Skip to content
Unveil the Latest Gadgets

Bahrain's Central Bank embarks on regulating the stablecoin sector

Bahrain's Central Bank is Developing a Forward-Thinking System for the Safe and Controlled Release of Stablecoins in the Local Area.

,   and  Administrator
3 min read
Bahrain's Central Bank Initiates Steering of Stablecoin Oversight
Bahrain's Central Bank Initiates Steering of Stablecoin Oversight

Bahrain's Central Bank embarks on regulating the stablecoin sector

Bahrain Introduces Pioneering Stablecoin Regulatory Framework

In July 2025, the Central Bank of Bahrain (CBB) unveiled the Stablecoin Issuance and Offering (SIO) Module, a comprehensive regulatory framework for stablecoin issuance, making Bahrain a trailblazer in digital asset oversight in the Middle East [1][2][3].

The SIO Module is an integral part of Volume 6 of the CBB's Capital Markets Rulebook and is based on the legal authority of the Central Bank of Bahrain Law of 2006. The framework applies exclusively to fiat-backed stablecoins pegged 1:1 to a single fiat currency, such as the Bahraini Dinar or the US Dollar. It excludes algorithmic, commodity-backed, or multi-asset stablecoins [1][3].

Key aspects of the SIO Module include:

  • Scope and Eligibility: Only licensed Bahraini Joint Stock Companies (BSCs) can issue stablecoins under this module, following strict financial, governance, and operational standards [1][3].
  • Backing and Reserves: Stablecoins must be fully backed by high-quality, liquid fiat assets held at a 1:1 reserve ratio. These reserves must be kept in segregated accounts and stored with third-party custodians like licensed banks or investment firms under formal agreements, ensuring transparency and security [1][3].
  • Licensing and Compliance: Issuers are required to obtain explicit written approval from the CBB and pay a BD100 non-refundable application fee. The CBB reviews applications within 60 calendar days. The issuance, minting, burning, and custody of stablecoins are regulated activities requiring compliance with broader regulatory modules such as Anti-Money Laundering (AML), Fit and Proper Requirements, and High-Level Controls [2][5].
  • Consumer Protections: The SIO Module guarantees permanent redemption rights for stablecoin holders and prohibits interest payments on stablecoins to avoid misuse. It also mandates operational transparency, requiring issuers to publish whitepapers, financial disclosures, and undergo annual independent audits. Cybersecurity and risk control measures are strongly emphasized to limit systemic risk [1][5].

Impact on Stablecoin Regulation in the Middle East:

Bahrain’s SIO Module has set a regional benchmark by providing a detailed, enforceable legal framework for stablecoins, which had been largely unregulated in the Middle East until now [2][3]. As the first Gulf country to introduce such a specific rulebook, Bahrain strengthens its status as a blockchain innovation hub and aims to attract global investment by offering a clear, compliant pathway for stablecoin projects [2].

This regulatory clarity and consumer protection model are expected to encourage regional regulators to consider similar frameworks, potentially harmonizing stablecoin regulation across the Middle East. It also addresses global concerns regarding stablecoin transparency, liquidity, and security, thereby fostering trust and stability in digital asset markets locally and internationally [1][2].

In summary, Bahrain's SIO Module rigorously defines the issuance, governance, compliance, and consumer safeguards for fiat-backed stablecoins, marking a significant step forward for digital asset regulation in the Middle East with potential ripple effects across the region’s financial ecosystem [1][2][3][5].

References:

[1] Central Bank of Bahrain. (2025). Stablecoin Issuance and Offering Module. Retrieved from https://www.cbb.gov.bh/en/regulations-and-guidance/stablecoin-issuance-and-offering-module

[2] Khaleej Times. (2025). Bahrain leads the way in Middle East stablecoin regulation. Retrieved from https://www.khaleejtimes.com/business/technology/bahrain-leads-the-way-in-middle-east-stablecoin-regulation

[3] Gulf Business. (2025). Bahrain introduces world's first dedicated regulation for stablecoins. Retrieved from https://gulfbusiness.com/bahrain-introduces-worlds-first-dedicated-regulation-for-stablecoins/

[4] CoinDesk. (2025). Bahrain unveils world's first dedicated regulation for stablecoins. Retrieved from https://www.coindesk.com/bahrain-unveils-worlds-first-dedicated-regulation-for-stablecoins

[5] Financial Times. (2025). Bahrain sets new standard for stablecoin regulation. Retrieved from https://www.ft.com/content/01f81f40-5654-4a60-9150-5264d8d86893

  • The SIO Module, as part of Bahrain's Capital Markets Rulebook, establishes safety measures for the issuance and offering of stablecoins within the financial technology sector in Bahrain.
  • The regulatory framework, enforced by the Central Bank of Bahrain, includes stringent financial, governance, and operational standards, ensuring a secure and transparent finance environment for stablecoin businesses.

Read also:

    Related

    Latest