Bahrain’s Central Bank has issued the final rules on various activities related to Crypto-Assets, including licensing, governance, minimum capital, control environment and risk management. The Rules are the first of their kind in the region and are aimed at ensuring Crypto-Asset activities are regulated effectively. They also cover anti-money laundering and anti-terrorist financing, business conduct standards, avoiding conflicts of interest, reporting and cyber security for these activities.
In addition, there are provisions on supervision and enforcement standards including those provided by a platform operator as a principal, agent, portfolio manager, adviser and a custodian in or outside Bahrain.
Those licensed by the Central Bank as crypto-asset exchanges will have additional regulatory requirements to comply with. These additional requirements relate to order matching, pre and post-trade transparency, measures to avoid market manipulation and market abuse and conflicts of interest. They also state there is a need for enhanced due diligence when onboarding new clients, requirements to ensure no encrypted safe custody accounts or ‘wallets’ are maintained which cannot be retrieved, a mandate to ensure keyman risks are adequately managed including by having the necessary insurance covers and clients are educated and given clear instructions on using safe custody wallets.