Bahrain Introduces Licensing Framework for Stablecoin Issuers

Coin WorldFriday, Jul 4, 2025 2:38 pm ET
2min read

The Central Bank of Bahrain (CBB) has introduced a new licensing framework for stablecoin issuers, marking a significant development in the regulation of digital assets within the region. Announced on July 4, 2025, during a fintech event in collaboration with the Bahrain Economic Development Board, this policy aims to safely integrate stablecoins into Bahrain’s financial system. The framework supports the growth and transparency of financial systems by enhancing investor confidence and promoting industry growth through comprehensive regulation.

The new framework permits licensed entities to issue single-currency stablecoins backed by the Bahraini dinar, U.S. dollar, or other approved fiats. This initiative is designed to mitigate risks associated with unregulated stablecoins and strengthen Bahrain’s position as a financial hub in the Middle East. According to Mohamed Al Sadek, the CBB’s executive director for market development, the move is part of a broader effort to encourage the development and adoption of innovative financial technologies. This milestone reflects the CBB's pioneering role in overseeing the crypto-asset market and ensuring that the Kingdom’s financial services landscape is equipped for future developments.

By introducing licensing for stablecoin issuers and custodians, the CBB framework ensures that only authorized institutions can distribute fiat-backed stablecoins. The framework also outlines mandates for yield-bearing stablecoins, ensuring that returns do not compromise coin stability. Ali Haroon AlAamer from CBB’s Capital Markets Supervision Directorate highlighted the initiative’s goal to maintain a transparent crypto asset market. The policy includes robust investor protection measures, with the market showing cautious optimism. Feedback from Bahrain’s financial circles suggests increased confidence in regulated digital assets.

The Central Bank of Bahrain (CBB) has taken a significant step forward in the regulation of digital assets by introducing a comprehensive framework for stablecoin issuance. This new module, known as the Stablecoin Issuance and Offering (SIO) Module, is part of Volume 6 of the CBB Capital Markets Rulebook and aims to provide legal clarity and oversight for stablecoin issuers. The regulations stipulate that entities currently licensed to offer regulated stablecoin services must seek written approval from the CBB. This move positions Bahrain as the first Gulf country to introduce a dedicated rulebook for stablecoins, setting a precedent for its regional peers.

The SIO Module recognizes stablecoin activities such as issuance, minting, burning, and custody as regulated financial services. This recognition ensures that any entity engaging in these activities must comply with the CBB's regulatory framework, thereby enhancing the transparency and security of stablecoin operations in the region. The new rules are designed to formalize the regulatory environment for digital assets, providing a clear legal pathway for issuance, governance, and operation of stablecoins.

The introduction of these regulations is a strategic move by the CBB to foster innovation in the financial sector while maintaining robust oversight. By establishing a licensing and regulatory framework, the CBB aims to ensure that stablecoin issuers operate within a structured environment, mitigating risks associated with digital assets. This framework not only protects investors but also encourages the growth of the digital asset ecosystem in Bahrain.

The SIO Module is expected to attract more entities to seek licensing for stablecoin services, as it provides a clear and compliant pathway for issuance. This development is likely to position Bahrain as a leader in regulated crypto innovation, potentially drawing more investment and interest from the global financial community. The CBB's proactive approach to regulating stablecoins underscores its commitment to embracing technological advancements while ensuring financial stability and security.

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