- allyBahrain sets clear stablecoin rules with strict reserves and annual audits
- CBB Rulebook 6 defines stablecoin issuance guidelines and licensing requirements
- Bahrain permits Dinar, Dollar, Sharia stablecoins, balancing innovation with strong safety
Bahrain has taken an important step in the world of digital assets. The Central Bank of Bahrain (CBB) has released its first framework for stablecoins. The new policies are termed the Stablecoin Issuance and Offering (SIO) Module. Companies will be able to issue stablecoin in Bahrain with the legal consideration of safety due to these rules.
Bahrain Sets First Clear Stablecoin Rules, Demands 1:1 Reserves
Now, this is the first time Bahrain has clear regulations on stablecoins. The CBB intends to ensure that stablecoins are fully backed by real money. It hence demands that those who are issuing maintain a 1:1 reserve ratio. This implies that a stablecoin should be covered by an equivalent balance in money or quality liquid assets.
Besides, other tough regulations have to be fulfilled by companies. For example, they are required to have annual audits. They should safeguard their systems against cyberattacks. These should have powerful internal controls to guard the customers. The CBB seeks to ensure that the companies doing stablecoin practice the best level of security and trust.
The new rules mean that only licensed companies will be allowed to issue stablecoins. They have to avail this license in several steps. Additionally, they must possess a paid-up capital of not less than BHD 250,000. They also have to demonstrate that their owners are transparent. There is also a need of good governance and systems of risk management. Business establishments will have to demonstrate that their information technology framework is prepared and securely safeguarded.
There is also a rule requiring a whitepaper to be written by stablecoin issuers. In this whitepaper, the mechanism of the stablecoin will have to be described. It should also demonstrate how the firm will deal with its finances. This assists in the development of trust in the customers and the general population.
New Bahrain Rules Require Written Approval for Stablecoin Services
The new rules are part of the CBB Rulebook, Volume 6. They established definite guidelines on the creation, issuance, and destruction of stablecoin. Further, they also indicate how the money behind the stablecoins has to be handled by the companies. When a firm already possesses a license, in case it desires to provide stablecoin services, then it has to obtain written permission of approval from the CBB. The company will also have to elaborate on how it will operate such new services.
Among the unique aspects of the new framework, there is the possibility of having yield-bearing stablecoins. Such stablecoins will be able to make money to customers. This is money that is paid as interest or other part of the reward on the reserve assets. The CBB, however, states that the rewards should be equitable. They should not increase the instability of the stablecoin or endanger the health of the company.
This is opposed to the regulation made by the UAE. The Central Bank of the UAE has recently established regulations of payment tokens. Algorithmic stablecoins are not tolerated by them. They only accept the UAE Dirham stablecoin in payments.
Bahrain is becoming more radical. It will permit the Bahrain Dinar and US Dollar stablecoins. It will also accommodate Sharia-compliant stablecoins. The yield-bearing stablecoins will also be able to be issued by companies in Bahrain, unlike in the UAE.
To conclude, the new regulations in Bahrain demonstrate that the country not only desires to become a leader in digital finance. The new framework provides safety and innovation in balance. In doing so, Bahrain considers that its growing digital economy will be able to attract additional companies and investors.
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