Here is the article rewritten in markdown format:
Bahrain Turns to Regulatory Sandboxes as Regional Fintech Sector Booms
As one of the Middle East’s oldest and most established financial services hubs, Bahrain has long been home to hundreds of traditional banking stalwarts. However, in recent years, a new generation of businesses has emerged, driving a market that is set to reach $2.5 billion by 2022.
A New Era of Innovation
Global Fintech firms like online bank Monzo and payments platform Stripe have surged in popularity, creating an opportunity for agile economies like Bahrain to cater for fledgling startups still experimenting with their ideas. To empower this wave of innovation, the Central Bank of Bahrain launched a revolutionary on-shore FinTech Regulatory Sandbox in 2017.
The FinTech Regulatory Sandbox
- Allows companies to test their technology-based solutions for up to a year under supervision
- Eligible solutions need to demonstrate:
- Innovation
- Customer benefit
- Technical testing
- An intention to be deployed in Bahrain after the sandbox period ends
Since its inception, the sandbox has nurtured several innovative Fintech businesses, with the first graduate Tarabut Gateway already working with financial institutions across the region to roll out open banking technologies.
Bahrain’s Approach Recognised as Global Model for Excellence
Bahrain’s success has been officially recognised by the World Bank’s CGAP think tank, which consulted with the Central Bank of Bahrain while creating a best-practice technical guide for financial regulators around the world seeking to build sandboxes of their own. The resulting paper reveals how such initiatives can “foster financial inclusion by enabling firms to experiment in a safe space” and highlights the Bahrain approach.
Benefits of Bahrain’s Approach
- Increased competition and improving financial inclusion throughout the country and the wider region
- Effective promotion of equality in the ecosystem
Bahrain Established as GCC’s Home of Fintech
However, the regulatory sandbox is not the only way Bahrain is encouraging FinTech innovation amid a strong appetite from traditional players to partner with up-and-coming enterprises. The Kingdom has built a robust ecosystem including:
- The first and largest Fintech hub in the Middle East
- A consortium connected to Asia and the US
Meanwhile, Al Waha - Bahrain’s $100 million government Fund of Funds - invests in bringing new ideas and technologies to the GCC from leading global markets like Europe, the US and the UAE.
Central Bank of Bahrain Remains Agile in Introducing New Regulation
The Central Bank of Bahrain has also demonstrated its agility when introducing new regulation. In February 2019, it was the first regulator in the Middle East to launch rules for the licensing of cryptocurrency asset services - and the country’s landmark bankruptcy law provides essential breathing space for entrepreneurs to experiment with new ideas.
Conclusion
Bahrain’s approach to FinTech innovation has been recognised as a model for global excellence. By building the right foundations, fostering new ideas and putting in place an agile ecosystem surrounding such initiatives, countries can harness the Bahrain approach and build out a successful Fintech future.