Bahrain Compliance Report

Generated 2026-10-23

Comprehensive Framework

Regulatory Overview

Regulatory Status: Dedicated crypto/VA legislation, licensing regime, active enforcement
Key Regulator(s): Central Bank of Bahrain’s Crypto-Asset, Al-Qaida Sanctions Committee and the UNSC, Taliban Sanctions Committee, Financial Intelligence Directorate
Risk Level: low
Primary Legislation: Bahrain’s primary AML/CFT statute is Decree‑Law No. (4) of 2001 on the Prohibiti, including VASPs, as they are deemed FIs under CBB regulations, Structuring transactions to evade Bank Secrecy Act (BSA) reporting thresholds re, Bahrain's AML/CTF and KYC framework was updated by Decree-Law No. (36) of 2025,
Travel Rule: Adopted — Threshold: Implemented
Tax Reporting: No personal income tax; corporate tax applies to certain activities. Individuals: Bahrain does not levy a personal income tax. Consequently, there is no capital gains tax on the profit derived from the sale or disposal of cryptocurrency for individuals.. 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.. Individuals: As there is no personal income tax in Bahrain, income generated from cryptocurrency activities (such as mining rewards, staking rewards, interest from crypto lending, or trading profits) is not subject to income tax for individuals.. Businesses: Similar to capital gains, income or profits generated by businesses from crypto-related activities are generally not subject to corporate income tax, unless the business falls into the specific categories (oil & gas, certain financial institutions) that are subject to corporate tax.

Key Facts

aml 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. Under the Central Bank of Bahrain Rulebook, Volume 6 (Capital Markets), the relevant sanctions/terrorism‑financing obligation is contained in Module AML: Anti‑Money Laundering & Combating of Financial Crime, not in a separate Module FC. The Module AML imposes requirements on Capital Market Service Providers to implement effective AML/CFT measures in line with FATF recommendations, including compliance with applicable UN Security Council resolutions on terrorism, proliferation, and related asset freezing; however, there is no Section FC‑1.1.1 (UN Sanctions) in a Volume 6 'Module FC (Financial Crime)' as cited. The Central Bank of Bahrain’s Rulebook Volume 6 (Capital Markets) Crypto‑assets module has been amended as of 6 March 2023; the PDF linked in the original claim (Vol‑6‑CRA.pdf) reflects the August 2022 version and is no longer the current authoritative source. OFAC (the U.S. Department of the Treasury’s Office of Foreign Assets Control) and the European Union each operate their own, separate sanctions regimes; there is no dedicated OFAC sanctions program targeting Bosnia and Herzegovina, and EU sanctions are adopted and enforced under EU law rather than by OFAC. While Bahraini law does not directly mandate compliance with OFAC or EU sanctions for entities purely operating within Bahrain and not involving US or EU persons/funds, in practice, due to the global nature of financial services and cryptocurrencies, most VASPs operating internationally or dealing with international partners will screen against these lists. Non-compliance with OFAC sanctions can lead to secondary sanctions, loss of access to the USD clearing system, and reputational damage for any entity (including a VASP) facilitating transactions with sanctioned parties, regardless of its location. Similarly, EU sanctions have extraterritorial reach in certain circumstances. VASP Best Practice: Given the interconnectedness of the crypto ecosystem and the potential for severe penalties, prudent VASPs in Bahrain handling international transactions or onboarding international clients will incorporate OFAC, EU, and other major international sanctions lists into their screening processes. Mandatory Screening: Licensed VASPs must screen all customers (initial onboarding and ongoing), beneficial owners, and transactions against:
banking Bahrain's financial sector is overseen by the Central Bank of Bahrain (CBB), which issues regulations to ensure stability and compliance within the banking system, including for emerging technologies such as cryptocurrencies. Banking | CBB To operate in Bahrain's financial market, entities offering cryptocurrency services must obtain a license from the CBB. The licensing process involves demonstrating compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Banking Regulations: Staying Compliant... - FasterCapital Financial institutions in Bahrain are required to implement robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. These include customer due diligence, ongoing monitoring of transactions, and reporting suspicious activities to the relevant authorities. Banking Regulation 2026 - Bahrain | Global Practice Guides The CBB has the authority to impose penalties on institutions that fail to comply with regulatory requirements, including fines, suspension of licenses, and other corrective actions. Recent enforcement emphasizes strict adherence to AML/KYC standards in digital asset transactions. Banking Regulation and Supervision in Bahrain Cryptocurrency holdings and transactions in Bahrain are subject to income tax based on the capital gains derived from such activities. The exact tax rates and treatment depend on the classification of the cryptocurrency under local tax laws, which are periodically reviewed by the Bahrain Ministry of Finance. REAB - Investor life hacks - Specifics of banking in Bahrain One significant gap is the evolving nature of cryptocurrency technology, which can outpace regulatory updates, potentially leaving vulnerabilities in compliance frameworks. Additionally, cross-border transactions pose risks related to inconsistent international regulations and enforcement capabilities. How to open a bank account in Bahrain - Bahrain Guide - Expat.com Banking Regulations: Staying Compliant... - FasterCapital Banking Regulation 2026 - Bahrain | Global Practice Guides
cross border Ex officio appointment: Officials can be appointed ex officio, holding roles like presiding or advisory positions without a specific office requirement. Military connotations: The term "official" carries military implications due to its historical use in Roman antiquity and the Catholic Church hierarchy. Public officials: In Bahrain, public officials are individuals employed by central or local government bodies. Legal liability for officials acting in capacity: Claims against organizations can be brought against persons "acting in their official capacity" under UK court precedents (TRA v. United Kingdom, 2019). Etymology: The word "official" as a noun was first recorded in Middle English in 1314 and has evolved from the Latin "officialis," meaning attendant to a magistrate or government official. Crypto Asset Service Providers (CASPs): Must register with FIRA, meet capital requirements, and adhere to strict operational standards. Cryptocurrency Exchanges/Brokers: Required to be registered, comply with AML/KYC regulations, maintain high transaction thresholds, and have a physical presence in Bahrain. Compliance officers (CDD), due diligence (EDD), strategic reporting, record retention, beneficial ownership disclosures, and ongoing monitoring for high-risk entities.
custody Regulatory Body: Central Bank of Bahrain (CBB) Core regulation for crypto-asset services (including custody and platform-type activities) is set out in CBB Rulebook Volume 6 – Capital Markets, primarily in the Crypto-Assets Module (CRA), with additional specialised modules such as the Stablecoin Issuance and Offering (SIO) Module governing specific activities like stablecoin issuance and offerings. You can access the CBB Rulebook and its Volume 6 – Capital Markets modules from the Central Bank of Bahrain website under the Rulebooks section, but there is currently no evidence that a module designated as “Module CRY” exists or is labeled that way in Volume 6. The CBB Rulebooks are now primarily hosted and maintained on the Thomson Reuters–powered platform at cbben.thomsonreuters.com (accessed via links from the CBB Laws & Regulations/Rulebook section), rather than being directly and comprehensively published at https://www.cbb.gov.bh/rulebooks/ as a standalone main page of substantive rulebook content. Note: Direct PDF links can change with updates, so it's best to navigate from the main rulebook page. The Central Bank of Bahrain's current cyber security rulebook, effective July 2025, has superseded the older CRY module references (CRY-1.1.1, CRY-1.2.1, CRY-1.3.1) with updated requirements under the 'Cyber Security Requirements' module. Authorization: Obtain a license from the CBB. Legal Entity: Must be incorporated in Bahrain.
enforcement Outcome: Received a Crypto-Asset Service Provider license. This is not an enforcement action but demonstrates the active regulatory environment.
general Payment tokens (e.g., cryptocurrencies) are crypto‑assets that are typically designed or intended to function as a medium of exchange or means of payment, but in current BH/US regulation they may also be classified and regulated as securities or commodities depending on their features and use, rather than being treated solely as payment instruments. Utility tokens are blockchain-based digital assets that primarily provide an immediately available, non-incidental consumptive use—such as access to or payment for a specific product, service, or platform function—but this access/consumptive feature alone does not determine their regulatory status, which now depends on the broader economic reality, including how they are sold, marketed, and used (e.g., speculation vs. consumption). Security Tokens: Represent traditional financial instruments (e.g., shares, bonds, units in a fund). A financial instrument is typically a contract that creates a financial asset for one party and a financial liability or equity instrument for another; many instruments embody rights or interests (such as equity, debt, or units in a collective investment scheme), but they do not necessarily represent a right or interest in an underlying asset in the sense used for derivatives. There is an expectation of profit: holders acquire the token with a reasonable expectation of generating returns (capital appreciation or income) that are derived primarily from the essential managerial or entrepreneurial efforts of others, as indicated by the issuer’s representations and marketing. The profit is derived from the efforts of others: The value or returns are primarily dependent on the entrepreneurial or managerial efforts of the issuer or a third party, rather than the holder's own use or effort. Shares or equity interests: Tokens representing ownership in a company, similar to traditional stock. Bonds or debt instruments: Tokens representing a loan to an issuer, entitling the holder to interest payments and principal repayment.
licensing CBB — Crypto-Asset Service Provider licensing (4 categories), prudential supervision — first MENA jurisdiction with comprehensive crypto framework (2019) CBB Rulebook Volume 6 — Crypto-Asset Module (2019) — Comprehensive crypto exchange, custody, brokerage, advisory licensing. Shariah-compliant crypto product guidance available. 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. CUSTODY: Category 3 Crypto Custodian license — BHD 100,000 minimum capital + BHD 50,000 reserve. Client asset segregation. Minimum insurance. 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. Central Bank of Bahrain (CBB) Official Website: https://www.cbb.gov.bh/ The Central Bank of Bahrain’s regulatory requirements are contained in the multi‑volume CBB Rulebook, which is accessed via the Laws & Regulations section of the CBB website (with detailed modules hosted on the linked Thomson Reuters Rulebook portal), rather than a single static URL such as https://www.cbb.gov.bh/cbb-rulebook/. 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.
marketing On October 13, 2026, the O/N Deposit Rate was 4.500%, One Week Deposit Rate was 4.750%, One Month Deposit Rate was 5.250%, O/N Repo Rate was 5.500%, and O/N BD Secured Rate was 5.500%. On October 12, 2026, the CBB oversubscribed a BD 70 million issue of Government Treasury Bills by 101%, indicating strong market interest in digital assets. In May 2026, the CBB published an amendment to Volume 2 Capital Adequacy Module (CA)-Part 2_Credit Risk, signaling a shift towards more stringent capital requirements for conventional and Islamic banks. Central Bank of Bahrain | Home: https://www.cbb.gov.bh/ Licensing Directory | CBB: https://www.cbb.gov.bh/licensing-directory/ Laws & Regulations | CBB: https://www.cbb.gov.bh/laws-regulations/ Central Bank of Bahrain – Rules and Regulations (Central Bank of Bahrain Rulebook): https://www.cbb.gov.bh/rulebook/ Central Bank of Bahrain | Currency Museum: [https://www.cbb
ongoing Source: Licensing & Registration | CBB Source: How to Secure a Financial Services License in Bahrain? Source: The 10 best Anti-Money Laundering (AML) & Compliance Lawyers... Source: FinTech & Innovation | CBB Short-term holdings (less than 1 year): Taxed at 20%. Medium-term holdings (1 to 3 years): Taxed at 15%. Long-term holdings (more than 3 years): Taxed at 10%. Source: Bahrain Tax Rates & System (2026) — TaxAtlas
sanctions Central Bank of Bahrain (CBB), established on September 6, 2006 (Source). Central Bank of Bahrain and Financial Institutions Law 2006 (CBB Law), Decree No. 64 of 2006, establishing the CBB as the single integrated regulator for Bahrain's financial industry (Source). The CBB aligns with FATF and Moneyval standards, though specific guidance on virtual assets is evolving. The CBB’s role extends to ensuring compliance with international AML/CFT standards (Source). License Requirement: No specific crypto license exists; any service provider must obtain a general financial services license from the CBB if they engage in activities such as money transmission, payment systems, or virtual currency exchanges (Source). Money transmission, digital asset exchange, custodial services for crypto assets. Customer Due Diligence (CDD): Mandatory identification and verification of customers before engaging in any crypto-related transactions (Source). Enhanced Due Diligence (EDD): Required for high-risk clients, including those involved in large or unusual transactions (Source). Suspicious Transaction Reporting (STR): Obligation to report any suspicious activity related to virtual asset transactions to the CBB (Source).
sandbox Central Bank of Bahrain (CBB): Responsible for maintaining monetary and financial stability; also acts as the single integrated regulator of Bahrain's financial industry. Website: https://www.cbb.gov.bh/ Global Financial Innovation Network (GFIN): Comprises 28 international regulators, including the CBB, focusing on cross-border FinTech innovation and collaboration. Central Bank of Bahrain and Financial Institutions Law No.64 of 2006: Establishes the regulatory framework for financial institutions in Bahrain. Regulatory Sandbox Framework (updated as of 2025): Specifies conditions for participation in the CBB's sandbox, emphasizing innovation, risk management, and compliance with AML/CFT standards. Who Needs a License: Both existing CBB licensees (financial institutions with FinTech initiatives) and other companies (local or foreign) seeking to test innovative financial services can apply. Activities Requiring Licensing: Testing of technology-based innovative solutions/services relevant to FinTech before scaling operations in Bahrain. Capital Requirements: No explicit monetary threshold is mentioned; however, applicants must demonstrate sufficient capital to support the innovation and mitigate associated risks. Prospective applicants should discuss their application with the CBB early on.
stablecoin 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. You can access the CBB Rulebook via the official CBB rulebook platform at https://cbben.thomsonreuters.com/ (linked from the official CBB website's Laws & Regulations section), rather than at https://www.cbb.gov.bh/rulebook/ 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. 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. E-Money Tokens: If a stablecoin meets the definition of electronic money (i.e., electronically stored monetary value representing a claim on the issuer, issued on receipt of funds for the purpose of making payment transactions, and accepted by persons other than the e-money issuer), it might be regulated under the E-Money Module (EMO) of the CBB Rulebook, typically issued by licensed e-money institutions. This would be for fiat-backed stablecoins pegged 1:1 to a single fiat currency. Securities Tokens: If a stablecoin is structured in a way that grants rights similar to traditional securities (e.g., fractional ownership, profit-sharing, dividend rights), it could be classified as a security token and fall under the existing securities regulations within the Capital Markets laws, in addition to relevant parts of the CRA Module. This is less common for typical stablecoins designed for payments. 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.
status Bahrain regulatory status: comprehensive
tax No personal income tax; corporate tax applies to certain activities Individuals: Bahrain does not levy a personal income tax. Consequently, there is no capital gains tax on the profit derived from the sale or disposal of cryptocurrency for individuals. 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. Individuals: As there is no personal income tax in Bahrain, income generated from cryptocurrency activities (such as mining rewards, staking rewards, interest from crypto lending, or trading profits) is not subject to income tax for individuals. Businesses: Similar to capital gains, income or profits generated by businesses from crypto-related activities are generally not subject to corporate income tax, unless the business falls into the specific categories (oil & gas, certain financial institutions) that are subject to corporate tax. 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. Treatment of Crypto: The National Bureau for Revenue (NBR) is the tax authority responsible for VAT. The VAT treatment of virtual assets in Bahrain generally follows international principles, but specific detailed guidance from the NBR on all nuances of crypto assets is not extensively published. 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.
travel rule Travel Rule adopted — threshold: BHD 500

Sources

This report is AI-generated from publicly available regulatory sources. Last updated: 2026-10-23. View full profile