While Bahrain may be the smallest of the Middle Eastern countries, it has been an economic leader in the region. Bahrain’s financial industry includes a vast network of 116 licensed banks, 151 insurance companies, and several other investment institutions that account for a fourth of its total GDP. Now, it seems that Bahrain is taking the lead in crypto-asset regulation as well. By undertaking numerous initiatives to attract blockchain talent, Bahrain is establishing itself as a blockchain pioneer in the region.
What Has Bahrain Done so far?
1. In October 2017, Bahrain’s Economic Development Board endorsed blockchain, approving over 28 blockchain companies. At the same time, the board has continued to expand Bahrain’s fintech capital flows from other GCC countries, as well as from China, India, and the UK.
2. Most central banks around the world still aren’t convinced of the benefits of digital currencies. However, Bahrain Central Bank (BCB) has issued rules on licensing, governance and cybersecurity among other crypto asset related topics. They also created a regulatory sandbox to help boost fintech and blockchain-related businesses. The program allows companies to test out their services as the country looks into regulating the emerging industry. While initially opposing cryptocurrency as a whole, Bahrain is starting to recognize it as a commodity that will be useful for the region.
3. University of Bahrain (UoB) recently announced that it would be issuing digital diplomas via the blockchain. This initiative makes UoB one of the first universities globally to issue digital diplomas and is supported by the Information and eGovernment Authority in Bahrain. UoB students will now have greater control over their records, significantly reducing the time needed for credential verification by employers. Furthermore, the issuance system to be used will also enable governments and corporations in the region to issue immutable certificates at scale.
4. Bahrain’s Electronic Network for Financial Transactions (BENEFIT) recently began designing and implementing a national Know Your Customer (KYC) utility that incorporates blockchain technology. Under this program, financial institutions that subscribe to BENEFIT will be able to instantly complete KYC and Anti-Money Laundering (AML) compliance procedures. The decentralization of customer data removes the need for duplicate requests for information — eliminating manual processes and enabling financial institutions to onboard new customers and products swiftly and seamlessly. The cloud-based utility allows financial institutions to verify customer identity via biometric verification, which links to Bahrain’s eKYC hub. Once the customer is on-boarded, the system writes data confirmations onto a blockchain for reuse by other financial institutions within the Bahraini ecosystem.
5. Launched just over a year ago, the Bahrain FinTech Bay (BFB) is the largest fintech hub in the Middle East and African region, already attracting more than 50 partners from local and international organizations. Centered right at the heart of Bahrain’s development, the launchpad provides a dedicated FinTech co-working space, with state of the art meeting rooms, innovation labs, acceleration programs, curated activities and educational opportunities. On top of all this, BFB also serves in a growth and mentorship capacity, providing services such as fintech advisory, corporate incubation, and venture acceleration — as well as a series of research publications and conferences.
Ultimately, Bahrain’s bold move into crypto asset regulation is positive not only for the blockchain industry but for the country as a whole. While a quarter of its GDP comes from the financial sector, the rest primarily comes from petroleum. As the country strives to offset the slump in crude oil prices and reliance on petroleum exports, embracing blockchain and cryptocurrency-based companies is a move in the right direction.
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