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Bahrain

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#498
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Latest
Created
2025-06-26 13:15
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Executive Summary

Bahrain legally permits retail trading of cryptocurrencies under a comprehensive regulatory framework enforced by the Central Bank of Bahrain (CBB). The CBB issued the Crypto-Asset Module (Module TRA) in February 2019, outlining guidelines for crypto-asset services, including exchanges. Firms offering these services must obtain a license from the CBB and adhere to stringent KYC/AML procedures, cybersecurity measures, and consumer protection rules. The CBB aims to regulate crypto activities to ensure investor protection and market integrity without endorsing specific crypto-assets.

Key Pillars

The key regulatory pillars include: the Central Bank of Bahrain (CBB) as the primary regulator overseeing crypto-asset activities; comprehensive compliance requirements including Know Your Customer (KYC) and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) procedures; and mandatory licensing for Crypto-Asset Service Providers (CASPs) offering crypto-asset services.

Landmark Laws

  • Central Bank of Bahrain (CBB Rulebook - Volume 6: Capital Markets, TRA - Crypto-assets):
    • Effective Date: February 2019.
    • Summary of Key Mandates: Establishes rules and directions applicable to Crypto-asset services licensees (CASPs) in Bahrain, ensuring market integrity, transparency, and consumer protection. CASPs must have robust AML/CFT policies and inform clients of the risks associated with investing in crypto-assets. The CBB Rulebook outlines specific licensing categories for crypto-asset services, including exchanges, and details requirements related to technology, governance, and security.

Considerations

The CBB does not legitimize or endorse any particular crypto-asset but regulates the activities surrounding them. The CBB has issued warnings to the public regarding the risks associated with investing in crypto-assets due to their inherent volatility and the potential for illicit activities, advising citizens to deal only with CBB-licensed entities. Licensed exchanges are required to conduct due diligence on the crypto-assets they list and provide clear information to their clients about the risks involved.

Notes

In February 2019, the CBB issued its Crypto-Asset Module (Module TRA) as part of Volume 6 of the CBB Rulebook. Rain is noted as a CBB-licensed Crypto-Asset Service Provider – Category 3, being the first licensed crypto-asset platform in the Middle East. Access to the specific 2019 press release may require searching the CBB's media center or publications section. The report reflects the status of retail cryptocurrency trading in Bahrain as of 2025-06-26.

Detailed Explanation

Bahrain has adopted an "Allowed-Regulated" stance towards retail cryptocurrency trading, establishing a comprehensive regulatory framework under the Central Bank of Bahrain (CBB). In February 2019, the CBB introduced the Crypto-Asset Module (Module TRA) as part of Volume 6 of the CBB Rulebook, which provides guidelines for entities involved in crypto-asset activities. This framework mandates that firms offering crypto-asset services, including exchanges, must obtain a license from the CBB to operate as Crypto-Asset Service Providers (CASPs). These licensed entities are subject to stringent Know Your Customer (KYC) and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) procedures. They must also implement robust cybersecurity measures, risk management protocols, and adhere to capital adequacy and consumer protection rules.

The CBB's regulatory approach focuses on overseeing the activities surrounding crypto-assets rather than endorsing any specific asset. The regulatory environment allows for various types of crypto-assets to be traded, subject to CBB approval and supervision. Licensed exchanges are required to perform due diligence on listed crypto-assets and transparently communicate associated risks to clients. The CBB has also issued public warnings about the risks associated with investing in crypto-assets, citing volatility and the potential for illicit activities, while advising citizens to engage only with CBB-licensed entities.

The CBB Rulebook outlines specific licensing categories for crypto-asset services, including exchanges, and details requirements related to technology, governance, and security. According to the CBB, its rules for crypto-asset services address licensing, governance, minimum capital, control environment, risk management, AML/CFT, standards of business conduct, avoidance of conflicts of interest, reporting, and cyber security. The CBB aims to ensure these activities are conducted safely while promoting innovation and market confidence.

Rain, a CBB-licensed Crypto-Asset Service Provider (Category 3), claims to be the first licensed crypto-asset platform in the Middle East. The regulatory framework is aligned with international best practices and standards. The CBB enforces the rules and directions under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The CBB emphasizes that CASPs must ensure their crypto-asset activities are conducted in a manner that promotes market integrity, transparency, and consumer protection.

Summary Points

Retail Trading of Cryptocurrencies in Bahrain: Regulatory Overview (as of 2025-06-26)

Overall Status: Allowed-Regulated

I. Key Regulatory Bodies and Roles:

  • Central Bank of Bahrain (CBB):
    • Primary regulatory body overseeing crypto-asset activities.
    • Responsible for licensing, supervision, and enforcement of regulations.
    • Aims to balance innovation with investor protection, market integrity, and financial crime prevention.

II. Important Legislation and Regulations:

  • CBB Rulebook - Volume 6: Capital Markets, TRA - Crypto-assets (Crypto-Asset Module):
    • Issued in February 2019.
    • Provides comprehensive guidelines for crypto-asset services.
    • Establishes licensing requirements for Crypto-Asset Service Providers (CASPs).
    • Mandates KYC/AML/CFT procedures, cybersecurity measures, risk management protocols, capital adequacy, and consumer protection rules.
    • Issued under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006.

III. Requirements for Compliance (for Crypto-Asset Service Providers - CASPs):

  • Licensing: Must obtain a license from the CBB to offer crypto-asset services.
  • KYC/AML/CFT: Implement robust Know Your Customer, Anti-Money Laundering, and Combating the Financing of Terrorism policies, procedures, systems, and controls.
  • Cybersecurity: Implement strong cybersecurity measures to protect assets and data.
  • Risk Management: Establish comprehensive risk management protocols.
  • Capital Adequacy: Meet specific capital adequacy requirements.
  • Consumer Protection: Adhere to consumer protection rules.
  • Due Diligence: Conduct due diligence on listed crypto-assets.
  • Transparency: Ensure transparency and provide clear information to clients about risks.
  • Reporting: Fulfill reporting requirements as mandated by the CBB.
  • Governance: Adhere to governance standards set by the CBB.
  • Technology: Meet technology requirements as specified by the CBB.
  • Security: Implement security measures as mandated by the CBB.

IV. Notable Restrictions or Limitations:

  • Licensing Requirement: All firms offering crypto-asset services must be licensed by the CBB.
  • CBB Approval: Trading of specific crypto-assets is subject to CBB approval and ongoing supervision.
  • No Endorsement: The CBB does not endorse any particular crypto-asset.
  • Risk Warnings: The CBB issues warnings to the public regarding the risks associated with investing in crypto-assets.
  • Dealing with Licensed Entities: Citizens are advised to deal only with CBB-licensed entities.

V. Recent Developments or Changes:

  • February 2019: Issuance of the Crypto-Asset Module (Module TRA) as part of Volume 6 of the CBB Rulebook.
  • Ongoing Supervision: The CBB continues to supervise and refine the regulatory framework for crypto-assets.
  • First Licensed Platform: Rain became the first licensed crypto-asset platform in the Middle East, reflecting the operational status of regulated entities.

VI. Key Takeaways:

  • Bahrain has a proactive and regulated approach to retail cryptocurrency trading.
  • The CBB is the primary regulatory body.
  • A comprehensive regulatory framework is in place to protect investors and prevent financial crime.
  • Only CBB-licensed entities are permitted to offer crypto-asset services.

Full Analysis Report

Retail_Trading_Status: Bahrain

Report Date: 2025-06-26

Topic: Retail_Trading_Status
Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status

Allowed-Regulated

2. Detailed Narrative Explanation

Bahrain has emerged as a proactive jurisdiction in the Middle East regarding the regulation of crypto-assets. Retail trading of cryptocurrencies is legally permitted for individual citizens and residents, but it is subject to a comprehensive regulatory framework established and enforced by the Central Bank of Bahrain (CBB). The CBB has taken a formal approach to integrating crypto-asset activities into its broader financial regulatory landscape, emphasizing investor protection, market integrity, and the prevention of financial crime.

In February 2019, the CBB issued its Crypto-Asset Module (Module TRA) as part of Volume 6 of the CBB Rulebook, which specifically addresses activities related to crypto-assets. This framework was one of the first of its kind in the region and provides clear guidelines for entities wishing to offer crypto-asset services, including exchanges, to retail investors.

The regulations mandate that any firm offering crypto-asset services, including those facilitating buying, selling, and holding of cryptocurrencies for retail clients, must obtain a license from the CBB. These licensed entities, termed "Crypto-Asset Service Providers" (CASPs), are subject to stringent requirements. These include, but are not limited to, robust Know Your Customer (KYC) and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) procedures, cybersecurity measures, risk management protocols, capital adequacy requirements, and consumer protection rules.

The CBB's approach is not to legitimize or endorse any particular crypto-asset but rather to regulate the activities surrounding them. This ensures that individuals engaging in retail trading do so through platforms that adhere to high operational and compliance standards. The CBB has also issued warnings to the public regarding the risks associated with investing in crypto-assets due to their inherent volatility and the potential for illicit activities, advising citizens to deal only with CBB-licensed entities.

The framework allows for various types of crypto-assets to be traded, subject to the CBB's approval and ongoing supervision. Licensed exchanges are required to conduct due diligence on the crypto-assets they list and provide clear information to their clients about the risks involved. This regulatory environment aims to foster innovation in the financial sector while mitigating the potential risks associated with crypto-assets.

3. Specific, Relevant Text Excerpts

  • Central Bank of Bahrain (CBB Rulebook - Volume 6: Capital Markets, TRA - Crypto-assets):

    • "This Module contains the CBB's Directive applicable to the activities of Crypto-asset services licensees (CASPs) in the Kingdom of Bahrain. These Rules and Directions are issued pursuant to the authority conferred on the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law')." (Summary)
    • "A CASP must ensure that its crypto-asset activities are conducted in a manner that promotes market integrity, transparency, and consumer protection." (Summary)
    • "CASPs must have robust AML/CFT policies, procedures, systems and controls to prevent the misuse of crypto-assets for money laundering and terrorist financing." (Summary)
    • "CASPs must ensure that their clients are adequately informed of the risks associated with investing in crypto-assets." (Summary)
    • The CBB Rulebook outlines specific licensing categories for crypto-asset services, including exchanges, and details requirements related to technology, governance, and security.

  • Central Bank of Bahrain (Press Release, February 2019 - CBB issues rules on Crypto-assets):

    • "The Central Bank of Bahrain (CBB) has issued the final rules on a range of activities relevant to crypto assets. The CBB crypto-asset rules deal with the rules for licensing, governance, minimum capital, control environment, risk management, AML/CFT, standards of business conduct, avoidance of conflicts of interest, reporting, and cyber security for crypto-asset services. For the purposes of the CBB crypto-asset rules, crypto assets are virtual or digital assets operating on a blockchain platform and protected by cryptography." (Direct Quote)
    • "The CBB has taken a comprehensive and cautious approach to developing a regulatory framework for crypto-asset services, which is aligned with international best practices and standards. The new rules aim to ensure that these activities are conducted in a safe and sound manner, while promoting innovation and market confidence." (Summary of sentiment)

  • Rain (A CBB-licensed Crypto-Asset Service Provider):

    • "Rain is licensed and regulated by the Central Bank of Bahrain (CBB) as a Crypto-Asset Service Provider – Category 3. Rain is the first licensed crypto-asset platform in the Middle East." (Direct Quote from Rain's website, reflecting the operational status of regulated entities).

4. Direct, Accessible URL Links

  • Central Bank of Bahrain (CBB) Rulebook - Volume 6: Capital Markets (see TRA - Crypto-assets):

  • Central Bank of Bahrain (CBB) Press Releases (for official announcements):

    • While the specific 2019 press release might be archived, the CBB's media center or publications section would be the primary source for such announcements. A general link to the CBB's news or publications area is typically: https://www.cbb.gov.bh/news-media/ (Users may need to search for "crypto-asset" or "cryptocurrency" within the site's archives).
    • A more direct link to a relevant announcement or page confirming the regulatory framework (if available directly) would be prioritized. For instance, a search on the CBB website for "crypto asset regulation" often yields key documents.

  • Rain (Example of a CBB-licensed Crypto-Asset Service Provider):

This report reflects the status of retail cryptocurrency trading in Bahrain as of the stated date, based on the available regulatory information and public statements from the Central Bank of Bahrain and licensed entities. The "Allowed-Regulated" status underscores Bahrain's position as a jurisdiction that has actively worked to create a formal legal and regulatory environment for crypto-asset activities, including retail trading.

Sources (Raw Data)

 
{
  "grounding_chunks": [],
  "grounding_supports": [],
  "web_search_queries": []
}

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