According to a recent report by the Saudi Gazette, the Bahrain-based crypto exchange, Rain, has become the first exchange to complete CBB's (Central Bank of Bahrain's) Regulatory Sandbox. This allowed Rain to become the first Shariah-compliant exchange in the country, and receive an official license from the central bank and the SRB (Shariyah Review Bureau).
The SRB examined every aspect of the brokerage service in the qualification process, deciding that Rain's services are compliant with the Shariah principles. The Shariah certification currently only allows the use of three digital coins — Bitcoin, Ethereum, and Litecoin.
The CBB's regulatory sandbox was launched earlier this month, with the goal of allowing crypto and blockchain-based firms to operate in the country, provided that they can pass the qualification process. The first distributed ledger protocol to ever receive Shariah compliance in the field of asset tokenization and money transfers was Stellar, which managed to do so in July last year.
While the regulations were still not formalized at the time, the event has shown that the new way of establishing which companies comply with the Shariah principles is necessary. The CBB came up with the regulatory sandbox as a result, and for now, only 28 firms were approved to even go through the process, and test their solution on a small number of users.
However, the CBB also finally published their crypto regulations on February 25th. The regulation concerns several crypto-related aspects, including risk management, licensing, governance, AML and Counter-Terrorist Financing measures, as well as the issues regarding cybersecurity.
Incidents revolving around hacking attacks, scams, money laundering, listing securities, and alike have been on the rise ever since 2017. As a result, the exchanges and regulators around the world have found themselves dealing with a large problem, since they needed to find a way to prevent criminal behavior while still allowing people to buy cryptocurrencies in a safe and controlled environment.
Most of the world's regulators are still struggling to come up with any practical regulations and guidelines. For now, only a few countries, which now include Bahrain, successfully managed to issue any such document.
The new regulation also states that cryptocurrency exchanges must have enhanced due diligence when it comes to bringing new clients on board. In addition, they need to ensure users that the custody wallets are encrypted, safe, and retrievable.
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