Introduction of Bahrain cryptocurrency license

The Central Bank of Bahrain (CBB) is a public corporate entity established under the CBB and Financial Institutions Act 2006. It was created on September 6, 2006. The CBB is responsible for maintaining monetary and financial stability in the Kingdom of Bahrain. It succeeded the Bahrain Monetary Board, which had performed central banking and regulatory functions since its establishment in 1973. The CBB inherits the BMA's 33-year track record and wide-ranging responsibilities. It conducts the kingdom's monetary policy, issues public debt, issues the national currency, and oversees the country's payment and settlement systems. It is also the sole regulator of Bahrain's financial sector, covering the full spectrum of banking, insurance, investment business and capital market activities. The broad remit of the CBB allows for a consistent policy approach across the kingdom's financial sector. It also provides a simple and effective regulatory framework for financial services companies operating in Bahrain.

The Central Bank of Bahrain (CBB) has issued regulatory rules in the form of directives governing "crypto assets." The rules contained in the CBB Directive cover licensing requirements, conditions for the issuance and holding of a CBB licence, minimum capital requirements, measures to protect the client or client's interests, technical standards, In particular, cybersecurity risk management requirements, reporting, notification and approval requirements, fulfilment of commercial obligations, prevention of market abuse and manipulation, enforcement, and inspection and access powers under the CBB Act.

Bahrain cryptocurrency assets details

According to the directive, no person shall market or engage in activities consisting of regulated crypto asset services through a business within or from the Kingdom of Bahrain without a CBB permit.

Regulated crypto asset services are defined as including the conduct of any of the following types of activities or any combination of activities:

Receipt and transmission of orders: Receiving an order for the purchase and/or sale of one or more accepted crypto assets from a customer and transmitting that order to a third party for execution.

Execute an order on behalf of a client: enter into an agreement to buy and/or sell one or more accepted crypto assets on behalf of a client.

Own-account trading: Trading against own-account capital to complete the trading of one or more accepted crypto assets.

Portfolio Management: Managing or agreeing to manage accepted crypto assets belonging to customers and their management arrangements enable licensees who manage or agree to manage these accepted crypto assets to invest in one or more accepted crypto assets at their sole discretion.

Investment advice for cryptocurrency licenses in Bahrain

Crypto Asset Custodian: protects, stores, holds, maintains custody or arranges acceptance of crypto assets on behalf of clients. Investment Advice: Providing, providing or agreeing to provide personal advice to a person acting as an investor or potential investor or as an agent of an investor or potential investor in connection with one or more transactions relating to one or more accepted crypto assets.

For the purposes of CRA-1.1.6(f), a "personal recommendation" refers to a recommendation made to a customer to whom it is directed or based on consideration of that person's circumstances, and must constitute a recommendation to buy, sell, exchange, exercise or not exercise any rights granted by or to hold a specifically accepted crypto asset. If the recommendation is issued only through distribution channels or to the public, the recommendation is not a "personal recommendation."

Activities related to crypto assets are deemed to be carried out "within or from the Kingdom of Bahrain" if, for example, the person concerned:

Incorporated in the Kingdom of Bahrain;

To communicate using an address located in the Kingdom of Bahrain; Or solicit clients directly in the Kingdom of Bahrain.

Bahrain exclusion

The following activities are excluded from regulated crypto asset services:

The creation or management of crypto assets;

Develop, distribute or use software for the purpose of creating or mining crypto assets; perhaps

A loyalty program.

Prerequisites and scope of business for the Bahrain Cryptocurrency license

Entities intending to participate in cryptocurrency financing must be licensed from the CBB, and in order to participate and serve the cryptocurrency sector, such entities must apply to the CBB under one of the following four categories:

Category 1 - Order reception and transmission + Investment advice

Category 2 - Accepted crypto assets + portfolio management and crypto asset custody services + investment advice for trading as an agent.

Category 3 - Trading accepted crypto assets as an agent + Trading accepted crypto assets as a principal + portfolio management + crypto asset custody + investment advice.

Category 4 - Operating a licensed crypto asset exchange + crypto asset custody service.

The entity must be (i) registered as a joint stock company or;

(ii) A subsidiary of an international company operating in Bahrain, legally established in accordance with the regulations of its home jurisdiction in order to obtain a license from a cryptocurrency licensee.

The CBB's regulatory framework for cryptocurrency services in the Kingdom also allows foreign entities already operating in other countries to apply for a license in Bahrain and operate as an "overseas crypto asset services licensee." In order to be successful in such applications, the CBB will investigate the applicant's management structure, financial position, the scope of its operations, and cryptocurrency-related legislation in its jurisdiction as part of the review process.