Bahrain
Retail_Trading_Status
- Analysis ID
- #601
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- Latest
- Created
- 2025-12-12 03:52
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- 3ca3118e...
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Executive Summary
Cryptocurrency trading is fully legal and regulated in Bahrain under a comprehensive framework established by the Central Bank of Bahrain (CBB). The CBB's Crypto-Asset Module (CRA), part of Volume 6 of the CBB Rulebook, governs licensing, supervision, and enforcement for crypto-asset service providers. Retail investors can legally buy, sell, and hold crypto assets through licensed exchanges like Rain and CoinMENA, subject to strict AML/KYC compliance.
Key Pillars
Central Bank of Bahrain (CBB) as the primary regulator
CBB Rulebook Volume 6, Module CRA (Crypto-Asset Module)
Tiered licensing structure (Categories 1-4) for service providers
Mandatory compliance with Bahrain's AML/CFT Law and FATF Travel Rule
Regulatory Sandbox for fintech innovation testing
Landmark Laws
CBB Rulebook Volume 6: Capital Markets (Module CRA - Crypto-Assets) (Module CRA) - Enacted: 2019-02-25
- The foundational regulatory framework establishing rules for licensing, governance, risk management, and AML/CFT for crypto-asset service providers. It defines regulated activities including trading, dealing, advisory, and custody.
- Source
Amendments to Crypto-Assets (CRA) Module (CRA Amendment 2023) - Enacted: 2023-03-30
- Expanded the regulatory scope to include 'Digital Token Offerings' and introduced enhanced requirements for safeguarding client assets to improve investor protection.
- Source
Considerations
No personal income tax or capital gains tax on crypto trading profits for individuals
VAT (10%) applies to trading fees and commissions, though the crypto asset itself is generally exempt
Strict KYC/AML requirements mean anonymous trading is effectively prohibited on local platforms
Bahraini banks are generally crypto-friendly and process transfers to/from CBB-licensed exchanges
Regulated insurance requirements for custodians to cover potential hacking or theft risks
Notes
Bahrain's 'Regulatory Sandbox' has been a key driver in its success, allowing companies like Rain to test their operations under supervision before receiving a full license. This model has since been emulated by other jurisdictions in the region.
Remaining Uncertainties
- Specifics on the approval process for new token listings by licensed exchanges (CBB approval required per asset?)
- Detailed tax treatment for corporate entities (vs. individuals) regarding crypto holdings
Detailed Explanation
Detailed Explanation
Cryptocurrency trading is fully legal and regulated in Bahrain under a comprehensive framework established by the Central Bank of Bahrain (CBB). The primary regulatory foundation is the CBB Rulebook, specifically Volume 6: Capital Markets, which contains the Crypto-Asset Module (CRA). This module, enacted on February 25, 2019, serves as the cornerstone of the regulatory environment, establishing detailed rules for the licensing, governance, risk management, and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) compliance for crypto-asset service providers. It explicitly defines the regulated activities, including trading, dealing, advisory, and custody services. The framework is designed to provide clarity and security for both businesses and investors, with retail investors able to legally buy, sell, and hold crypto assets through licensed exchanges such as Rain and CoinMENA, which operate under strict supervision. The regulatory approach is further characterized by a tiered licensing structure (Categories 1-4) for service providers and the inclusion of a Regulatory Sandbox to foster fintech innovation by allowing companies to test their operations under the CBB's supervision before obtaining a full license. A significant amendment to the Crypto-Assets Module was enacted on March 30, 2023, which expanded the regulatory scope to include 'Digital Token Offerings' and introduced enhanced requirements for safeguarding client assets, thereby strengthening investor protection. All licensed entities are subject to mandatory compliance with Bahrain's AML/CFT Law and the FATF Travel Rule, ensuring a robust financial integrity framework. From a tax perspective, there is no personal income tax or capital gains tax on crypto trading profits for individuals; however, a 10% Value Added Tax (VAT) generally applies to the fees and commissions charged by trading platforms, while the crypto asset itself is typically exempt. The regulatory regime requires regulated insurance for custodians to cover risks such as hacking or theft, and the strict KYC/AML requirements effectively prohibit anonymous trading on local platforms. Bahraini banks are generally supportive and process transfers to and from CBB-licensed exchanges, facilitating a functional and integrated ecosystem.
Summary Points
I. Regulatory Status
* Cryptocurrency trading is fully legal and regulated.
* Status: Allowed-Regulated.
II. Key Regulatory Bodies
* Central Bank of Bahrain (CBB) is the primary regulator.
III. Important Legislation
* CBB Rulebook Volume 6: Capital Markets (Module CRA - Crypto-Assets)
* Enacted: 2019-02-25.
* The foundational regulatory framework governing licensing, supervision, and enforcement for crypto-asset service providers.
* Defines regulated activities including trading, dealing, advisory, and custody.
* Amendments to Crypto-Assets (CRA) Module
* Enacted: 2023-03-30.
* Expanded the regulatory scope to include 'Digital Token Offerings'.
* Introduced enhanced requirements for safeguarding client assets.
IV. Compliance Requirements
* Mandatory compliance with Bahrain's AML/CFT Law and the FATF Travel Rule.
* Strict KYC/AML requirements are enforced.
* A tiered licensing structure (Categories 1-4) exists for service providers.
* Regulated insurance requirements for custodians to cover potential hacking or theft risks.
V. Notable Restrictions or Limitations
* Strict KYC/AML requirements mean anonymous trading is effectively prohibited on local platforms.
VI. Recent Developments or Notes
* Bahrain's 'Regulatory Sandbox' has been a key driver for fintech innovation, allowing companies to test operations under supervision.
* This model has been emulated by other jurisdictions in the region.
* Retail investors can use licensed exchanges like Rain and CoinMENA.
* There is no personal income tax or capital gains tax on crypto trading profits for individuals.
* VAT (10%) applies to trading fees and commissions, though the crypto asset itself is generally exempt.
* Bahraini banks are generally crypto-friendly and process transfers to/from CBB-licensed exchanges.
Full Analysis Report
Full Analysis Report
Bahrain is widely recognized as a pioneer in cryptocurrency regulation within the Gulf Cooperation Council (GCC), having established a clear and comprehensive legal framework as early as 2019. The Central Bank of Bahrain (CBB) serves as the sole regulator for the sector, overseeing all crypto-asset activities through the 'Crypto-Asset Module' (CRA) located in Volume 6 of the CBB Rulebook. This framework provides legal certainty for both businesses and retail investors, moving the jurisdiction firmly into the 'Allowed-Regulated' category.
The regulatory regime is structured around a tiered licensing system, ranging from Category 1 (investment advice) to Category 4 (exchange and custody services). This granularity allows the CBB to apply proportionate regulation based on the risk profile of the activity. Prominent regional exchanges such as Rain and CoinMENA have successfully obtained Category 3 licenses, authorizing them to act as broker-dealers, custodians, and exchanges. These platforms are fully operational and serve retail clients with direct fiat on-ramps (BHD pairs) via local banking networks.
In March 2023, the CBB demonstrated its proactive approach by amending the CRA Module to explicitly cover 'Digital Token Offerings' and strengthen rules regarding client asset protection. These amendments align Bahrain's framework with evolving international best practices, particularly those recommended by the FATF. The regulations mandate that licensed providers maintain capital reserves, segregate client funds, and adhere to rigorous cybersecurity standards.
For retail traders, the environment is favorable. There is no prohibition on holding or trading assets, and the tax regime is attractive, with 0% capital gains tax for individuals. However, the strong regulatory oversight means that users must undergo full KYC verification to use local platforms. The CBB maintains a public register of licensed licensees, providing transparency and allowing investors to verify the legitimacy of service providers before depositing funds.
Bahrain is widely recognized as a pioneer in cryptocurrency regulation within the Gulf Cooperation Council (GCC), having established a clear and comprehensive legal framework as early as 2019. The Central Bank of Bahrain (CBB) serves as the sole regulator for the sector, overseeing all crypto-asset activities through the 'Crypto-Asset Module' (CRA) located in Volume 6 of the CBB Rulebook. This framework provides legal certainty for both businesses and retail investors, moving the jurisdiction firmly into the 'Allowed-Regulated' category. The regulatory regime is structured around a tiered licensing system, ranging from Category 1 (investment advice) to Category 4 (exchange and custody services). This granularity allows the CBB to apply proportionate regulation based on the risk profile of the activity. Prominent regional exchanges such as Rain and CoinMENA have successfully obtained Category 3 licenses, authorizing them to act as broker-dealers, custodians, and exchanges. These platforms are fully operational and serve retail clients with direct fiat on-ramps (BHD pairs) via local banking networks. In March 2023, the CBB demonstrated its proactive approach by amending the CRA Module to explicitly cover 'Digital Token Offerings' and strengthen rules regarding client asset protection. These amendments align Bahrain's framework with evolving international best practices, particularly those recommended by the FATF. The regulations mandate that licensed providers maintain capital reserves, segregate client funds, and adhere to rigorous cybersecurity standards. For retail traders, the environment is favorable. There is no prohibition on holding or trading assets, and the tax regime is attractive, with 0% capital gains tax for individuals. However, the strong regulatory oversight means that users must undergo full KYC verification to use local platforms. The CBB maintains a public register of licensed licensees, providing transparency and allowing investors to verify the legitimacy of service providers before depositing funds.
Source Evidence
Primary and secondary sources cited in this analysis
"The purpose of this Module is to provide the CBB's Directive concerning trading, dealing, advisory services, portfolio management services in accepted crypto-assets... within or from the Kingdom of Bahrain."
"The CBB rules deal with the rules for licensing, governance, minimum capital, control environment, risk management, AML/CFT... for crypto-asset services."
"Searchable database of all CBB licensed financial institutions, including Crypto-Asset Services."
"Rain obtained the Crypto-Asset Module (CRA) license from CBB after completing the bank's two-year regulatory sandbox program."
"Licensed by the Central Bank of Bahrain, the fully regulated, onshore crypto exchange offers a wide variety of assets."
Web Sources (6)
Sources discovered via web search grounding
Search queries used (6)
- Bahrain crypto tax laws
- Rain exchange Bahrain license status
- list of licensed crypto exchanges Bahrain
- CoinMENA Bahrain license status
- CBB Rulebook Volume 6 Crypto-asset Module
- Central Bank of Bahrain crypto asset regulations retail trading
https://charltonsquantum.com/wp-content/uploads/docs/bahrain-crypto-guide.pdf
https://www.bahrain.bh/wps/portal/en/BNP/HomeNationalPortal/ContentDetailsPage/!ut/p/z1/nVVdU-IwFP0rfeGR5vaD0D7CioCCKLUqfXFCiRBtk9iEov9-U5mdWSjWZTOdaTP3nNyTm5NblKAnlHBSsjXRTHCSmfkiwc_OuAOj4BfA7YXvwt1DOMf9qQPToYcemwAAPkpMGA5GD_pzt-8BDCM45of3IQbsuj3fjYYezOCL_7_5K0A9_99Kavnj-BJwMLz0fRzMu53uYf66vAeUoESmbIUWIQlpB_tum4bUb_svgdMOHeq2HZxiTH2_A_6qQqdcS71BiyWXz5S3gCzFVlt6Q603xtcrkbdgxdZMk8yiqeAi_2xBQTOi6crSQrJUtSAtPqUWFlGKalUtqnRtK3jaM1pDGOPJsDqLplJWJ7Xne04wGF5dg3Mbzz3Ak2iEo4eBex0e8Z37GAx_3JvPLi8cuK6Vsg44zB-7HcA9Z-rczUzYxbWjrAEO-KNJZMLTm6jvxENnNK7x64CkuTx7foNXk2anNO_fd_7Nyg1e_YF_dVSgm9sLwLNR0HW7fW8WutVlZq_v70nPeFBwTT80emow4ZJsCsK49ceMa1HSgueUa-tVbAtOT_hSkkJzWqgNk8raMb35WlIWrDQwS9FUi-JYaH0nZwo987Y01skfnJ0-p0RtCzOz0q3SIqeFpUz_VC8krbroCTmnYJZ5qKJFyVKqjBeSZpXuMeDEdWsEVH78qTkmjd17VtNQvxMjQAtj6-63pz02vi8Z3aGYiyI3f5zozIa6X_4bjb2Ju19wX2O02EllS1HozBjBzhh_q4LVm0hZpUxFbrNlbu-kTVY54_aGZuZTSntHMxOk9ouRqVBEOZJ5bEYeePyT7Uc7WXayMn9sv80H82A68DqyvGn_BgaUCos!/?uri=nm:oid:Z6_1I50H8C001TU00QVIAROFD1041
https://charltonsquantum.com/bahrain-virtual-assets-regulation/
https://agrtech.com.au/crypto-blockchain/best-crypto-exchanges-bahrain/
https://www.cbb.gov.bh/media-center/cbb-issues-a-new-regulatory-framework-for-digital-tokens-further-developing-the-crypto-assets-market/
https://www.cbb.gov.bh/wp-content/uploads/2022/08/Vol-6-CRA.pdf