The Kingdom of Bahrain crypto market is projected to hit a revenue of US $2.1 million in 2024. However, it will have a negative annual growth rate of -3.83% by 2025 (US $2.0 million). But hey! We all know the market is a rise-and-fall game, don’t we?
Source: Statista.com
The Kingdom, as it is often called, has been a strong believer in crypto, and one of the early adopters of crypto banking regulation in the Middle East, when compared with counterparts such as Kuwait and Oman, of course.
In the last quarter of 2017, when countries such as Korea and Singapore were making their mark in the ‘cryptoverse’, Bahrain was not left out, as it took an innovative crypto experimentation, which laid the foundation of its stronghold today in the financial sector.
The Sandbox Approach: Bahrain’s Crypto Experimentation to Cautious Adoption
In 2016, the United Kingdom’s Financial Conduct Authority launched its first crypto regulatory sandbox. Similarly, in Singapore, the Monetary Authority of Singapore (MAS) launched what it termed the FinTech Regulatory Sandbox.
A Sandbox is a controlled playground where applications, files, or codes can be tested without affecting the rest of a system. So what then is a Crypto Regulatory Sandbox? Simply put, Crypto Regulatory Sandboxes are live-testing environments that allow for security checks and regulatory compliance for cryptocurrencies or other financial transactions.
In 2015, the first Regulatory Sandbox was established and launched in the United Kingdom. Since then, the word and technique have traveled across continents.
The Kingdom of Bahrain watched closely and replicated these sandbox technologies in 2017 to experiment with blockchain technology.
In the words of Khalid Al Rumaihi, the then Chief Executive of the Economic Development Board of Bahrain, and currently, the Executive Chairman of Amriya Group, said, while responding to some queries at the MIT Innovation Forum in 2018.
This (Regulatory Sandbox) is much like Singapore and what the UK is looking at. This is not just talk. We have launched it. You can go to the website, and the application process is clear. We are open for business,
In affirmation of his statement, Rain Financial became the first crypto exchange to join the Sandbox experiment in Bahrain. Sooner than later, the Central Bank of Bahrain (CBB) issued Rain Financial the license to operate as a crypto service provider in 2019.
It is worthy of note that Rain was also the first licensed cryptocurrency exchanger in the Middle East, which gave it an unprecedented opportunity to lead the region in the cryptoverse.
Binance, which is one of the biggest and leading crypto exchange providers, was issued a license by CBB to also operate in the Kingdom in March 2022.
Since then, Bahrain has been open arms to operators such as CoinMena and, recently, BitOasis.
Recommended reading: History of Cryptocurrency Exchanges
The CBB Positioning Bahrain as a Global Leader in Crypto Adoption
In the words of Gordon B. Hinckley, “You can't build a great building on a weak foundation. You must have a solid foundation if you're going to have a strong superstructure.”
The CBB has been the solid foundation holding firm the superstructure of cryptocurrency in Bahrain through:
Regulations
The CBB is the regulatory body responsible for issuing licenses for Bahrain’s crypto assets, collectively called Crypto Asset Service Provider (CASP). This regulatory framework is currently part of the CBB Rulebook (Volume 6), which governs the financial markets.
CBB has been cementing Bahrain’s position as a global leader in the fintech sector by ensuring a dynamic regulatory environment and embracing crypto assets.
In a bid to broaden the scope of tradable assets to include crypto, Bahrain’s central bank outlined in Resolution No. (45) of 2023. This identifies the significance of digital currencies while clamoring for proper oversight and, at the same time, being subjected to specific rules and regulations.
Security
With robust security measures, the CBB has ensured all crypto-asset service providers adhere to and build on the existing Crypto-Asset (CRA) Module of its rulebook. Since its inception, adherence to global benchmarks like the Crypto Currency Security Standards (CCSS) has been non-negotiable in Bahrain.
These standards include multi-factor authentication, data protection, proof of reserves, ensuring integrity of transactions, and wallet controls.
Innovations
To validate its commitment to a future-proof framework further, the CBB amended the CRA Module in 2023. This amendment establishes a new chapter on digital token offerings and grants the CBB additional operations, such as crypto-asset licensees on a case-by-case basis.
This approach brings flexibility and lauds innovation while improving and maintaining regulatory control.
Partnerships
Bahrain’s central bank did not stop there. It did not restrict its innovation and approach within its borders but extended it by collaborating with the Agile Nations Network, an inter-governmental regulatory network that joins forces on innovative practices between participating governments.
Led by UAE’s Artificial Intelligence Office, the CBB partnership with Agile Nations Network has brought about knowledge sharing and fostered best practices.
Through innovation, partnerships, and robust oversight, the CBB is revolutionizing and creating a fairground for crypto players and users to harness the full capabilities and powers of digital currencies.
Bahrain: The Ideal Home for Crypto Companies
The Kingdom of Bahrain has been an attractive destination for blockchain and crypto companies due to its supportive business environment, sandbox approach, regulatory foresight, and strategic location.
Let’s go into details:
Supportive Business Environment: Crypto companies have gotten a lot of support from the government of Bahrain and that has skyrocketed the fintech sector. This support ranges from initiatives and incentives such as simplified business registration processes to tax advantages.
Source: Statemag.state.gov
The government has been hands-on in embracing digital transformations, which has piloted and made Bahrain a global leader in technological advancements.
Bahrain has also been an ideal destination due to its wider GCC market. Bahrain’s crypto market has been on a steady growth trajectory due to the proactive collaborations between the government, regulators, and stakeholders.
Regulatory foresight: The Central Bank of Bahrain has ensured that all regulatory frameworks are streamlined and sleek for crypto exchanges. This has positioned Bahrain as a leader in technological advancements in the Middle East.
The regulatory framework ensures that crypto companies operate in a secure environment and are transparent with their activities, building investors’ confidence and making it easier for crypto enterprises to thrive.
The Sandbox Approach: This ‘test playground’ by CBB has allowed a lot of startups and companies to test-run their products in Bahrain. This has fostered innovations, opened doors for new players, and most especially attracted existing and international players.
The sandbox initiative has also allowed startups to refine their products before a full-scale launch. It acts as a safe space to innovate without risking significant financial consequences if something goes wrong.
This has been used to assess the feasibility of new crypto projects and identify potential regulatory challenges before full implementation.
Strategic Location: Situated in the Persian Gulf, in-between Qatar, and Saudi Arabia, Bahrain’s strategic position in the Middle East offers it unequivocal access to markets of the Gulf Cooperation Council (GCC) and far beyond.
Infrastructural Presence: From advanced telecommunication infrastructure to a robust financial sector, Bahrain has provided a solid foundation for crypto companies to thrive.
Bahrain’s well-developed and technologically driven legal frameworks and logistics networks make it easier for businesses to communicate, operate, and scale rapidly and easily.
Highly Skilled Workforce: Bahrain boasts a population of over 1.6 million persons, with a literacy rate of 97.85% (15 years and above). Males amounting to 98.83%, and females to 96.11% (World Bank).
This data reflects that Bahrainis are not just able to understand the concepts and terminologies of cryptocurrencies, but also possess the skills and required education to drive its growth.
Varsities and training programs produce a steady stream of talented and skilled workforce ready to join hands and grow the fintech and crypto sectors.
Moreover, the government of Bahrain has been proactive in supporting research and developments, making it a breeding ground for cutting-edge solutions in the cryptoverse.
Recommended reading: How to Overcome Cryptocurrency Adoption Challenges
Overview of Bahrain’s Crypto Market
As reported by Statista, a global data company, the market for cryptocurrencies in Bahrain is projected to reach US $2.1 million with annual growth (CAGR 2024-2025) to US $2.0 million by 2025 (-3.83%).
An average Bahraini spends US $22.4 in the cryptocurrency market (as of 2024). The number of citizens adopting and using crypto services is expected to reach 93,850 thousand by 2025.
Source: Statista.com
These data are testament to the conducive environment created by CBB, which has led to the establishment of cryptocurrency exchanges in Bahrain.
Conclusion
In conclusion, the sandbox infrastructure created a safe space that led to the establishment of numerous cryptocurrency exchanges in the kingdom.
The CBB's regulatory framework ensures the operations of companies are transparent and secure, building trust between investors, crypto exchanges, and stakeholders.
The strategic position of Bahrain in the GCC and its accessibility beyond the Middle East has positioned the country for international trade and made it easier for partnerships.
The high literacy rate and talented workforce have also been major contributors to the high adoption of cryptocurrencies in the Kingdom of Bahrain.
