December 15th, 2018
The Central Bank of Bahrain (CBB) has prepared draft rules designed to regulate digital assets and certain aspects of the country’s crypto industry. The move aims to establish Bahrain as a regional leader in the fintech sector and restore its role as a major banking hub in the Persian Gulf.
Addressing Market Demand
The regulations have been released for consultation and the bank has set Dec. 31 as the deadline for providing feedback. The proposals have been published on the bank’s website, local media reported.
The comprehensive rules cover the implementation of a licensing regime for companies operating cryptocurrency trading platforms. A supervisory mechanism for the providers of other services related to crypto assets has been developed as well.
The draft paper addresses the need to introduce measures to safeguard the interests of customers. It also contains technology standards designed to minimize and manage the cybersecurity risks associated with the nascent industry.
In a statement quoted by the Bahrain News Agency, CBB’s executive director of banking supervision Khalid Hamad explained:
This regulatory framework will address the demand from the market for these services and the need to recognize this financial innovation.
Hamad further commented that the CBB’s experience with the participants in Bahrain’s regulatory sandbox has been “insightful in shaping these rules.” The bank official was referring to Bahrain Fintech Bay, which was established to allow companies from the sector to operate and experiment with new ideas under lighter regulations.
Restoring Regional Leadership
Authorities in Manama launched the sandbox to boost the development of the fintech industry and increase the number of companies offering related services. At the same time, the initiative was part of efforts to reduce government expenditure through the implementation of new financial technology. In fintech Bahrain sees an opportunity to restore its position as a regional banking and business hub.
Bahrain Fintech Bay, which was set up in February of this year, has become home to around 30 companies working with cryptocurrencies, digital payments, blockchain and financial technologies. Other players in the Persian Gulf, including Abu Dhabi and Dubai, are also investing heavily to support the growth of fintech startups.
But while Bahrain’s CBB is working to adopt regulations for decentralized, private cryptocurrencies, the central bank of the United Arab Emirates and the Saudi Arabian Monetary Authority have announced plans to issue a government-controlled digital currency. The new “blockchain-backed” coin will be used to improve the efficiency of cross-border transactions between the two neighboring countries.
What do you think of Bahrain’s decision to regulate the crypto industry? Let us know in the comments section below.