In the Central Bank of Bahrain Rulebook Volume 6 (Capital Markets), the Crypto-Asset Module (CRA) remains in force and governs crypto-asset services, but stablecoin activities are now subject to an additional, dedicated Stablecoin Issuance and Offering (SIO) Module that operates alongside the CRA rather than being covered solely under the CRA.

In Bahrain's CBB Rulebook, electronic money and e-money activities for conventional banks are covered under Module OM-3 ('Electronic Money and Electronic Banking Activities') within the Operational Risk Management framework — not under a standalone 'Volume 1 – Conventional Banks' section with an 'EMO – E-Money Module' page.

For Bahraini fiat‑backed stablecoins, the primary regime is now the dedicated Stablecoin Issuance and Offering (SIO) Module under CBB Rulebook Volume 6; the Volume 1 E‑Money Module (EMO) may still apply only where a licensed conventional bank issues a stablecoin that also meets the definition of e‑money, but it is no longer the main or default framework for stablecoin regulation.

From this page, navigate to "Volume 1 – Conventional Banks" and then find the "EMO – E-Money Module."

Asset-Referenced Tokens: This is the most common classification for stablecoins under the CRA Module. These are defined as tokens that aim to maintain a stable value by referencing other assets (e.g., fiat currency, a basket of currencies, commodities). The CRA Module specifically addresses the requirements for issuers of such tokens.

Payment Tokens: While not a distinct regulatory classification, stablecoins are primarily envisioned and regulated as instruments that facilitate payments, particularly when they are fiat-backed and meet the criteria of asset-referenced or e-money tokens.

CRA-1.1.2: Defines crypto-assets and includes "stablecoins."

CRA-1.2.1: Outlines the CBB's approach to classifying crypto-assets based on their functionality and characteristics.

Full Backing: Issuers must ensure that their stablecoins are fully backed by reserve assets.

Segregation: The reserve assets must be held separately from the issuer's operational funds and other assets, ensuring they are bankruptcy-remote.

CBB-Licensed Custodian: The reserve assets must be held in custody by a CBB-licensed custodian (or a custodian approved by the CBB, adhering to CBB's standards).

Under the GENIUS Act framework for U.S. payment stablecoins, issuers must provide independent third‑party monthly reserve attestations and, for large issuers, annual PCAOB‑standard financial statement audits; these requirements focus on verifying reserve existence and composition and enhancing transparency, but comprehensive, in‑depth audits are not uniform across all issuers and occur annually rather than on the same regular cadence as attestations.

Permitted Reserve Assets: The CBB specifies the types of assets that can constitute reserves, typically highly liquid, low-risk assets like fiat currency (held in segregated bank accounts), short-term government securities, or other highly rated financial instruments.

CRA-B.1.1: Outlines general business conduct requirements for licensees, including safeguarding client assets.

Crypto-Asset Services Provider (CASP) License: Issuing crypto-assets (including stablecoins) is one of the regulated activities under the CRA Module. Entities wishing to perform this function must obtain a CASP license from the CBB.

Licensing Requirements: Licensees must meet rigorous requirements concerning:

Capital: Minimum capital requirements are stipulated.

Governance: Robust corporate governance, risk management frameworks, and internal controls.

Fit and Proper: Directors, senior management, and significant shareholders must pass "fit and proper" assessments.

AML/CFT: Strict adherence to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

Cybersecurity: Robust cybersecurity frameworks and measures.

Business Plan: A comprehensive business plan detailing operations, technology, and compliance.

FinTech Regulatory Sandbox: Bahrain offers a FinTech Regulatory Sandbox, which allows innovative FinTech firms (including those dealing with stablecoins) to test their solutions in a live environment with tailored regulatory requirements for a limited period before full licensing.

CRA-2.1.1: Lists the categories of crypto-asset services that require a license (including "issuing crypto-assets").

CRA-A.1.1 sets out the scope of application and key definitions under the EU Cyber Resilience Act; it does not establish general business licensing requirements for BH stablecoin issuers.

CRA-A.2: Details the application procedures.

FRS – FinTech Regulatory Sandbox Module (Volume 6): Provides the framework for the sandbox.

Issuers of payment stablecoins are generally required to provide holders with a clear, enforceable right to redeem their stablecoins for the reference currency at par value, subject to the applicable stablecoin regime and licensing framework.

Clear Policies: Issuers must have clear, transparent, and enforceable policies and procedures for redemption, outlining the process, timelines, and any applicable fees (which should be reasonable).

Liquidity Management: Issuers must maintain sufficient liquidity in their reserve assets to meet potential redemption demands promptly.

While specific sections might not explicitly say "redemption rights," these rights are an implicit requirement derived from the full backing, transparency, and consumer protection principles applied to asset-referenced tokens. The CBB's general consumer protection framework (e.g., BP – Business Principles Module, Volume 6) would also apply.

CRA-B.1.1: General business conduct rules for protecting client interests.

Implicit Exclusion: The requirements for "asset-referenced tokens" necessitate holding actual, segregated reserve assets. Algorithmic stablecoins that are unbacked or rely on volatile crypto-collateral without robust over-collateralization and independent custody would not meet these criteria.

Risk Aversion: Post-Terra/Luna, regulators globally have become highly cautious of algorithmic stablecoins. The CBB's framework, predating some of these failures, already prioritized asset-backed stability, reflecting a prudent approach to risk.

CRA-3.3.1 (and subsequent sections related to reserves): The explicit requirements for physical reserves held by custodians implicitly exclude algorithmic designs that lack such backing.

The CBB has conducted notable proofs-of-concept and pilots demonstrating interest in digital currency innovation. In particular, starting from 2020 it collaborated with J.P. Morgan and Bank ABC on pilots and tests for real-time cross-border payments using JPM Coin, which culminated in a successful test with ALBA and the subsequent soft launch of a commercial service in 2023. However, there is no verifiable evidence that the CBB partnered with OpenNode or ran a Bitcoin payment processing pilot for the Kingdom.

Bahrain is exploring and designing a potential retail CBDC (often referred to as a digital dinar) as part of its broader digitalisation and payments strategy, but no retail CBDC has yet been launched; therefore it is not currently competing with or displacing private BHD‑pegged stablecoins, although such competition could arise depending on the eventual CBDC design and implementation.

The CBB's digital asset ecosystem includes active partnerships with regulated private stablecoins (e.g., AX Coin) for wallet infrastructure and digital payment solutions, moving beyond exploration to tangible commercial collaboration.

Framework Evolution: The insights gained from CBDC exploration are likely to inform and further refine the broader digital asset regulatory framework, including for stablecoins.

Monitor formal regulatory frameworks, supervisory guidance, and implementation rules on FinTech, blockchain, and digital currency — not just pilot announcements — as authorities have largely moved from experimental pilots to enforceable regimes, especially for stablecoins and other payment-focused digital assets.

Introduction of a Licensing Scheme: The CBB will require stablecoin issuers to obtain a license before launching their tokens, ensuring they meet stringent operational and reserve requirements.

Reserve Backing Requirement: Issuers must maintain 100% reserve backing of the stablecoin with a government-issued currency or a similarly secure asset.

Transparency and Reporting: Issuers are obligated to provide regular audits and transparent reporting on the reserves supporting the stablecoin, ensuring ongoing oversight by the CBB.

Application Process: Applicants must submit a detailed business plan, risk management strategy, and proof of compliance with the CBB’s operational standards.

Compliance with Shariah Principles: For stablecoins targeting the Islamic finance market, issuers must demonstrate compliance with Shariah principles, as highlighted in the CBB's regulatory provisions.

Know Your Customer (KYC): Issuers must implement robust KYC procedures to verify the identity of users and monitor transactions for suspicious activity.

Anti-Money Laundering (AML): Continuous monitoring and reporting mechanisms are required to detect and prevent money laundering and terrorist financing risks.

Non-Compliance Penalties: The CBB reserves the right to impose fines, suspend licenses, or take legal action against issuers failing to adhere to the regulatory framework.

Public Disclosures: Instances of non-compliance may result in public notifications to safeguard market participants and maintain regulatory integrity.

Tax Implications: The CBB has indicated that stablecoin transactions will be subject to existing tax laws, including potential capital gains tax on profits derived from stablecoin holdings.

Operational Risks: Despite the robust framework, operational risks such as technological failures or cybersecurity threats remain a concern for stablecoin issuers.

Market Adoption: The success of the framework hinges on widespread adoption by both local and international entities, which may be influenced by regulatory clarity and market confidence.

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