Cryptocurrency's rise has been meteoric, affecting the financial and legal sectors. It is digital cash that may be used wherever credit cards are accepted.
We can call it a digital medium of exchange where the transactions are highly secured in simple language. The power of governing the same doesn't lie in the hands of the government or any single authority.
The Kingdom of Bahrain has been one of the most growing nations in the Middle East due to the favorable business-friendly laws. As a result, the Bahraini government has decided to take action in response to the ever-increasing demand for bitcoin.
If you plan to invest in crypto, this guide is a must-read!
Cryptocurrency in Bahrain
Undoubtedly, cryptocurrency is a highly complicated digital asset that has confused global investors regarding its implementation.
Bahrain is a country that has embraced development and innovation more than most Gulf countries. With this in mind, Bahrain has set out to establish itself as a prominent player in fintech.
The issuance of a crypto-asset service provider license can be considered a milestone that marks crypto as fully licensed and regulated around the globe. This has also paved new opportunities for global investors to invest securely and smartly.
Who are the Eligible Investors?
To obtain or deal with a crypto-asset license, the following eligibility criteria are to be met:
The person should be above 21 years of age
A corporate entity incorporated in Bahrain or Overseas jurisdiction
What are Crypto-Assets?
Crypto-assets can be defined as virtual or digital assets (tokens) that operate on a blockchain platform and are encrypted to prevent unauthorized access.
The tokens are classified into four types, namely:
Payment tokens (Exchange tokens)
Utility tokens
Asset tokens
Hybrid tokens (a combination of the above-specified tokens)
Accepted Crypto Asset
It is a type of cryptocurrency permitted by the CBB to undertake a regulated crypto-asset service.
Regulated Crypto Asset
This is one of the crypto assets issued to conduct a set of services mentioned in the next section.
Bahrain Crypto Licensing Categories
Bahrain's Central Bank has set a milestone by issuing a crypto-asset service provider license. While obtaining a crypto-asset permit, the applicants must seek to get the same under the following categories:
Category 1
Category 2
Category 3
Category 4
Reception and transmission of orders
Trading in accepted crypto-assets as an agent
Trading in accepted crypto-assets as an agent
Operate a licensed crypto-asset exchange
Investment advice
Portfolio management
Trading in accepted crypto-assets as a principal
Crypto-asset custody service
Crypto-asset custody service
Portfolio management
Investment advice
Crypto-asset custody
Investment advice
The Capital Required for Bahrain Crypto License
To avail of the crypto-license in Bahrain, one must meet the minimum capital requirements based on the category:
License Category
Minimum Capital (BHD)
Category 1
25,000
Category 2
100,000
Category 3
200,000
Category 4
300,000
Central Bank of Bahrain (CBB) Issues License for Crypto Exchange
The Bahraini Central Bank (CBB) has issued regulatory guidelines for "crypto-assets" in the form of a Directive. The assets have been defined as digital assets operating on a blockchain platform protected by cryptography.
A specific set of rules has been issued to minimize the risk of financial fraud and illegal use of digital assets. The CBB rules deals with the rules of:
Licensing
Governance
Minimum capital
Control environment
Risk management
AML / CFT
The standard for business conduct
Avoidance of conflict of interest
Cyber security
Crypto-asset services
CBB Approval Factors
A crypto-asset license is issued by the CBB under regulations to carry out the services in Bahrain. Certain factors that are considered by the board of CBB include:
The technological experience
Track record and reputation of the issuers and the team
Details regarding the issuer's AML, cybersecurity systems, and controls
Protocols taken to deal with blockchain
Exclusions of Crypto-Asset Services
The following activities are excluded from the crypto-asset services, which include:
The creation and administration of crypto assets
The development, dissemination, or use of software to create or mine a crypto-asset
A loyalty program
How to Obtain a Cryptocurrency Bahrain License?
To obtain a crypto license in Bahrain, the licensee must incorporate a Bahraini Joint Stock Company or a Branch resident in Bahrain of an overseas company; here’s a guide on Branch of a Foreign Company in Bahrain, which highlights the process to be followed.
Join hands with an expert
First, the investor needs to join hands with a professional expert who is well-versed with the legal proceedings and requirements.
Handover the documents
A business plan outlining the business activities and operations
Details of the business shareholders and subsidiaries
Application forms for all "controlled functions."
Crypto-asset risk disclosure (as mandated by the CBB)
Documents Gets Scrutinized
Once the documents are submitted, they are scrutinized by the government authorities
Apart from the docs, the following parameters will also be taken into consideration, which involves:
The shareholders
The management structure finalized
Financial position
Activities and the regulations that govern the crypto-activities
Issuance of License
Once approved, the license will be issued accordingly by the authority.
Cryptocurrency constitutes a new way of transmitting and receiving value in a virtual space with minimal or no transaction fees. Thus, understanding the legislation behind this tool is sought out by many people across all governments worldwide.
However, before transferring any digital currency, you should know its nature. Speaking to an experienced professional will help you to clear your doubts at the initial stage.
There are many technical aspects to gaining a cryptocurrency license in Bahrain, and Business Setup Worldwide can assist you in getting your license in a hassle-free manner.
Every business transaction gets publicly broadcast to the network and is shared from node to node. After every ten minutes, these transactions are collected by miners and are grouped into blocks, and added permanently to a blockchain.
4. What is cryptographic identity?
Cryptographic identity can be defined similarly to an email address where you need a password to access the account.