Bahrain first in Mideast to launch crypto regulation

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MANAMA: Bahrain has taken the lead in regulating crypto assets, which would help attract blockchain technology and cryptocurrency trading companies.

The Central Bank of Bahrain (CBB) yesterday issued final rules on a range of activities relevant to crypto assets.

The new rules cover licensing, governance, risk management, anti-money laundering and countering financing of terrorism (AML/CFT) measures, business conduct, conflict of interest avoidance, reporting and cybersecurity.

The regulation also establishes new supervision and enforcement standards.

Bahrain’s early regulation of blockchain technology and cryptocurrency trading comes as the sector remains largely unlicensed and unregulated in major global financial hubs.

According to mobile banking service BABB’s chief operating officer Adam Haeems a crypto-asset is a digital asset which utilises cryptography, peer-to-peer networking, and a public ledger to regulate the creation of new units, verify transactions, and secure the transactions without the intervention of any middleman.

A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

A platform that allows users to buy, sell and store digital currency is a crypto exchange.

The CBB has mandated that cryptocurrency exchanges licensed by it will also have to comply with guidelines concerning order matching, pre and post-trade transparency, market manipulation and market abuse avoidance, as well as conflicts of interest.

Eight of the 28 companies that have got access to the CBB regulatory sandbox – a safe space where new business models and products that blend finance and technology can be tried and tested without falling foul of regulations – are crypto related.

Among these is Rain, a Bahraini cryptocurrency exchange backed by bitcoin developer Jimmy Song.

Rain had announced last year it wanted to become the region’s first regulated digital currency exchange after securing a full operational licence this year.

The CBB’s executive director for banking supervision Khalid Hamad told the GDN that the introduction of rules relating to crypto-assets was in line with the regulator goal to develop comprehensive rules for the fintech ecosystem supporting Bahrain’s position as a leading financial hub in the Mena region.

The cryptoexchanges will need to have enhanced due diligence when onboarding new clients, ensure that safe encrypted custody wallets will always be able to be retrieved, have necessary insurance covers to adequately manage keyman risks and safe custody of wallets, say the new rules.

avinash@gdn.com.bh

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