Registry is available, SQMU tokens can represent legal title directly. Implementation requirements include:
- Partnership with Licensed Entity: Work with an approved sovereign infrastructure provider (such as droppRWA) that has direct RER integration
- Government-Authored Standards: Ensure token standards align with any technical specifications issued by Saudi authorities
- Encoded Compliance: Program foreign ownership restrictions, investor eligibility rules, and transfer controls directly into SQMU whitelist contracts
- DvP Settlement: Utilise atomic swap functionality to ensure simultaneous transfer of tokens and funds
For SPV-Based Deployments (Pre-Integration)
Where direct RER integration is not yet available, SQMU tokens should represent shares in a property-holding SPV. Implementation requirements include :
- SPV Formation: Establish a bankruptcy-remote Saudi entity that holds legal title to the property
- Classification Memo: Prepare formal analysis defining the token as equity, debt, or fund units
- Offering Pathway: Choose private placement (institutional) or public offering (retail) based on target investors
- Documentation: Prepare regulator-ready PPM/prospectus, subscription agreements, and disclosures
- Regulator Engagement: Align expectations with CMA early in the process
- Token Integration: Issue SQMU tokens as the last step, with whitelist contracts enforcing investor restrictions
For Both Models
- Settlement in SAR: Use Saudi Riyal through licensed banking channels to avoid SAMA stablecoin requirements
- AML Integration: Implement customer due diligence and transaction monitoring aligned with Saudi requirements
- Audit Trail: Maintain comprehensive on-chain and off-chain records for regulator inspection
- Legal Opinions: Obtain formal opinions confirming compliance with Saudi property, securities, and payment laws
4.4 Limitations and Considerations
SQMU Does Not Replace Legal Title: Even with perfect technical implementation, SQMU tokens alone do not constitute legal title. They must be integrated with the RER (for direct title representation) or issued by an SPV (for indirect representation) to have legal effect .
Regulatory Approval Required: SQMU’s open-source code does not confer any regulatory exemptions. All tokenised offerings must follow CMA-approved pathways before marketing or onboarding investors .
Smart Contract Audits Essential: Given the value at stake, SQMU contracts must undergo rigorous security audits by recognised firms. The CMA expects issuers to address smart contract risks in their disclosures .
Cross-Border Complexity: While Saudi Arabia’s model provides legal certainty within the Kingdom, recognition of tokenised title by foreign courts remains untested. Cross-border offerings require additional legal analysis.
Technology Neutrality: Saudi regulators focus on the economic substance of offerings, not the technology used. SQMU’s technical sophistication does not reduce regulatory requirements—it makes compliance easier to implement and verify .
V. Conclusion
Saudi Arabia has established itself as the global leader in sovereign real estate tokenisation through the February 2026 execution of the world’s first registry-native tokenised property transfer. By integrating the Real Estate Registry directly with blockchain infrastructure and authoring government technical standards, the Kingdom has eliminated the abstraction layer that plagues tokenisation in other jurisdictions .
The regulatory framework, administered by the CMA, REGA, and SAMA, is characterised by clarity and rigour. The CMA does not regulate tokens by name but regulates securities offerings based on economic substance . This technology-neutral approach ensures investor protection while enabling innovation. Five foundational decisions—classification, offering pathway, ownership structure, investor eligibility, and sequencing—determine the compliance strategy for any tokenisation project .
The SQMU standard aligns closely with Saudi regulatory expectations. Its measurement-based supply (1 SQMU = 1 verified m²) provides the transparency and auditability that regulators demand . Its ERC-1155 dual-layer architecture enables both unique property identification and divisible ownership representation. Built-in compliance tools—whitelist contracts, transfer restrictions, and audit trails—allow regulatory requirements to be enforced at the protocol level.
Crucially, SQMU is positioned as a technology layer, not a regulatory competitor. It integrates with and enhances Saudi’s sovereign infrastructure while deferring to licensed entities and regulatory oversight at all times. For direct RER-integrated deployments, SQMU tokens can represent legal title through approved sovereign infrastructure. For SPV-based deployments, SQMU tokens can represent shares in property-holding entities following CMA offering rules.
The outlook for real estate tokenisation in Saudi Arabia is extraordinarily promising. With a development pipeline exceeding $1 trillion, including projects such as NEOM, The Red Sea, and Diriyah Gate, the Kingdom offers unparalleled scale . The new foreign ownership system opens the market to global capital . The February 2026 transaction demonstrates production readiness . And the government’s commitment to digital transformation under Vision 2030 provides sustained political support.
For developers, issuers, and investors, the message is clear: Saudi Arabia is not a regulatory sandbox or a pilot programme. It is a live production market where tokenised real estate operates with absolute legal certainty, backed by sovereign infrastructure and government-authored standards. The SQMU standard provides the open-source technology layer to participate in this market compliantly, transparently, and efficiently.
VI. References
- The Asset. (2026, February 5). Saudi closes first tokenized property deed transaction.
- Zawya Projects. (2026, February 17). *Token as Title: How Saudi’s 66-second deal rewrites property ownership*.
- IndexBox. (2026, February 6). Saudi Arabia Executes First Sovereign Tokenized Property Transfer.
- Gulf Business. (2026, February 5). Saudi Arabia executes world’s first sovereign-native tokenised property deed.
- PR Newswire. (2026, February 4). His Excellency Al-Hogail Sponsors the Kingdom’s First Ever Tokenized Property Title Deed Transfer.
- Cryptoverse Legal Consultancy. (2026, February 11). CMA Rules Explained: The Practical Regulatory Playbook for Tokenising Real Estate and Commodities in Saudi Arabia.
- Saudi Gazette. (2026, February 23). The integration of regulation, digitization, and financing is reshaping the Saudi real estate market.
- Gulf Construction. (2026, February 4). Saudi Arabia completes world’s first tokenised property deed transaction.
- Nasdaq. (2026, January 22). Open World Launches Saudi Arabia’s First RWA Tokenization Center of Excellence.
- Graana.com. (2026, February 4). Saudi Arabia Executes World’s First Sovereign Tokenised Property Title Deed Transfer.
Last Updated: February 2026