Bahrain’s Fintech Sector: A Hub of Innovation and Growth

Regulatory Reforms Drive Fintech Development in Bahrain

The Kingdom of Bahrain has been at the forefront of regulatory reforms in the financial services sector, introducing several key developments in the fintech space over the past year. The Central Bank of Bahrain (CBB) has issued a range of new regulations and directives aimed at enhancing business opportunities for investors and fostering innovation.

Open Banking Regulations: A Significant Milestone

In November 2018, the CBB issued regulations on open banking, which apply to account information service providers and payment initiation service providers in Bahrain. This move marked a significant milestone in introducing open banking regulations in the MENA region. Open banking enables consumers’ personal information to be shared between organisations in a standardised and secured manner, with explicit consent from consumers.

Electronic Transferable Records Law: A Global First

In January 2019, Bahrain became the first nation to enact the Model Law on Electronic Transferable Records globally, as developed by the United Nations Commission on International Trade Law. The Electronic Transferable Records Law introduces electronic transferable records that are functionally equivalent to commercial documents and instruments issued on paper.

Regulated Crypto-Asset Services: A New Era of Licensing

In February 2019, the CBB issued regulations to govern and license ‘regulated crypto-asset services’, including trading, dealing, advisory, and portfolio management services in accepted crypto-assets. Overseas domiciled or incorporated persons/entities can obtain a licence and operate within Bahrain as an ‘overseas crypto-asset service licence’.

Digital Financial Advice Guidelines: A Comprehensive Framework

In March 2019, the CBB issued directives on digital financial advice, which is the provision of financial advice using technology. This move aims to subject digital financial advice to a comprehensive governance and controls framework.

Electronic Know Your Customer (eKYC) Project: Enhanced Identity Verification

The CBB, in collaboration with the Information & eGovernment Authority and BENEFIT, launched the first Electronic Know Your Customer (eKYC) project in the Arab region. The project provides an advanced online platform for financial institutions to authenticate client identities and validate information before granting services.

Insurance Aggregators Regulations: Simplifying Insurance Choices

In August 2019, the CBB issued regulations on insurance aggregators, enabling customers to find and choose insurance quotes from several insurance companies under a single electronic platform or mobile device application.

Competition Law and Personal Data Protection Law: Enhanced Protection for Individuals

On January 18, 2019, and August 1, 2019, respectively, the Competition Law (Law No. 31 of 2018) and the Personal Data Protection Law (Law No. 30 of 2018) came into force. The PDPL provides individuals with rights in relation to how their personal data is collected, processed, and stored.

FinHub 973: A Digital Fintech Lab for Innovation

In October 2020, the CBB launched FinHub 973, a digital fintech lab, in collaboration with the Bahrain Economic Development Board, Bank ABC, ila Bank, BENEFIT, National Bank of Bahrain (NBB), and Bahrain Islamic Bank (BisB). The lab aims to create a collaborative ecosystem for fintech innovation.

Conclusion

Bahrain’s regulatory reforms have positioned the country as a leader in fintech development. With its comprehensive ecosystem and new regulations, Bahrain is poised to continue growing its fintech sector in the future.