Financial Crime World

CBB Implements Regulatory Framework for Cryptocurrency in Bahrain

The Central Bank of Bahrain (CBB) has introduced a legislative framework to oversee and operate regulated crypto-asset services in the kingdom. This move aims to position Bahrain as a leading financial hub in the Middle East and North Africa (MENA) region.

Key Components of the Regulatory Framework

  • The CBB’s regulatory framework, outlined in Volume 6 of the CBB Rulebook, governs financial markets and includes rules for:
    • Licensing
    • Governance
    • Minimum capital
    • Risk management
    • Anti-money laundering and combating the financing of terrorism (AML/CFT)
    • Standards of business conduct
    • Cybersecurity for crypto-asset services
  • The guidelines also cover supervision and enforcement standards

Requirements for License Applicants

To participate in cryptocurrency financing, entities must obtain a license from the CBB. This requires:

  • A non-refundable registration fee of BHD 100
  • An annual fee charge equal to 0.25% of their operational costs
  • A 60-day period for the CBB to decide on license applications

Licensing Categories and Minimum Capital Investment

Entities must either register as a Joint Stock Company or obtain an overseas crypto-asset service license. The minimum capital investment required varies depending on the licensing category, ranging from:

  • BHD 25,000 for Category 1
  • BHD 50,000 for Category 2
  • BHD 100,000 for Category 3
  • BHD 300,000 for Category 4

Regulatory Compliance

The CBB has authority to evaluate whether a crypto-asset is suitable for use in licensed services and must obtain prior written clearance before using any new assets. Licensees are required to:

  • Maintain accurate records of their clients
  • Include information on fees, costs, and other charges

Eligible Investors

Eligible investors include:

  • Legal persons incorporated either in Bahrain or overseas jurisdictions
  • Natural persons above 21 years of age

Regulatory Agreement

Licensed crypto-asset services can only be provided if the Crypto-asset license and its client enter into an agreement that includes details on:

  • Regulatory status
  • Fees, costs, and other charges
  • Soft dollar arrangements
  • Crypto-asset risk disclosure

The introduction of this regulatory framework is a testament to the dynamism of financial markets and progressive legal frameworks in Bahrain.