While a long list of counties across the globe are doing their best to attract blockchain development expertise to their domestic financial “hubs”, Bahrain, a nation comprising more than 30 islands in the Arabian Gulf, has been silently making appropriate moves in the background to pave the way for the ongoing growth of its financial services and fintech development effort, which should now include blockchain technology as one of its main priorities. The Central Bank of Bahrain (CBB) is the catalyst for these activities.
As we have reported many times before: “If the truth be known, there has been a silent and ongoing “arms race” of sorts by small financial centers across the globe, each seeking to win the favor of the current titans in the crypto ecosphere. A brief list of contenders includes Malta, Bermuda, Gibraltar, the Seychelles, Switzerland, Puerto Rico, and Liechtenstein.” Bahrain can now be added to this list.
Bahrain, like many of its local Arab brethren, are looking out to the future when revenues from oil exports will decline substantially. As a result, they and others are investing heavily current capital in order to diversify the nature of their core commercial businesses for the long term. As Entrepreneur.com notes:
More than 60 per cent of the country’s export receipts are from oil and gas. One of the sectors in which the kingdom has invested heavily and has taken a lead in the geographical region is banking, with evolution of financial technology (fintech) being the backbone.
The CBB is the banking regulator, and, like other central banks, it has a mandate to formulate monetary policy and to ensure the financial stability of the kingdom. The bank has also assumed the mantle of enabling innovation. The pace of change in the financial services arena has accelerated, and CBB does not want Bahrain to fall behind in the new Digital Age. It firmly supports more investment and effort behind present initiatives to build a national financial hub, inclusive of blockchain technology.
Yasmeen Al-Sharaf, head of fintech and innovation unit at CBB, told Entrepreneur India:
The kingdom of Bahrain has always been recognized as a leading financial hub in the region. We base our regulations on international best standards and policies. So, it’s extremely important for us to move in line with this digital movement and innovation to retain our position. The way for us to do that, of course, is through regulatory forums and amendments fostering fintech and innovation, while at the same time ensuring that financial stability is not hindered in any manner.
One important initiative undertaken by the innovation unit of the CBB was to set up what it calls a “Regulatory Sandbox”, where fintech firms and startups can meet, discuss ideas, network, and generally share what each firm is doing. The environment also helps the government develop accommodating regulations for the digital marketplace, as well. Presently, there are 35 firms in the “sandbox”, two have already graduated to “full license” status.
Per Al-Shareef:
This approach provides the regulator with the ability to know and learn more about upcoming innovations which will enable us to ultimately think about the necessary changes required in regulations and legislations as the space is evolving. We have around four other companies in the pipeline ready to graduate from the sandbox as well this year. So we think that the sandbox is a great way for SMEs to scale up their business in an agile manner.
Al-Sharraf concludes that global cooperation is necessary:
While developing regulations at the national level is important, that should not happen in isolation. Digitization is going to break down the borders between jurisdictions whereby fintech companies will ultimately want to serve customers from more than one jurisdiction. So it’s extremely important for regulators around the world to have open communication, collaborations to share their learning, and knowledge for solving policy challenges and to harmonize regulations to ensure international financial security.