Bahrain’s growing coziness with the decentralized digital economy is not an overnight development.
The Central Bank of Bahrain (CBB), the financial regulators in the Kingdom, planned every step meticulously after due consultation with all relevant government bodies and the homegrown FinTech ecosystem. And then in February 2019, just as the asset class was preparing to bid farewell to a prolonged slowdown, Bahrain finally became the first Arab nation to issue a comprehensive regulatory framework for Bitcoin and other cryptocurrencies.
One of the most crypto-friendly countries in the Middle East
The landmark move by the CBB was in line with the country’s efforts to emerge a hotbed for FinTech innovation — an ambitious objective now on the verge of being fulfilled. Blockchain technology and its offshoots, in particular, have been at the forefront of the government’s growing focus.
Dr. Abdulhussain Mirza, the Minister for Electricity and Water Affairs, couldn’t have made this any clearer during his keynote at the SmartSec Cyber Security and Blockchain Conference earlier last year. The minister candidly discussed how blockchain could potentially revolutionize the banking and payments industries by offering a much more secure means of transactions.
Dr. Mirza said, “Technologies such as blockchain take us a huge step forward in finding a secure way to facilitate transactions. Blockchain’s ability to protect users’ data is a true mark of progress because it can be applied in different companies from different industries including cybersecurity.”
The Minister then urged the FinTech community in Bahrain to embrace the government’s initiative with blockchain technology saying that it will pave the way for quality innovations among the “great minds of the community.”
Recently we spoke with Joseph Dallago, co-founder and CEO at Rain, about Bahrain’s homegrown cryptocurrency space and how it promises to transform the country’s financial services industry. For the uninitiated, Rain happens to be the region’s first licensed cryptocurrency exchange.
Banks don’t need to change to embrace digital currencies
Joseph clarified it upfront that the global cryptocurrency industry is still very nascent and undergoing experimentation on several fronts. However, he is confident that if things go as anticipated, the asset class could evolve to form the very foundation on which the world’s financial order will operate in the future.
It will revolutionize the way we make online purchases, conduct international business transactions, and donate money to charitable causes, he noted.
As for the possible impact of cryptocurrencies on Bahrain’s banking services, Joseph said that banks do not have to undergo any transformation to give space to the digital assets like Bitcoin.
“In the medium term, we believe that banks can work with cryptocurrency exchanges, such as ourselves, to bridge the traditional financial system with the world of cryptocurrency,” he said. “Banks do not necessarily need to change to make this happen, they just need to be selective about their partnerships. On a long term timeframe, cryptocurrency could change banking quite dramatically.”
On the question of regulation, the Rain CEO stated on an optimistic note that government agencies are quickly becoming aware of the nature of the decentralized digital economy and the unique regulatory challenges it brings along.
According to him, the industry currently requires “knowledgeable and fair regulators” who can hold institutions accountable without suffocating innovations.
When asked where he sees the future of FinTech in Bahrain in the coming 5-10 years, Joseph noted: “Given Bahrain’s long-standing expertise in the financial industry, I see Bahrain’s FinTech ecosystem continuing to grow to provide a number of progressive financial services to the region.”
The FinTech industry is going to be transformative within Bahrain, the Gulf region, and worldwide. We are proud to have StartUp Bahrain and its role in highlighting FinTech in the Kingdom and across the region. We are also proud to have Rain, Bahrain FinTech Bay, and other entities that are playing an important role in promoting FinTech in the Kingdom.