On-shore VASP in Bahrain

CBB — Crypto-Asset Service Provider licensing (4 categories), prudential supervision — first MENA jurisdiction with comprehensive crypto framework (2019)

VASP: CASP License from CBB: Category 1 (Exchange): BHD 100,000 (~$265K USD) + BHD 50,000 reserve. Category 2 (Brokerage): BHD 25,000. Category 3 (Custodian): BHD 100,000 + BHD 50,000 reserve. Category 4 (Advisory): BHD 25,000. 3-6 months. CBB pragmatic and accessible.

EXCHANGE: Category 1 Crypto Exchange license — BHD 100,000 minimum capital + BHD 50,000 reserve. Rain Financial was first licensed exchange. Valued as regulatory testbed for GCC.

CUSTODY: Category 3 Crypto Custodian license — BHD 100,000 minimum capital + BHD 50,000 reserve. Client asset segregation. Minimum insurance.

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Module RA (Risk Management Module) - Specifically, RA-6 Virtual Asset Regulatory Framework: This module (introduced in 2019) is the cornerstone of VA regulation in Bahrain. It provides specific licensing requirements, operational standards, technological governance, and crucial AML/CFT measures tailored for VASPs. It categorizes virtual assets and defines various VASP activities (e.g., exchange, custody, portfolio management, advisory).

Module FC (Financial Crime) sets out core AML/CFT requirements for specific categories of CBB licensees, with separate FC Modules issued in different CBB Volumes (e.g., for conventional banks, Islamic banks, insurance licensees). VASPs, where regulated by the CBB, must comply with those FC provisions expressly applicable to their licensee category, including requirements on CDD, EDD, suspicious transaction reporting, record‑keeping, and internal controls, rather than a single generic FC module covering all CBB licensees uniformly.

Bahrain’s primary AML/CFT statute is Decree‑Law No. (4) of 2001 on the Prohibition and Combating of Money Laundering and Terrorist Financing, as amended, most recently by Decree‑Law No. (36) of 2025.

Law No. (4) of 2001 with respect to the Prevention and Prohibition of the Laundering of Money (as amended): This is Bahrain's overarching anti-money laundering law, which defines ML/TF offenses and imposes obligations on financial institutions (including VASPs, as they are deemed FIs under CBB regulations) to report suspicious transactions.

Obtain name, permanent address, date of birth, nationality, and an official identification number (e.g., CPR/National ID, passport number).

Verify identity using reliable, independent source documents (e.g., government-issued photo ID, passport) and proof of address (e.g., utility bill).

Identify and verify the identity of the beneficial owner(s) (any natural person owning or controlling 10% or more of shares/voting rights, or otherwise exercising control).

Assess and, on an ongoing risk‑based and event‑driven basis, reassess the customer’s risk profile using collected and updated customer information, including beneficial ownership information, as part of the institution’s customer due diligence obligations.

The regulation regarding 'Source of Funds and Source of Wealth (SoF/SoW)' in Bahrain has been updated, reflecting more robust risk assessment methodologies.

Bahraini law and Central Bank of Bahrain (CBB) regulations require financial institutions, including VASPs, to comply with UN Security Council sanctions and with Bahrain’s own AML/CFT and terrorism‑financing measures, which include domestic designations and restrictions. This framework obliges institutions to freeze assets and prohibit transactions involving individuals and entities designated under applicable UN resolutions and corresponding Bahraini laws, ministerial orders, and CBB directives, not just UN lists alone.

Mandatory Screening: Licensed VASPs must screen all customers (initial onboarding and ongoing), beneficial owners, and transactions against:

UN Sanctions Lists: Specifically the Consolidated List maintained by the UNSC 1267/1989/2253 ISIL (Da'esh) & Al-Qaida Sanctions Committee and the UNSC 1988 Taliban Sanctions Committee List, as well as other relevant UN sanctions lists.

National Sanctions Lists of Bahrain: This includes lists of designated terrorists and terrorist organizations issued by the Kingdom of Bahrain's competent authorities.

Travel Rule: The CBB has implemented the FATF's "Travel Rule," requiring VASPs to obtain and transmit originator and beneficiary information for crypto transfers above a certain threshold. This enhances the ability to identify cross-border transactions involving high-risk jurisdictions or sanctioned entities.

Fines (can be substantial).

Suspension or revocation of the VASP's license.

Imprisonment for individuals found responsible for serious AML/CFT breaches, including facilitating sanctioned transactions.

Confiscation of assets.

CBB Law (Law No. 64 of 2006): Grants the CBB powers to impose administrative sanctions and refer criminal offenses to the Public Prosecution.

Regulatory Body: Central Bank of Bahrain (CBB)

Authorization: Obtain a license from the CBB.

Legal Entity: Must be incorporated in Bahrain.

Minimum Capital: Maintain adequate financial resources. For a Class 4 (Custody) license, the minimum paid-up capital is BD 50,000 (approx. USD 132,600), plus additional operational risk capital requirements based on a risk assessment (CR-1.3.1).

Absolute Segregation: Crypto-asset platform operators must ensure that client crypto-assets are held separate from their own crypto-assets and are clearly identifiable as client assets (CRY-5.1.1).

No Commingling: Client crypto-assets must not be commingled with the operator's proprietary assets (CRY-5.1.2).

Trust Arrangement: Client crypto-assets must be held in trust for the clients (CRY-5.1.3).

Prohibition on Use: Operators are prohibited from using client crypto-assets for their own account or for the benefit of any other client without explicit, written client consent and regulatory approval (CRY-5.1.4).

Reconciliation: Regular reconciliation of client crypto-assets with internal records is mandated (CRY-5.1.5).

Module Reference: CRY-4.2.1, CRY-4.2.2

Significant Proportion in Cold Storage: This includes the use of cold storage (offline storage) for a significant proportion of client assets (CRY-4.2.1).

A crypto-asset platform operator should maintain appropriate risk management and, where required by its business model, adequate insurance or equivalent financial protections for client-asset safekeeping risks such as cyber incidents, theft, fraud, and operational failures; current U.S. regulatory guidance emphasizes safe-and-sound operations and broader risk controls rather than a universal standalone insurance mandate.

Directors and senior management of CBB licensees must meet the Central Bank of Bahrain’s fit and proper criteria as set out in the standalone Fit and Proper Requirements Module (Module FP), rather than EN-1.2.1.

Travel Rule adopted — threshold: BHD 500

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Bahrain currently does not impose a general corporate income tax on most non‑oil‑and‑gas businesses, and there is no standalone capital gains tax on such businesses’ profits from crypto asset disposals; however, Bahrain has enacted a new 10% Corporate Income Tax regime (on taxable income exceeding BHD 200,000) that is scheduled to apply to Bahrain businesses from 1 January 2027, which will introduce broad-based corporate taxation going forward.

Bahrain introduced Value Added Tax (VAT) at a standard rate of 5% on 1 January 2019 and subsequently increased the standard VAT rate to 10% with effect from 1 January 2022.

Services related to Crypto: Generally, the supply of services related to virtual assets, such as exchange fees, custodian fees, transaction fees charged by crypto-asset service providers (CASPs), or other commission-based services, are likely to be subject to VAT at the standard 10% rate, provided the service is supplied in Bahrain by a VAT-registered entity.

Outcome: Received a Crypto-Asset Service Provider license. This is not an enforcement action but demonstrates the active regulatory environment.