Bahrain stands out as a premier destination for crypto businesses in the MENA region, offering a unique blend of strategic advantages and robust regulatory oversight:

• A Proactive Approach to Crypto Regulation: Bahrain's regulatory framework, spearheaded by the Central Bank of Bahrain (CBB), demonstrates a forward-thinking attitude towards the crypto industry. Prioritising investor protection and aligning with international standards, Bahrain offers a transparent and well-regulated environment for crypto businesses.
• Strategic Location in the MENA Market: Situated at the heart of the MENA region, Bahrain provides unparalleled access to growing markets in the Middle East and beyond. Its strategic position makes it an ideal hub for businesses looking to establish a foothold in the region while benefiting from Bahrain’s business-friendly environment.
• Favourable Tax Policies: Bahrain’s low-tax environment is a key draw for crypto enterprises. The country’s tax-friendly policies reduce operational burdens, allowing well-capitalised businesses to optimise their growth strategies.

Entering Bahrain’s thriving crypto asset market offers significant opportunities, but businesses and investors must be prepared to navigate its unique regulatory and operational landscape. Here are key considerations to keep in mind:

• Active Communication with CBB: Securing a licence in Bahrain requires ongoing, proactive engagement with the CBB to address regulatory requirements and compliance expectations effectively.
• Substantial Capital Requirements: To establish a crypto business, entities must demonstrate significant financial capacity, with capital requirements reaching up to $800,000.
• Shareholder Nationality Requirements: For companies establishing crypto exchanges, Bahrain mandates that shareholders must be Bahraini citizens, adding an additional layer of complexity for international investors.

Our comprehensive report delves into Bahrain’s regulatory framework for crypto assets, highlighting:

1. Business Analysis

The report delves deeper into Bahrain’s crypto asset regulatory framework, providing a comprehensive guide for crypto businesses. It examines essential aspects, such as

• Crypto Asset Issuance: Comprehensive insights on the classification and issuance process of crypto assets under Bahraini law, essential for companies looking to issue digital tokens.
• Service Provider Licensing: A step-by-step guide to obtaining a crypto asset service provider licence, enriched by our firsthand experiences, to help businesses navigate the complexities of the licensing process.

2. Compliance Guidance

Emphasising the importance of thorough preparation and compliance, the report offers detailed insights into compliance requirements such as

• AML Regulations: Detailed examination of Anti-Money Laundering frameworks, emphasising adherence to both national and international standards to ensure compliance with evolving regulatory requirements.
• Taxation: In-depth analysis of crypto asset taxation and financial planning considerations, providing businesses with essential guidance on tax obligations and benefits.

3. Launch Roadmaps

Actionable steps and up-to-date strategies for establishing and operating your crypto project in Bahrain’s regulatory environment, ensuring a smooth and compliant launch.

4. Expert Insights

Perspectives from industry experts with a deep understanding of global regulatory environments, offering guidance to navigate the complexities of Bahrain’s crypto regulations.

Bahrain’s regulatory environment for crypto assets includes the following key aspects:

• Licensing Categories: The CBB has delineated four specific licence categories tailored to different crypto activities.
• Licence Fees: Fees range from $5,000 to $30,000, depending on the activity’s nature.
• Capital Requirements: Minimum capital requirements vary from $65,000 to $800,000, with crypto exchanges requiring the highest capital.
• Application Process: The process to obtain a licence can take up to three months.

Only the issuance of digital tokens (that are deemed securities under CBB law) is regulated. Other types of tokens are not regulated.

Currently, there is no specific legal framework regulating crypto mining in Bahrain. However, crypto mining is not a regulated activity under CBB law.

DAOs lack formal legal guidance or regulatory standards in Bahrain at present.

Bahrain offers a highly favourable tax environment, making it an attractive destination for crypto businesses and investors. The country imposes no taxes on income, sales, capital gains, or estates, with a few exceptions in the oil and gas sector.

In most cases, transactions involving payment and asset tokens are exempt from Value Added Tax (VAT), reducing the tax burden for businesses operating in these areas. Unlike payment and asset tokens, utility tokens may not qualify for VAT exemptions, requiring careful tax planning and compliance.

Central Bank of Bahrain Volume 6, Capital Markets, CRA Crypto-Asset