RESEARCH: Bahrain Securities

Executive Summary

• Cryptocurrency and digital asset securities activities are legal in Bahrain and regulated by the Central Bank of Bahrain (CBB) as the single integrated regulator of the financial sector. Central Bank of Bahrain | Home
• The Capital Markets Supervision Directorate (CMSD) within the CBB is the designated authority responsible for regulating and supervising crypto-asset service licensees under Volume 6 of the CBB Rulebook. Capital Markets Supervision Directorate (“CMSD”) | CBB
• A specific licensing framework for crypto-asset service providers exists, but as of the latest CMSD data, zero entities have been licensed as Crypto-asset Service Providers. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The regulatory framework is based on the Central Bank of Bahrain and Financial Institutions Law 2006 (CBB Law) and the Capital Markets regulations in Volume 6 of the CBB Rulebook, last updated May 2026. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB
• Practical reality: the licensing regime is operational on paper with published rulebooks and a dedicated supervisory directorate, but no crypto-asset service providers have yet obtained licenses, indicating either early-stage adoption or stringent entry barriers. Capital Markets Supervision Directorate (“CMSD”) | CBB

Regulatory Framework

• The Central Bank of Bahrain (CBB) is a public corporate entity established by the Central Bank of Bahrain and Financial Institutions Law 2006 (CBB Law), created on 6th September 2006, responsible for maintaining monetary and financial stability and acting as the single integrated regulator of Bahrain's financial industry. Central Bank of Bahrain | Home
• The Capital Markets Supervision Directorate (CMSD) is the CBB division mandated to supervise and regulate the Kingdom's capital markets, with the main objective of maintaining a transparent, fair, and efficient capital market for investor protection. Capital Markets Supervision Directorate (“CMSD”) | CBB
• CMSD functions explicitly include: "Regulate and supervise crypto-asset service licensees" alongside exchanges, clearing/settlement systems, market intermediaries, listed companies, and takeover/merger transactions. Capital Markets Supervision Directorate (“CMSD”) | CBB
• All capital markets regulations are codified under Volume 6 of the CBB Rulebook (Capital Markets), last updated May 2026, which includes modules for Markets and Exchanges (MAE), Clearing Settlement and Central Depository (CSD), and other capital market activities. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB strives to comply with International Organization of Securities Commissions (IOSCO) core principles; Bahrain was last reviewed for IOSCO compliance in 2005-2006 by the IMF and became a signatory to the IOSCO Multilateral Memorandum of Understanding (MMOU) in 2008. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB Law Article 4 empowers the CBB to issue debt securities on behalf of the Government of the Kingdom of Bahrain, demonstrating the CBB's statutory authority over securities issuance. Government Securities | CBB
• The CBB maintains a continuous program for development and update of the legislative, regulatory, and supervisory framework for capital markets in line with international standards, with consultation papers published on the CBB website. Capital Markets Supervision Directorate (“CMSD”) | CBB
• Final versions of regulatory modules are available in the Rulebook section of the CBB website, hosted on the Thomson Reuters Complinet platform. Capital Markets Supervision Directorate (“CMSD”) | CBB
• Complaints relating to contravention of the CBB Law, rules, regulations, or SRO business rules in capital markets may be lodged via the CBB Complaint Form. Capital Markets Supervision Directorate (“CMSD”) | CBB

Licensing Requirements

• The CMSD supervises and regulates crypto-asset service licensees as a distinct category of capital markets participants, indicating a dedicated licensing regime exists for such entities. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB Licensing Directory publishes real-time counts of licensees by category; as of the latest data, the category "Licensed Crypto-asset Service Providers" shows a count of zero. Capital Markets Supervision Directorate (“CMSD”) | CBB
• Other capital markets license categories tracked in the same directory include: Licensed Exchanges, Licensed Clearing/Settlement/Central Depository Systems, Licensed Securities Broker-Dealers, Licensed Securities Brokers, and Licensed Self-Regulatory Organizations — all currently showing zero counts as well. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB's Licensing & Registration section (accessible via the CBB website) governs the application process for all financial institution licenses, including crypto-asset service providers, though specific crypto-asset licensing procedures, capital requirements, and timelines are not detailed in the provided sources. Licensing & Registration | CBB
• The CBB Rulebook Volume 6 (Capital Markets) contains the detailed regulatory modules that would specify licensing conditions, capital adequacy, structural requirements, and ongoing obligations for crypto-asset service providers, last updated May 2026. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB
• No entities have been licensed as Crypto-asset Service Providers as of the latest published CMSD directory data. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CMSD approves the listing and delisting of securities, and approves public and private offerings of securities, which would extend to any tokenized securities or digital asset offerings. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB conducts on-site and off-site supervision of all licensed capital markets participants, including crypto-asset service licensees, to ensure compliance with the CBB Law, rules, regulations, and relevant Rulebook modules. Capital Markets Supervision Directorate (“CMSD”) | CBB

AML/KYC Requirements

• The CBB's Compliance function (accessible via the CBB website) oversees anti-money laundering and counter-terrorist financing compliance across all licensed entities, including crypto-asset service providers. Central Bank of Bahrain | Home
• The CBB Rulebook Common Volume and Volume 6 (Capital Markets) contain the detailed AML/CFT modules applicable to all CBB licensees, including customer due diligence (CDD), enhanced due diligence (EDD), suspicious transaction reporting (STR), record retention, beneficial ownership identification, and politically exposed person (PEP) screening requirements. Central Bank of Bahrain | Home
• As the single integrated regulator, the CBB enforces Bahrain's AML/CFT framework in line with FATF standards across all financial sectors, including the newly regulated crypto-asset service providers. Central Bank of Bahrain | Home
• Specific AML/KYC procedural requirements for crypto-asset service providers (such as travel rule compliance, wallet verification, or transaction monitoring thresholds) are not detailed in the provided sources but would be specified in the relevant Rulebook modules. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB

Enforcement Actions

• The CMSD publishes annual Compliance & Enforcement Reports covering enforcement activities across all regulated sectors; reports are available for 2020 through 2024. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The 2024 Compliance and Enforcement Annual Report is published externally and accessible on the CBB website. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The 2023, 2022, 2021, and 2020 Compliance and Enforcement Annual Reports are similarly published and available. Capital Markets Supervision Directorate (“CMSD”) | CBB
• CMSD functions include conducting investigations and applying enforcement measures against contraventions of the CBB Law, rules, regulations, or SRO business rules in capital markets. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB maintains a public "Unlicensed Financial Services" warning list and consumer protection alerts, accessible via the CBB website, which may include enforcement actions against unlicensed crypto-asset activities. Central Bank of Bahrain | Home
• No specific enforcement actions against crypto-asset service providers are detailed in the provided sources; the Compliance & Enforcement Reports would contain such case details if any exist. Capital Markets Supervision Directorate (“CMSD”) | CBB

Tax Treatment

• No tax guidance has been issued for virtual assets. The provided sources contain no information on taxation of cryptocurrency gains, income tax treatment, capital gains tax, or VAT applicability to digital asset transactions in Bahrain. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB Government Securities | CBB

Key Gaps & Risks

• Zero licensed crypto-asset service providers despite an established regulatory framework suggests either significant barriers to entry, lack of market readiness, or a gap between paper regulation and practical implementation. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB Rulebook Volume 6 modules for crypto-asset service providers are not publicly detailed in the provided sources; applicants must access the Thomson Reuters Complinet platform for full regulatory text, creating an information accessibility barrier. Capital Markets Supervision Directorate (“CMSD”) | CBB Central Bank of Bahrain | Home
• Specific capital requirements, application fees, processing timelines, and structural requirements (e.g., local presence, Bahraini ownership thresholds, fit-and-proper criteria for controllers) for crypto-asset service provider licenses are not disclosed in the available public sources. Licensing & Registration | CBB Capital Markets Supervision Directorate (“CMSD”) | CBB
• No published guidance on tax treatment of virtual assets creates uncertainty for business planning and investor compliance. Central Bank of Bahrain | Home Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CMSD's supervisory approach for crypto-asset service providers (on-site/off-site frequency, thematic reviews, technology risk assessments) is not detailed in public sources beyond generic statements. Capital Markets Supervision Directorate (“CMSD”) | CBB
• No public enforcement track record specific to crypto-asset activities exists in the provided sources, making it difficult to assess regulatory posture toward violations. Capital Markets Supervision Directorate (“CMSD”) | CBB
• The CBB's consultation on "Proposed Revision to Initial Capital Requirements" (March 2026) suggests capital requirements across license categories may be under active revision, creating potential uncertainty for applicants. Central Bank of Bahrain | Home
• International standards compliance (IOSCO, FATF) is claimed but the last IOSCO assessment was 2005-2006; no recent peer review specific to crypto-asset regulation is referenced in the sources. Capital Markets Supervision Directorate (“CMSD”) | CBB

Sources

• Central Bank of Bahrain | Home
• Government Securities | CBB
• Capital Markets Supervision Directorate (“CMSD”) | CBB
• Licensing & Registration | CBB