Bahrain Introduces New Stablecoin Regulations Requiring 1:1 Reserve Ratio

The Central Bank of Bahrain (CBB) has introduced a new regulatory framework for stablecoin issuance and offerings, marking a significant milestone in the region's approach to digital assets. The new rules, issued under Volume 6 of the CBB Capital Markets Rulebook, aim to provide legal clarity and oversight for stablecoin issuers operating in or from Bahrain. This framework covers the offering, issuance, minting, and burning of stablecoins, as well as the custody and reserve asset management associated with them, treating these activities as regulated financial services.

Entities seeking to provide stablecoin services must obtain a license from the CBB, and no stablecoin activity can occur without prior approval. The regulations stipulate that only fully fiat-backed stablecoins pegged to the Bahraini Dinar, the U.S. Dollar, or other fiat currencies are acceptable. Issuers must maintain a 1:1 reserve ratio, backed by high-quality, liquid assets that meet stringent risk criteria. Additionally, issuers are required to fulfill annual audit obligations and adhere to robust standards on cybersecurity, internal controls, and consumer protection.

The new licensing framework introduces clear operational and prudential requirements, including a minimum paid-up capital of BHD 250,000 and conditions related to shareholder transparency, governance, risk management, and IT system readiness. Issuers must provide a stablecoin whitepaper outlining key details of the project and its financial underpinnings. The regulations also enforce a permanent right of redemption for stablecoin holders, prohibit the payment of interest, and require that all reserve assets be subject to external audits and held in segregated accounts.

The CBB retains the authority to reject any stablecoin issuance deemed contrary to the interests of Bahrain’s national economy or the general public. The body also reserves the right to impose additional capital buffers if the issuer’s activities are deemed to pose heightened risk to the financial system. This move by the CBB underscores Bahrain's commitment to fostering a regulated and secure environment for digital assets, positioning the Gulf nation as a leader in the region's crypto landscape.

In July 2025, the Central Bank of Bahrain introduced a new module for stablecoin issuance, formalizing the regulatory framework for digital assets in the region. This regulatory framework signifies Bahrain's commitment to integrating digital assets with traditional finance, offering greater clarity and stability for new fintech developments. The Central Bank of Bahrain's new regulation mandates that stablecoin issuers undergo licensing to operate within the country. Fiat-backed stablecoins pegged to the Bahraini Dinar and the US Dollar are now authorized, showcasing Bahrain's progressive stance in the fintech industry. While the initiative primarily targets stablecoin infrastructure, indirect impacts might be observed in DeFi protocols due to increased legitimacy of these digital currencies.

Financial implications are noteworthy, especially for industries leveraging stablecoins. The inclusion of yield-bearing options suggests opportunities for passive income, subject to transparency mandates. Regulatory consistency aligns with global practices, offering broader financial integration. The expected uptake in stablecoins could enhance remittance systems and regional economic operations, although detailed financial data on potential increases in transaction volumes or liquidity remains undisclosed. Future integrated systems might evolve, promoting further technological advancements within the digital asset ecosystem.

Bahrain's regulatory developments extend beyond stablecoins. In April, a subsidiary of Binance secured a Payment Service Provider license from the CBB. This license allows the subsidiary to operate as a regulated entity, offering fiat on- and off-ramps, custodial services, and e-wallet functionality. This development enables users in Bahrain to make fiat deposits and withdrawals via bank transfers and cards directly on the platform, enhancing the digital payments ecosystem in the region.

Furthermore, in October 2024, the National Bank of Bahrain launched the region’s first Bitcoin-linked structured investment product, offering capital-protected exposure to BTC. Developed in collaboration with ARP Digital, this product targets accredited investors seeking controlled exposure to crypto assets. These initiatives align with broader adoption trends in the Middle East and North Africa, reflecting a mature and growing market for digital assets.