Detailed overview
Bahrain: Crypto-Asset Licensing, Stablecoin Issuance and CBB Supervision
Regulator
The Central Bank of Bahrain is the principal regulator for crypto-assets, digital token services and stablecoin issuance in Bahrain. The relevant rules are primarily contained in Volume 6 of the CBB Rulebook for capital markets and, where applicable, Volume 4 for investment firms.
Legal framework
Bahrain has an active licensing regime for regulated crypto-asset services. A person may not market or undertake regulated crypto-asset services by way of business within or from Bahrain unless licensed by the CBB.
The CBB framework is not merely an AML registration regime. It is a licensing, prudential, conduct, custody, client-asset and AML framework. The main rules are in the CBB Rulebook CRA Crypto-Asset Module, the SIO Stablecoin Issuance and Offering Module, the AML Module and, for existing investment firms, the Volume 4 Authorisation Module.
Crypto-assets
A crypto-asset is a cryptographically secured digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology. Central bank-issued digital currencies are excluded.
The CBB classifies crypto-assets into payment tokens, utility tokens, asset tokens and hybrid tokens.
The creation of crypto-assets, the development or use of software to create or mine crypto-assets, and loyalty programmes are not, by themselves, regulated crypto-asset services under the CRA Module. The result changes where the business performs a regulated service such as exchange, custody, dealing, portfolio management, advice, digital token advisory or client order activity.
Regulated crypto-asset services
Regulated crypto-asset services include reception and transmission of client orders, trading in crypto-assets as agent, trading in crypto-assets as principal, portfolio management, crypto-asset custody, investment advice, operating a crypto-asset exchange and acting as a digital token advisor.
A provider seeking to offer another crypto-asset service or a service not specified in the rules must obtain prior written CBB approval.
Licence categories
Bahrain has four crypto-asset licence categories.
Category 1 permits reception and transmission of orders and investment advice. A Category 1 licensee may not hold or control client assets or client money, may not receive fees or commissions except from the client and may not operate a crypto-asset exchange.
Category 2 permits trading as agent, portfolio management, crypto-asset custody and investment advice. A Category 2 licensee may hold or control client assets and client money but may not deal as principal or operate a crypto-asset exchange.
Category 3 permits trading as agent or principal, portfolio management, crypto-asset custody, investment advice and acting as a digital token advisor. A Category 3 licensee may hold or control client assets and client money but may not operate a crypto-asset exchange.
Category 4 permits operation of a licensed crypto-asset exchange, crypto-asset custody and digital token advisory activity. A Category 4 exchange licensee may not execute client orders against its own proprietary capital or through matched principal trading.
A Category 1, 2 or 3 broker or dealer may not structure operations to look like an exchange. CBB treats public order books, price discovery and matching-engine characteristics as exchange indicators.
Capital and fees
Minimum capital is BD 25,000 for Category 1, BD 100,000 for Category 2, BD 200,000 for Category 3 and BD 300,000 for Category 4.
The non-refundable application fee for a regulated crypto-asset service licence is BD 100.
Annual licence fees are calculated at 0.25% of relevant operating expenses, subject to minimum and maximum amounts. The minimum and maximum are BD 2,000 to BD 6,000 for Category 1, BD 3,000 to BD 8,000 for Category 2, BD 4,000 to BD 10,000 for Category 3 and BD 5,000 to BD 12,000 for Category 4.
Digital tokens
Bahrain has a digital token framework within the CRA Module.
Category 3 and Category 4 licensees may act as digital token advisors.
Category 3 and Category 4 licensees undertaking OTC trading of digital tokens must establish and publish written rules. They must open a dedicated account with a licensed bank in Bahrain for collection and payment of funds and must provide two-way buy and sell quotes.
The CBB may impose conditions or restrictions, including suspension or termination of digital token trading.
A token issuer, launch platform, token advisor or OTC trading desk should determine whether the digital token advisor framework, Category 3 or Category 4 licence, or another CBB approval applies.
Stablecoins
Bahrain introduced a dedicated Stablecoin Issuance and Offering Module in 2025. The CBB announced the new stablecoin framework on 4 July 2025.
A person may not undertake, hold itself out as undertaking, or actively market regulated stablecoin offering services to the public by way of business within or from Bahrain unless licensed by the CBB.
Stablecoin activity is treated as within or from Bahrain where the person is incorporated in Bahrain, uses a Bahrain address for correspondence or solicits clients within Bahrain.
Licensed stablecoin issuers may issue single-currency stablecoins backed by reserve assets in Bahraini dinar, US dollars or another fiat currency acceptable to the CBB with prior approval.
The minimum initial paid-up share capital for a stablecoin issuer licence is BHD 250,000.
Stablecoin issuers must hold reserve assets equal to at least 100% of the par value of outstanding approved stablecoins. Reserve assets must be high quality and high liquidity with minimal market, credit and concentration risk.
Reserve assets must be legally and operationally segregated from the issuer’s own assets so that the issuer’s creditors have no recourse to the reserve assets in insolvency.
Holders of approved stablecoins must have a direct legal right to redeem the approved stablecoins for the pegged fiat currency at par value.
A stablecoin issuer may issue yield-bearing approved stablecoins only where passive returns are paid from interest or Shariah-compliant rewards earned from investment of reserve assets.
Investment firms and crypto-assets that are financial instruments
Existing CBB investment firm licensees must obtain prior CBB approval before providing regulated investment services involving crypto-assets that fall within the definition of financial instruments.
The prior-approval route covers dealing as agent, arranging deals, managing financial instruments, safeguarding financial instruments, advising on financial instruments and operating a collective investment undertaking.
Investment firm licensees may not deal in crypto-assets as principal under this route.
A CBB investment firm should not assume that its existing licence automatically covers crypto-assets. The crypto-asset must be classified, and prior approval must be obtained before launch.
Client assets and custody
The CRA Module defines client assets as crypto-assets, money and other assets received or held on behalf of a client and any assets accruing from them.
A licensee must hold client money and crypto-assets in specially created and segregated accounts identified separately from accounts holding the licensee’s own assets.
Client money must be held in client bank accounts with retail banks licensed in Bahrain.
A licensee that maintains custody or control of client crypto-assets must store at least 90% of each listed client crypto-asset in cold wallets.
A licensee may not maintain custody arrangements under which a single person or signatory can completely authorize movement, transfer or withdrawal of client crypto-assets. It may not have an arrangement where only one person can fully access the relevant private keys.
A custodial exchange, hosted wallet provider, private-key controller or MPC provider should assess these custody and segregation rules before onboarding clients.
Risk disclosure and client terms
Before entering into an initial transaction with a client, a licensee must disclose all material risks associated with crypto-asset products and services in clear, conspicuous and legible Arabic and English writing. The disclosure must include that a crypto-asset is not legal tender and is not backed by government.
A licensee must also disclose relevant terms and conditions when registering a new client and must provide written transaction terms before each crypto-asset transaction.
AML, CFT and transfer information
CBB AML rules apply to crypto-asset licensees and are issued as a legally binding Directive.
Crypto-asset licensees must establish and implement policies to identify suspicious wallet addresses.
For accepted crypto-asset transfers and wire transfers, required information includes originator name, originator account number or wallet, originator address, national identity number or customer identification number or date and place of birth, beneficiary name and beneficiary account number or wallet.
Ordering financial institutions must ensure that accepted crypto-asset transfers contain required and accurate originator and beneficiary information. Intermediary financial institutions must retain originator and beneficiary information accompanying accepted crypto-asset transfers. Beneficiary financial institutions must take reasonable measures to identify transfers lacking required information.
A crypto-asset licensee should maintain customer due diligence, beneficial-owner checks, sanctions screening, suspicious-wallet monitoring, blockchain analytics or equivalent controls, travel-rule tooling, suspicious transaction reporting and recordkeeping.
Offshore and Bahrain-facing activity
A person may not market or undertake regulated crypto-asset services by way of business within or from Bahrain without a CBB licence.
For stablecoins, activities are treated as within or from Bahrain where the person is incorporated in Bahrain, uses a Bahrain correspondence address or solicits clients within Bahrain.
An offshore crypto exchange, stablecoin issuer, token advisor, broker or custody provider should not market to Bahrain clients or solicit Bahrain customers without assessing CBB licensing.
Regulatory outlook
Bahrain has one of the more developed crypto-asset frameworks in the region. The CRA Module covers crypto-asset services, digital tokens, custody, client protection and exchange controls. The SIO Module added a specific stablecoin issuer framework in 2025. The investment-firm rules added a prior-approval route in 2024 for crypto-assets that are financial instruments.
New entrants should classify the asset, map the activity, identify the correct licence category, determine whether client assets or money are held, verify digital token or stablecoin status, build custody and AML controls, and obtain CBB approval before marketing or launching in or from Bahrain.