The Central Bank of Bahrain has issued one of the most comprehensive set of cryptocurrency regulations in the Middle East, including rules on licensing, governance, and risk management for the new asset class.
Bahrain First Arab Country to Introduce Comprehensive Regulation for Cryptocurrencies
The Middle East may not be the first place that comes to mind when it comes to a regulated crypto space, but a tiny country in the Arab world has taken the lead in regulating the industry in the region.
According to a Feb. 25th report from Trade Arabia, the Central Bank of Bahrain (CBB) has issued its final ruling on cryptocurrency assets. The ruling includes, but is not limited to licensing, governance, anti-money laundering, avoidance of conflicts of interest, cybersecurity, and risk management, the report said.
Khalid Hamad, executive director of banking supervision at the central bank, told Bloomberg:
“The introduction of the rules relating to crypto assets is in line with its goal to develop comprehensive rules for the fintech eco-system supporting Bahrain’s position as a leading financial hub.”
Better Regulation Could Help Position Bahrain as a Leader in the Industry
The bank specified the need for enhanced due diligence when onboarding new clients. However, the bank’s biggest concern seems custodial in nature—with the new regulations focused on cryptocurrency wallets.
The Central Bank issued requirements to ensure that “encrypted safe custody accounts,” or more simply cryptocurrency wallets, are maintained in such a way that both retrievable and secure. Moreover, the ruling mandates that the crypto is covered by insurance to protect against incidents of hacking or theft, reports showed.
However, the country’s plan to become the leader both in banking and crypto in the Middle East and North Africa faces tough competition.
Bahrain was once the undisputed banking center of the Gulf but is now fighting with the UAE, Saudi Arabia, and Qatar to regain its place by breaking through using the blockchain sector. Earlier in January, Saudi Arabia and the United Arab Emirates launched a joint pilot cryptocurrency initiative to enable easier cross-border transactions.
Ola Doudin, chief executive officer of BitOasis, a leading crypto-currency exchange platform in the Middle East, told Bloomberg that Bahrain’s move is a “great step in the right direction for the crypto-asset ecosystem in the region.”
BitOasis is one of the companies enrolled in Bahrain’s incubator-style sandbox licensing program. Launched by the Central Bank, the program allows crypto exchanges and blockchain companies to test out their services under more flexible rules.
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