Quick Answer
Yes, cryptocurrency is legal and regulated in the Kingdom of Bahrain.
- The Central Bank of Bahrain (CBB) issues licenses for crypto-asset businesses.
- Firms must follow strict anti-money laundering (AML) and compliance rules.
Legal Status of Crypto in Bahrain
Cryptocurrency is unequivocally legal in Bahrain, operating within a well-defined and regulated environment rather than a legal gray area. This clarity comes from the Central Bank of Bahrain (CBB), which has established a comprehensive framework requiring any firm offering crypto-asset services to be formally licensed. Licensed providers must adhere to stringent regulations detailed in the CBB Rulebook, which includes robust anti-money laundering (AML) and compliance obligations. This proactive regulatory stance ensures a secure and transparent ecosystem for digital assets in the kingdom.
Current Regulations
The Central Bank of Bahrain (CBB) governs the nation's crypto market through its Crypto Asset Module, which is part of Volume 6 of the CBB Rulebook. These comprehensive regulations establish licensing categories, minimum capital requirements, and measures to safeguard client assets. Following recent amendments, the rules were extended to cover Digital Token Offerings, which are tokens that exhibit the characteristics of securities. Any business wishing to offer regulated services—such as trading, custody, or operating an exchange—must first obtain a crypto asset license from the CBB.
Regulatory Authorities
Several key bodies are responsible for creating and enforcing the rules governing crypto assets in Bahrain.
- Central Bank of Bahrain (CBB): The CBB is the primary regulator, responsible for issuing licenses and creating the comprehensive legal framework for crypto-asset services. It supervises all licensed entities, sets capital requirements, and ensures compliance with the CBB Rulebook.
- Financial Intelligence Directorate (FID): As Bahrain's financial intelligence unit, the FID receives and analyzes suspicious transaction reports from crypto service providers to detect and investigate potential money laundering. It works closely with law enforcement to combat financial crime within the digital asset space.
- Ministry of Industry and Commerce (MOIC): The MOIC helps coordinate the government's national anti-money laundering strategy and facilitates international cooperation on financial regulation. Its role supports the broader compliance environment in which crypto firms must operate.
- National Committee for Combating Money Laundering: This committee is responsible for setting the country's general policies for preventing money laundering and terrorism financing. It coordinates the implementation of Bahrain's AML/CFT strategy across various government agencies.
Historical Context
Timeline of Crypto Regulation
Bahrain’s regulatory journey began in June 2017 with a regulatory sandbox, allowing firms to test products in a controlled environment. A major policy shift occurred in 2019 when the CBB moved from experimentation to a formal framework, issuing comprehensive regulations for crypto-asset services. This established a licensed, supervised market and signaled that Bahrain was open for business. The framework has continued to evolve, with significant amendments in March 2023 extending oversight to Digital Token Offerings. This update enhanced investor protection and demonstrated the CBB's commitment to adapting to market developments, cementing Bahrain’s reputation as a progressive fintech hub.
Compliance Requirements for Businesses in Bahrain
Under Bahrain's Prevention and Prohibition of Money Laundering Law, businesses must adhere to a strict set of compliance obligations. Key requirements include:
- Customer Due Diligence (CDD) and KYC: Firms must verify the identity of all customers and beneficiaries using official documents before establishing a business relationship. This includes understanding the customer’s source of funds and conducting ongoing monitoring. Enhanced due diligence is mandatory for high-risk clients, such as politically exposed persons (PEPs). Additionally, businesses are prohibited from opening or maintaining any secret, fictitious, or anonymous accounts.
- Record-Keeping: All customer identification data and transaction records must be maintained for a minimum of five years after the business relationship or transaction has ended.
- Suspicious Transaction Reporting: Businesses must promptly file Suspicious Transaction Reports (STRs) with the Financial Intelligence Directorate (FID) for any activity that raises concern. These reports are filed electronically, and it is illegal to "tip off" a client that a report has been made about them.
- Internal Controls and Governance: Companies are required to establish robust internal AML policies. This includes appointing a dedicated compliance officer at the management level, providing regular AML training for all relevant employees, and developing an audit function to evaluate the effectiveness of these internal controls.
- Risk-Based Approach (RBA): Firms must assess the specific money laundering and terrorist financing risks associated with their business activities, products, and customer base. Controls and resources should be applied proportionally based on the identified level of risk.
- Cooperation with Authorities: All businesses have a mandatory obligation to cooperate fully with government entities, including the CBB and the FID. This includes providing any requested information or assistance during audits and investigations.
Why this matters for Cross-Border Payments
Bahrain's robust regulatory framework positions it as a secure and transparent hub for cross-border crypto payments, offering a level of clarity that is attractive for international businesses. However, this progressive stance creates friction when dealing with countries like India, which maintains a more restrictive and cautious approach to digital assets. For businesses, this regulatory divergence can introduce significant pain points, including complex compliance challenges, operational delays, and increased costs when navigating the conflicting legal landscapes for transactions between the two nations.
How Lightspark Enables Compliant Crypto-Native Payments
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For regulated institutions, Lightspark provides tools to navigate complex compliance landscapes. The platform facilitates adherence to rules like Bahrain's AML/CFT requirements by offering features such as audit-ready reporting and flexible custody options. Built-in solutions for OFAC screening and the Travel Rule empower digital banks and exchanges to leverage crypto for cross-border payments while maintaining their own regulatory obligations, providing a compliant-ready foundation.
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Notice: This article is provided for informational purposes only and does not constitute legal advice.
Sources
- Bahrain. Legislative Decree No. 4 of 2001 Prevention and Prohibition of Money Laundering Law and Terrorism Finance. Bahrain Economic Development Board, 29 Jan. 2001, bahrainbusinesslaws.com/all-laws/financial-services-laws/Prevention-and-Prohibition-of-Money-Laundry-Law.
- Central Bank of Bahrain. “Central Bank of Bahrain grants Crypto Service license to Fasset Financial Services.” CBB, 23 Jan. 2025, www.cbb.gov.bh/media-center/central-bank-of-bahrain-grants-crypto-service-license-to-fasset-financial-services/.
- Central Bank of Bahrain. “Crypto-asset.” Rulebook, Apr. 2023, cbben.thomsonreuters.com/rulebook/crypto-asset.
- Goud, Siddharth. “Central Bank of Bahrain Issues Regulations governing Crypto-Asset Services.” Al Tamimi & Company, Apr. 2019, www.tamimi.com/law-update/april-2019/central-bank-of-bahrain-issues-regulations-governing-crypto-asset-services/.
- Team FOCAL. “AML Compliance in Bahrain: Frameworks, Risks, and Reporting.” FOCAL by Mozn, 23 July 2025, www.getfocal.ai/blog/aml-compliance-in-bahrain.
- Trowers and Hamlins LLP. Bahrain: Amendments to the Crypto-assets rules. Trowers & Hamlins LLP, May 2023, trowers.com/-/media/files/articles/bahrain---amendments-to-the-crypto-assets-rules.pdf.
