RFC2181, Clarifications to the DNS Specification: section 11 explicitly allows any binary string. Non-ASCII encodings such as UTF-8 have indeed been (privately) used over DNS per RFC6055. The system of internet domain name registration is, however, totally incapable of handling non-ASCII encodings, hence the restriction; see also RFC5890 §§ 2.2, 2.3 on the format of names.