Central Bank of Bahrain Introduces Enhanced Regulatory Framework for Digital Tokens to Strengthen Crypto-Assets Market

The Central Bank of Bahrain has made changes to its Crypto-assets Module in March 2023, after consulting with industry experts.

The amendments were made to accommodate the ever-evolving crypto-assets market and align with industry best practices while also improving investor protection.

This move is part of the Central Bank's plan to expand the crypto-assets market in line with the Kingdom's Economic Recovery Plan.

Under the new amendments, the Central Bank of Bahrain has widened the scope of its regulated crypto-assets activities to include "Digital Token Offerings." Consequently, any digital token offerings that show security-like characteristics will be regulated by the Central Bank of Bahrain.

To determine if a digital token is a security, the Central Bank of Bahrain will examine its underlying economic purpose, structure, characteristics, and associated rights.

The amendments also provide new requirements to improve the safety of client assets, giving investors high levels of protection.

Moreover, the new amendments enable crypto-asset licensees to engage in additional activities that are not covered under the regulated crypto-asset services after obtaining approval from the Central Bank.