The Central Bank of Bahrain (CBB) enhanced its regulatory sandbox framework to allow financial technology firms to test and experiment their ideas and solutions more efficiently and effectively. The improved framework enhances the eligibility criteria for participation in the regulatory sandbox, enhances collaborations between start-ups and fintech firms and the sector, and streamlines the sandbox process to ensure a more phased and consistent approach to support testing. Overall, the framework sets out the participation approach in the fintech regulatory sandbox, covering aspects such as the scope of application, eligibility criteria for participation, application and approval process, sandbox duration and extension, and exit process from the sandbox.
Applicants wishing to enter into the sandbox must apply to CBB through the Regulatory Sandbox online application platform. In cases where two or more fintech firms are jointly involved in an innovative project or where a CBB licensed financial institution wishes to work with a particular fintech firm, a joint application may be made. The duration of the sandbox is up to a period of 12 months from the date of the CBB authorization to participate in the sandbox, though the testing period may be extended subject to certain conditions. The regulatory sandbox has gained significant interest from local, regional, and global start-ups and a number of companies have successfully completed testing their solutions to date. The regulatory sandbox is not suitable where the applicant is unable to comply with the requirements of this framework, in particular, the core requirements such as those related to anti money laundering and combating the financing of terrorism (AML/CFT), handling of volunteer customer or client money and assets, and maintaining the confidentiality of customer information. A participant may choose to discontinue the testing at any time, subject to providing CBB with a one-month notice. CBB may impose conditions in such cases and restrict a participant from the exit until its conditions are met.
The regulatory sandbox, which is open to the existing CBB licensees and other local and foreign firms, was first introduced in 2017 in an effort to enhance the local fintech ecosystem and is being overseen by the FinTech & Innovation Unit of CBB. The FinTech & Innovation Unit is responsible for the approval process to participate in the regulatory sandbox, the supervision of authorized sandbox companies’ testing progress, and the monitoring technical and regulatory developments in fintech, both regionally and internationally, to lead on strategic fintech initiatives and to work closely with all stakeholders within the fintech ecosystem in the Kingdom.
Keywords: Middle East and Africa, Bahrain, Regulatory Sandbox, Fintech, Regtech, CBB
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