The Central Bank of Bahrain (“CBB”) has issued the final rules on a range of activities relevant to Crypto-assets. Crypto-assets operating under block chain distributed ledger systems have drawn much regulator attention globally, and the CBB rules are aimed at ensuring that the related activities are brought within the regulatory perimeter and are subject to comprehensive regulatory and supervisory measures.
Mr. Khalid Hamad, Executive Director – Banking Supervision, said: “We will continue to enhance our regulatory framework in order to keep pace with the innovations taking place in the major financial centres around the globe. The CBB’s introduction of the rules relating to crypto-assets is in line with its goal to develop a comprehensive rules for the FinTech eco-system supporting Bahrain’s position as a leading financial hub in the MENA region.”
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. They also cover supervision and enforcement standards including those provided by a platform operator as a principal, agent, portfolio manager, adviser and as a custodian within or from the Kingdom of Bahrain.
In addition, for those licensed by the CBB as crypto-asset exchanges, the regulatory framework also contain rules relevant to order matching, pre and post trade transparency, measures to avoid market manipulation and market abuse, and conflicts of interest.
Recognising the emerging nature of these activities and the risks involved, the CBB rules also specify, among other measures the following:
- Need for enhanced due diligence (EDD) when on boarding new clients;
- Requirements to ensure that no encrypted safe custody accounts or “wallets” are maintained that cannot be retrieved;
- A mandate to ensure that keyman risks are adequately managed including by having the necessary insurance covers;
- The clients are educated and given clear instructions for use of the safe custody wallets.
