Bahrain - Fintech Laws and Regulations 2025

1. The Fintech Landscape

1.1 Please describe the types of fintech businesses that are active in your jurisdiction and the state of the development of the market, including in response to the COVID-19 pandemic and ESG (Environmental, Social and Governance) objectives. Are there any notable fintech innovation trends of the past year within particular sub-sectors (e.g. payments, asset management, peer-to-peer lending or investment, insurance and blockchain applications)?

The fintech landscape in Bahrain is a vibrant and rapidly evolving sector, characterised by a diverse range of businesses leveraging technology to enhance or revolutionise financial services.  This dynamic environment is supported by a proactive regulatory framework established by the Central Bank of Bahrain (CBB), which aims to foster innovation, ensure financial stability, and protect consumers.

Types of Fintech Businesses in Bahrain

Bahrain’s fintech ecosystem encompasses a wide variety of businesses, including but not limited to:

• Open Banking Platforms: Facilitating secure and seamless sharing of financial data between banks and third-party providers, thereby enhancing customer experience and financial innovation.
• Digital Payments and Remittances: Offering efficient and convenient solutions for digital transactions, both domestically and internationally.
• Peer-to-Peer Lending and Crowdfunding: Connecting borrowers directly with lenders or investors, thus democratising access to finance.
• Digital Asset Management and Robo-Advisory Services: Utilising algorithms and artificial intelligence (AI) to provide personalised investment advice and management services.
• Insurtech: Leveraging technology to streamline insurance processes, from policy issuance to claims management.
• Blockchain and Crypto-Assets: Developing solutions for digital currencies, smart contracts, and secure, transparent transaction systems.

State of Market Development

Bahrain has implemented key initiatives to strengthen its fintech ecosystem, including the establishment of a dedicated Fintech & Innovation Unit at the CBB, a regulatory sandbox, and specialised regulations for digital banking and payment services. These measures have significantly accelerated market expansion, with the number of fintech firms in Bahrain doubling since 2018.  Today, Bahrain is home to over 120 fintech companies, spanning digital banking, mobile payments, crowdfunding and open banking solutions.  The CBB’s Fintech & Innovation Unit plays an essential role in regulatory development, fostering collaboration between fintech firms and financial institutions, and supporting innovation.

COVID-19 Pandemic Response

The COVID-19 pandemic accelerated the adoption of fintech solutions in Bahrain, highlighting the sector’s resilience and adaptability.  The demand for digital financial services, such as contactless payments and online banking, surged as consumers and businesses sought safer and more convenient ways to manage their finances amid lockdowns and social distancing measures.

ESG Objectives

Bahrain’s fintech sector is increasingly aligning with Environmental, Social, and Governance (ESG) objectives.  In November 2023, the CBB released the ESG requirements module, mandating comprehensive ESG reporting for financial institutions.

Notable Innovation Trends

Several innovation trends have emerged within Bahrain’s fintech sector:

• Open Banking: Bahrain has been at the forefront of open banking in the region, promoting innovation and competition in financial services.
• Blockchain Technology: The regulatory framework for crypto-assets and blockchain technology has fostered innovations in digital currencies and secure transaction mechanisms.
• Digital Financial Advice: The introduction of regulations for digital financial advice, including robo-advisory services, reflects Bahrain’s commitment to leveraging technology in financial planning and investment management.

In summary, Bahrain’s fintech landscape is characterised by a supportive regulatory environment, rapid adoption of digital financial services in response to the COVID-19 pandemic, a growing focus on ESG objectives, and notable innovation trends across various sub-sectors.  Together, these elements contribute to the continued growth and dynamism of the fintech sector in Bahrain.

1.2 Are there any types of fintech business that are at present prohibited or restricted in your jurisdiction (for example cryptocurrency-based businesses)?

No, not to the best of our knowledge.

2. Funding For Fintech

2.1 Broadly, what types of funding are available for new and growing businesses in your jurisdiction (covering both equity and debt)?

In Bahrain, new and growing businesses, including those in the fintech sector, have access to a variety of funding options, spanning both equity and debt.  These options cater to the different stages of a company’s lifecycle, from startup to growth and expansion.  Key funding types include:

• Venture Capital (VC): VC firms provide equity financing to high-potential startups and growth-stage companies.  Bahrain has seen an increase in VC activity, with both local and regional VCs actively investing in the fintech sector.
• Angel Investors: High-net-worth individuals who provide capital for startups in exchange for ownership equity or convertible debt.  Bahrain has a growing network of angel investors interested in supporting innovative fintech solutions.
• Bank Financing: Traditional loans provided by banks.  While more commonly accessed by established businesses due to their requirements, innovative fintech companies with solid business models can also secure bank loans.
• Government Grants and Support Programs: The Bahraini government, through various initiatives and entities such as the Bahrain Economic Development Board (EDB) and Tamkeen, offers financial support, grants, and incentives to startups, including fintech companies, to foster innovation and entrepreneurship within the Kingdom.
• Crowdfunding: Platforms that allow businesses to raise small amounts of money from a large number of people, typically via the internet.  Bahrain’s regulatory framework includes provisions for both conventional and Sharia-compliant crowdfunding.

2.2 Are there any special incentive schemes for investment in tech/fintech businesses, or in small/medium-sized businesses more generally, in your jurisdiction, e.g. tax incentive schemes for enterprise investment or venture capital investment?

Bahrain has implemented several incentive schemes to promote investment in the tech and fintech sectors, as well as in small and medium-sized enterprises (SMEs) more broadly:

• Regulatory Sandbox: The CBB offers a regulatory sandbox that allows fintech firms to test their innovative solutions in a controlled environment, facilitating easier access to funding by showcasing their viability.
• Dedicated Funds: Entities like the Bahrain Development Bank and initiatives supported by the Bahrain EDB provide dedicated funds and investment opportunities for tech startups and fintech companies.
• Tax Incentives: While Bahrain does not levy corporate or income taxes, it offers other financial incentives, such as no restrictions on repatriation of capital, profits, and dividends, making it an attractive environment for investment.

2.3 In brief, what conditions need to be satisfied for a business to IPO in your jurisdiction?

To conduct an Initial Public Offering (IPO) in Bahrain, a business must satisfy conditions laid out by the Bahrain Bourse and the CBB, including:

• Financial Health: The applicant should have at least achieved net profits during the last three years preceding the submission of its application, or achieved net profits of an average of approximately 10% of its issued and paid-up capital as per its audited financial statements preceding the submission of the application or since its incorporation, whichever is less.  This rule does not apply to newly established issuers.
• Corporate Governance: Adherence to stringent corporate governance standards as per the guidelines of the CBB and Bahrain Bourse.
• Transparency and Reporting: Commitment to transparency and accuracy in financial reporting, including the adoption of international accounting standards.
• Minimum Capital Requirements: The paid-up capital of the issuer should not be less than BHD 1,000,000, or its equivalent in other currencies.
• Minimum Number of Shareholders: An issuer intending to list on the Mainboard Market must have 100 or more shareholders who are not employees or associated persons.
• Free Float: The issuer must issue to the abovementioned shareholders a Free Float of at least 10% of the total issued outstanding shares.

2.4 Have there been any notable exits (sale of business or IPO) by the founders of fintech businesses in your jurisdiction?

No, not to the best of our knowledge.

3. Fintech Regulation

3.1 Please briefly describe the regulatory framework(s) for fintech businesses operating in your jurisdiction, and the type of fintech activities that are regulated.

Bahrain’s regulatory framework for fintech businesses, established by the CBB in 2017, demonstrates an intention to moving towards fostering a conducive environment for innovation in financial services.  Notably, this framework ensures a balance between innovation, financial stability, and consumer protection:

• Regulatory Sandbox: Launched in June 2017, Bahrain’s regulatory sandbox provides fintech startups and firms an opportunity to test their novel solutions in a controlled, regulatory environment for up to nine months, with a possibility of extension.
• Crypto-Asset Regulations: In February 2019, Bahrain introduced the Crypto-Asset Module (CRA Module) within its CBB Rulebook Volume 6 (Capital Markets), outlining a regulatory framework for crypto-assets.  This includes licensing, prudential standards, business conduct rules, and measures for anti-money laundering (AML) and counter-terrorist financing (CTF) for crypto-related activities.
• Open Banking: Bahrain implemented open banking regulations in 2019.  These regulations mandate banks to enable third-party providers to access customer financial data, with customer consent, thus promoting competition and innovation in financial services.
• Digital Financial Advice and Robo-Advisory: The CBB issued guidelines for digital financial advice in 2018, setting forth standards for robo-advisory services that include operational, technical, and regulatory requirements.
• Crowdfunding and Peer-to-Peer Lending: Bahrain introduced crowdfunding regulations in 2017, which include frameworks for both equity and debt crowdfunding platforms.  These regulations aim to facilitate access to finance for startups and SMEs in a regulated environment.
• Payment Services: Bahrain’s regulations for payment services providers are part of a comprehensive strategy to ensure the security and efficiency of payment systems within the fintech ecosystem.

3.2 Are financial regulators and policy-makers in your jurisdiction receptive to fintech innovation and technology-driven new entrants to regulated financial services markets, and if so how is this manifested? Are there any regulatory ‘sandbox’ options for fintechs in your jurisdiction?

Receptiveness to Fintech Innovation

Bahrain’s financial regulators and policymakers have displayed a strong receptiveness to fintech innovation, actively fostering a regulatory environment that encourages technological advancement and entry of new players into the regulated financial services markets.  This pro-innovation stance is embodied in several key initiatives:

Fintech & Innovation Unit

The CBB established the Fintech & Innovation Unit as part of its commitment to the digital transformation of the Kingdom.  This unit plays a critical role in ensuring that financial services provided to individual and corporate customers leverage the latest in fintech innovations.  It also underscores the CBB’s dedication to fostering an agile regulatory framework that supports fintech growth and innovation.  This initiative is in line with other strategic actions by the CBB, such as the regulatory sandbox and the issuance of crowdfunding regulations, both conventional and Sharia-compliant.

FinHub 973: CBB Digital Lab

Launched by the CBB, FinHub 973 stands as the region’s first cross-border, digital innovation platform.  Powered by Fintech Galaxy, it connects financial institutions with fintechs under the supervision of the CBB, facilitating collaboration, exploration, testing, and prototyping in a centralised digital sandbox.  FinHub 973 not only underscores Bahrain’s position as a financial hub but also drives innovation and cross-border collaboration across the region.  The platform integrates technical testing of digital solutions with the regulatory framework of the CBB.

Global Financial Innovation Network (GFIN)

Bahrain’s engagement with the GFIN launched in January 2019.  The GFIN comprises 28 international financial regulators and related organisations and supports financial innovation in the interest of consumers.  It offers innovative firms a more efficient way to interact with regulators and navigate between countries as they look to scale new ideas.  This includes a pilot for firms wishing to test innovative products, services, or business models across multiple jurisdictions.

Regulatory Sandbox

A cornerstone of Bahrain’s fintech-friendly regulatory regime is the regulatory sandbox mentioned in question 3.1, which has been introduced by the CBB.  This sandbox allows startups, fintech firms, and licensees to test and provide innovative banking and financial solutions within a regulated environment, fostering a culture of innovation and risk-taking with appropriate oversight.

Through these initiatives, Bahrain demonstrates receptiveness to fintech innovation by supporting technological advancements and facilitating the growth of new entrants in the financial services sector.

3.3 What, if any, regulatory hurdles must fintech businesses (or financial services businesses offering fintech products and services) which are established outside your jurisdiction overcome in order to access new customers in your jurisdiction?

Fintech businesses or financial services businesses offering fintech products and services that are established outside of Bahrain and looking to access new customers within the jurisdiction must navigate a series of regulatory requirements.  These are designed to ensure that foreign entities operate in alignment with Bahrain’s legal, regulatory, and operational standards, safeguarding the interests of consumers and maintaining the integrity of the financial system.  Key regulatory requirements include:

Licensing and Registration

• Obtaining Local Licences: Foreign fintech firms must obtain the appropriate licences from the CBB to operate within the country.  This might involve applying for a specific fintech licence or a more traditional financial services licence, depending on the nature of the services offered.
• Regulatory Sandbox Entry: For innovative fintech products and services, entering the CBB’s regulatory sandbox could be a preliminary step before full-scale operation.  Accessing the sandbox requires meeting specific eligibility criteria and obtaining approval from the CBB’s Fintech & Innovation Unit.

Compliance with Local Regulations

• Adherence to Financial Regulations: Foreign entities must comply with Bahrain’s financial regulations, including those related to AML, CTF, consumer protection, data privacy, and cybersecurity.
• Open Banking Regulations: If the fintech service involves accessing banking data (under the open banking framework), the entity must comply with the open banking regulations, ensuring that customer data is handled securely and with consent.

Market Entry Strategy

• Establishing a Local Presence: While not always a regulatory requirement, establishing a local presence (e.g., through a branch or a subsidiary) might be necessary for operational or practical reasons and could be encouraged or required by specific regulations.
• Partnerships with Local Financial Institutions: Engaging in partnerships with local banks or financial institutions can be a strategic way to overcome regulatory hurdles.  Such partnerships might facilitate easier integration into the local financial ecosystem and compliance with regulatory expectations.

Cross-Border Restrictions and Reporting

• Cross-Border Data Flow: Compliance with regulations regarding the cross-border flow of data, particularly concerning personal and financial information, is crucial.  Bahrain’s data protection laws may impose certain conditions or restrictions on how data is transferred internationally.
• Reporting Obligations: Foreign fintech firms may be subject to reporting obligations to the CBB, ensuring transparency and regulatory oversight of their operations in Bahrain.

Engagement with Regulators

• Continuous Dialogue: Maintaining an open and continuous dialogue with the CBB and other relevant regulatory bodies is essential for navigating the regulatory landscape effectively.  This can help foreign fintech businesses understand local regulatory expectations, changes in the regulatory framework, and any sector-specific guidance that may apply.

3.4 How is your regulator approaching the challenge of regulating the traditional financial sector alongside the regulation of big tech players entering the fintech space?

The CBB has adopted an approach focused on regulatory parity between traditional financial institutions and big tech entrants in fintech, as described in the responses to questions 3.1 and 3.2.  Specifically, the CBB emphasises the principle of “same activity, same regulation”, requiring big tech companies engaging in regulated financial activities to comply with standards equivalent to traditional providers.  The establishment of the Fintech & Innovation Unit, implementation of the regulatory sandbox, and development of comprehensive open banking regulations collectively enable the CBB to facilitate innovation by big tech firms in a controlled manner while safeguarding financial stability and consumer interests.  This integrated strategy ensures a balanced regulatory environment that supports technological innovation without compromising regulatory integrity or consumer protection.

4. Other Regulatory Regimes / Non-Financial Regulation

4.1 Does your jurisdiction regulate the collection/use/transmission of personal data, and if yes, what is the legal basis for such regulation and how does this apply to fintech businesses operating in your jurisdiction?

Yes, Bahrain regulates the collection, use, and transmission of personal data under Law No. (30) of 2018, the Personal Data Protection Law (PDPL).  The law applies to (i) data subjects residing in Bahrain, (ii) data controllers or processors with a place of business in Bahrain, and (iii) entities processing personal data using means available in Bahrain (except for data merely transiting through Bahrain).

The PDPL establishes core data protection principles similar to the EU General Data Protection Regulation, including:

• Fair and Lawful Processing: Data must be collected and processed transparently.
• Data Accuracy: Controllers must ensure that data is accurate, relevant, and not excessive for its purpose.
• Consent Requirements: Processing personal data generally requires the explicit consent of the data subject, except where lawful grounds apply (e.g., contractual necessity, legal obligation).
• Security Measures: Organisations must implement technical and organisational safeguards to prevent data breaches and unauthorised access.

For fintech businesses, the PDPL directly impacts customer onboarding (eKYC), digital payments, open banking, and AI-driven financial services by imposing strict rules on data collection, processing, and international transfers.  Additionally, fintech companies must comply with sector-specific cybersecurity requirements under the CBB regulations to protect financial data from cyber threats.

4.2 Do your data privacy laws apply to organisations established outside of your jurisdiction? Do your data privacy laws restrict international transfers of data?

The PDPL applies to organisations established outside of Bahrain if such entities process personal data using means available within Bahrain, except when the processing means are used only for transiting data through Bahrain.  Such organisations are required to appoint a representative in Bahrain to carry out their obligations under the PDPL.

Regarding international data transfers, the PDPL restricts the transfer of personal data to countries that do not offer an adequate level of data protection, unless specific conditions are met, such as obtaining consent from the data subject or the approval of the Personal Data Protection Authority, with the approval being given on a case-by-case basis.  Moreover, cross-border transfers of personal data may be made without obtaining the consent of the data subject or the approval of the Personal Data Protection Authority to countries that provide an adequate level of protection, as determined by the Personal Data Protection Authority in Order 42 of 2022, and are permissible without prior authorisation.

4.3 Please briefly describe the sanctions that apply for failing to comply with your data privacy laws.

Failing to comply with the PDPL can result in various sanctions, including fines, penalties, imprisonment sentences and corrective orders issued by the Personal Data Protection Authority.  The PDPL outlines both civil and criminal liabilities for breaches of data protection principles, unauthorised processing of data, and violations of data subject rights.  Specific sanctions depend on the nature and severity of the breach.  Legal persons shall be punished with two times the fine prescribed for an offence committed if the crime was made in a legal person’s name and/or to their benefit.

4.4 Does your jurisdiction have cyber security laws or regulations that may apply to fintech businesses operating in your jurisdiction?

Yes, Bahrain has a comprehensive cybersecurity regulatory framework that applies to fintech businesses, combining sector-specific regulations under the CBB Rulebook with broader national cybersecurity and data protection laws.

Volume 5 and Its Scope

Volume 5 of the CBB Rulebook sets out cybersecurity requirements for specialised licensees, including payment service providers, financing companies, microfinance institutions, money changers, trust service providers, administrators, and ancillary service providers.  Fintech businesses falling under these categories must implement robust cybersecurity frameworks, fraud prevention mechanisms, transaction security measures, and regulatory incident reporting protocols.  These requirements ensure secure financial operations, data integrity, and compliance with Bahrain’s evolving cybersecurity standards.

Payment and Remittance Services

Fintech companies offering payment solutions or remittance services operate under payment service provider licences, requiring them to comply with cybersecurity measures outlined in Volume 5 to secure transactions, prevent fraud, and mitigate cyber threats.

Crypto-Asset Services

Fintech firms engaged in cryptocurrency exchanges, digital wallets, or blockchain-based financial services fall under Volume 6 (Crypto-Asset Module), which introduces risk management measures, cybersecurity controls, and transaction monitoring protocols to mitigate risks associated with digital assets.

Robo-Advisory and Digital Wealth Management

Companies providing automated financial advice and investment management are subject to the CBB’s investment business rules, with Volumes 1 and 2 (covering conventional and Islamic banks, respectively) requiring strong cybersecurity risk management within the operational risk management framework to protect digital financial services and client data.

Insurtech

Companies leveraging technology to modernise insurance services must comply with Volume 3 of the CBB Rulebook, which includes cybersecurity risk management requirements for digital insurance platforms, policy issuance, and claims processing.

Beyond CBB regulations, fintech businesses must also comply with the PDPL and Order No. (43) of 2022, which mandate secure data handling, encryption, breach notification, and cybersecurity audits.

Given the evolving cybersecurity landscape, fintech firms in Bahrain must continuously enhance security frameworks, adopt real-time fraud detection tools, and maintain compliance with regulatory standards to safeguard financial services and customer data.

4.5 Please describe any AML and other financial crime requirements that may apply to fintech businesses in your jurisdiction.

In Bahrain, fintech businesses are required to adhere to stringent AML and financial crime regulations to combat money laundering, terrorist financing, and other related financial crimes.  These requirements are integral to maintaining the integrity and security of Bahrain’s financial sector.

Adherence to the Financial Crimes Module

Fintech businesses must comply with the Financial Crimes Module outlined in their relevant Volume of the CBB Rulebook.  This module provides a comprehensive framework for the prevention and detection of financial crimes, detailing the obligations of licensed entities in identifying, reporting, and mitigating risks associated with money laundering and terrorist financing.

Money Laundering Reporting Officer (MLRO)

A key requirement for fintech companies under the Financial Crimes Module is the appointment of an MLRO.  The MLRO is responsible for overseeing the implementation of the company’s AML policies and procedures, ensuring compliance with Bahrain’s financial crime regulations, and acting as the primary point of contact with the CBB on matters related to AML and financial crimes.

Relevant Laws

Fintech businesses must also align their operations with the broader legal framework for AML and financial crimes in Bahrain, which includes:

• The AML Law: Legislative Decree No. (4) of 2001 on the Prohibition and Combating of Money Laundering and Terrorism Financing, as amended, sets the foundation for AML efforts in Bahrain, outlining the legal obligations for financial institutions in preventing, detecting, and reporting money laundering and terrorist financing activities.
• Decree Law No. (54) of 2018: This law establishes the AML and Terrorism Finance Supervision and Enforcement Directorate within the CBB, reinforcing the regulatory framework for combating financial crimes and enhancing the supervisory and enforcement capabilities of the CBB.

4.6 Are there any other regulatory regimes that may apply to fintech businesses operating in your jurisdiction (for example, AI)?

Bahrain is in the process of developing a dedicated AI regulatory framework, with a Draft AI Law currently under review.  While the law has not yet been enacted, it is expected to introduce ethical, transparency, and governance requirements for AI-driven financial services.  Fintech businesses employing AI, particularly in automated decision-making, robo-advisory services, fraud detection, and credit scoring, should closely monitor regulatory developments and ensure their AI applications align with global best practices, data protection laws, and ethical AI principles.

Fintech companies operating across multiple sectors – such as telecommunications, healthcare, or e-commerce – may also need to comply with additional industry-specific regulations.  For example, fintech collaborations in digital health payments or insurtech could be subject to health data protection standards and sectoral oversight beyond financial services regulations.

Additionally, intellectual property (IP) laws play a crucial role in fintech innovation.  Companies developing proprietary algorithms, AI-based financial models, or blockchain technologies should ensure they secure appropriate patents, trademarks, or copyrights to protect their innovations and maintain a competitive advantage.

While cybersecurity and data protection regulations under the PDPL and CBB Rulebook already apply to fintech businesses, those leveraging AI and blockchain for data management and transactions must implement robust security measures and comply with cross-border data transfer regulations to mitigate risks associated with emerging technologies.

5. Technology

5.1 Please briefly describe how innovations and inventions are protected in your jurisdiction.

In Bahrain, innovations and inventions are primarily protected under Law No. (1) of 2004 concerning Patents and Utility Models (Patent Law), Law No. (6) of 2014 with Approval of Trademarks Law (Regulation) of the Cooperation Council of the Arab States of the Gulf (Trademarks Law), and Law No. (22) of 2006 on the Protection of Copyright and Neighbouring Rights (Copyright Law).  The Patent Law ensures that patents are awarded for new inventions that include a creative step and are capable of industrial application, covering new industrial products, methods, or improvements.  The Copyright Law protects intellectual works such as books, articles, software, and other forms of literature.  Copyright protection is provided to intellectual works without the need for registration.  The Trademarks Law protects names, words, signatures, logos, etc. that are registered in Bahrain with the Intellectual Property Division of the Ministry of Industry and Commerce.

5.2 Please briefly describe how ownership of IP operates in your jurisdiction.

Ownership of IP in Bahrain is governed by laws that align with international standards and agreements.  The rightful owner of an invention or a piece of IP is typically the person registered to be the owner of the IP except in the case of copyright, which is automatically attributed to the author as mentioned in our answer to question 5.1.

5.3 In order to protect or enforce IP rights in your jurisdiction, do you need to own local/national rights or are you able to enforce other rights (for example, do any treaties or multi-jurisdictional rights apply)?

To protect or enforce IP rights in Bahrain, it is necessary to have rights registered in the jurisdiction.  Bahrain is a member of several international treaties, including the Paris Convention for the Protection of Industrial Property, which facilitates the protection of IP across member states.  Local registration provides direct protection within Bahrain, while international treaties enable broader protection and enforcement capabilities across multiple jurisdictions.

5.4 How do you exploit/monetise IP in your jurisdiction and are there any particular rules or restrictions regarding such exploitation/monetisation?

The exploitation or monetisation of IP in Bahrain can take various forms, including licensing, sale, or commercialisation of patented inventions, trademarks, and trade secrets.  The legal framework allows IP owners to license their rights to others, sell their IP, or otherwise commercially exploit their inventions and innovations.  Specific provisions under Bahraini law, such as those found in the patents and trademarks regulations, outline the conditions under which IP can be licensed, including the requirement for licensing agreements to be in writing.  However, there are restrictions to ensure that licensing or exploitation practices do not violate public order or moral standards or lead to anti-competitive practices.