The Kingdom of Bahrain recently became the first Middle-Eastern country to grant the crypto coin exchange Binance to take up operations within its borders. Bahrain has expressed its interest in the development of the FinTech sector. Today, Cryptocurrency in Bahrain is the talking point of economic developments.
Expanding Landscape of Cryptocurrency in Bahrain
Though Bahrain is a Gulf country, it does not enjoy the same levels of oil as its richer neighbors do. In order to lessen this gap, Bahrain diversified into the tourism and banking sectors as well. Due to this, it is one of the first post-oil economies in the Gulf. It attempts to enter the market of cryptocurrency in Bahrain. It is another way to diversify its economy. Due to its expertise in the financial and banking centers, Bahrain may have an advantage when it comes to adapting to this new-age technology.
Regulations set by the Central Bank of Bahrain
To aid them in this journey, the Central Bank of Bahrain drafted a number of regulations and guidelines to help conduct all crypto-asset-related activities in a smooth manner. Any exchange looking to offer crypto-asset-related services would have to undergo rigorous background checks and conform to the various policies.
The exchanges would also have to background check their clients, who must compulsorily be above 21 years of age. Anyone looking to deal in crypto assets must register with these exchanges as clients in order to trade. All licensed exchanges will have to adhere to these rules, as well as refrain from manipulating the market for their own gain.
Hence, the Central Bank of Bahrain is quite strict when it comes to cryptocurrency trading. In February 2019, the Bank declared that firm regulations would be applied to cryptocurrency trading. This was done mostly to comply with Anti Money Laundering guidelines and assure transparency to the users.
Set up Crypto Exchange platforms in Bahrain
Country has implemented strict rules to combat any instances of financial fraud using cryptocurrency in Bahrain. Cryptocurrency is also known to be extremely volatile due to rampant hacking and the lack of regulations. This caused the Central bank of Bahrain to put a number of strict regulations in place for citizens aspiring to trade and invest in cryptocurrency in Bahrain. Despite these regulations, many cryptocurrency exchange platforms are flocking to Bahrain to set up shop there.
The reason? The administration of such platforms is simply cheaper in smaller countries like Bahrain, rather than in the larger financial hub countries. A smaller country would also allow better communication with regulators, which would help to keep regular checks on the workings of the exchange.
Bahrain is also the first Gulf country to show serious interest in the cryptocurrency market. Investing in the development of cryptocurrency may help to expand to other Gulf countries, as well as the Middle-east in the future. Being a developed Gulf country, Bahrain has proven to be a great untapped potential for the cryptocurrency sector. Its strict rules ensure that any users of the exchange will have complete transparency while doing transactions.
Only people or establishments that have been licensed by the Central Bank of Bank are allowed to carry out crypto-asset services in the country. This includes exchange platforms like Binance and Rain.
Bahrain and Binance
The world’s largest crypto asset service provider, Binance, recently received permission to assume operations in the Kingdom of Bahrain. Though the country is the smallest country in the Gulf, it is also one of the most progressive when it comes to adapting to new technology. Due to its interest in digital assets and Fintech, Binance has finally been able to enter the Middle-Eastern market. Shortly after Bahrain gave its approval, Dubai also welcomed Binance to set up a platform in the country.
Binance is the third digital currency exchange platform given permission to operate in Bahrain. The first legal exchanges set up in the country were Rain and Coin MENA. Along with trading services, the platform will also provide portfolio management and custodian services to its users.
The Central Bank (CBB) of the country has issued guidelines dealing with four different types of crypto assets. These are crypto coins (or payment coins), asset tokens, utility tokens, and hybrid tokens. The CBB rules cover minimum capital requirements for trading, governance, Anti-Money Laundering guidelines, Risk management rules as well as cyber security.
Taxation of gains on Cryptocurrency in Bahrain
So, who all can engage in the activities associated with cryptocurrency in Bahrain? People residing in the country, dealing with clients in the country, and companies registered in Bahrain can engage in these activities.
The tax levied on each crypto-asset type is different.
Payment tokens are exempt from VAT. Customers can wholly retain any gains from cryptocurrency in the country including crypto-asset transactions.
Utility tokens undergo the same treatment as multipurpose or single-use vouchers.
Asset tokens are usually exempt from VAT. The Asset token exempt on the tokens supplied on discount.
Taxation on hybrid tokens may depend according to the circumstances. It may either represent multiple or composite supplies of any goods or services.
Many countries, including Bahrain, still do not recognize cryptocurrency as legal tender due to its volatile nature. Some countries, like China, have even banned digital currency outright. Due to this, the jurisdiction of where crypto assets lie is still quite unclear, which can make taxation difficult. The country, fortunately, does not levy any tax on individual gains from crypto trading.
Conclusion
Bahrain is one of the emerging FinTech centers in the world. The country gives a lot of importance to financial and banking activities, which contribute greatly to its GDP. Looking to broaden its scopes, it is looking to enter into and dominate the cryptocurrency market. Many countries in the middle east remain skeptical of legalizing cryptocurrency trading due to the risks involved.
However, the country has put together a number of regulations and rules in place to encourage the growth of the Fintech sector in the country. It is also the first middle eastern country to allow the exchange platform Binance to operate within its borders. With these measures, Bahrain hopes to reap the rewards of the untapped crypto-assets sector in the Middle East.
