February 21, 2019, | AtoZ Markets - Bahrain is trying to regain its position in the financial industry. To achieve this goal, the country which once was the center of the Middle East for financial industries, chose to embark on the crypto market.
Crypto companies are welcome in Bahrain, but yet on a pilot basis
According to the local press, the Bahrain government will allow companies engaged in blockchain technology and cryptocurrency trading to work in the country on a pilot basis. The government of Bahrain would like to determine how to regulate cryptocurrencies by running this pilot. Dalal Bouheji, the head of the Bahraini Economic Development Board, expressed her confidence that the Central Bank would issue regulations without a particular deadline. The Central Bank representatives noted that it already had issued draft rules for the crypto asset platform operators.
According to crypto experts, the digital assets trading sector is largely unlicensed and unregulated in the financial sectors. Hence, this forces adopters to clarify rules and prohibitions in smaller jurisdictions, such as Malta, Liechtenstein, Gibraltar and now in the Middle East as well. In one of her tweets Bouheji noted, that over the next 10 years, FinTech startups located in Bahrain are expected to attract huge investments from private funding.
The Bahrain Central Bank allows companies to "test their decision on a limited number of users with a limited number of transactions," said Buheji. The goal of the program is to find a quick way for companies to enter the market, she added. SprinkleXchange is among the 28 companies that received permission to work within the so-called sandbox of the Central Bank of Bahrain. SprinkleXchange is a platform built on the blockchain technology for the offering of shares.
Each of these companies has been working on a trial basis for nine months, as the Central Bank is studying potential regulation. The exchange, which is managed by New York-based Sprinkle Group SA, will be launched this month - with an initial limit of 10 listings. The company plans to place the first company by May, said CEO Alexander Wallin.
According to the local media reports, the first licensed cryptocurrency exchange in the Arabian Gulf is currently going through the test-phase offered by the Central Bank.
Some Reddit users met this announcement positively, like the Reddit user under the nickname momoxoxo, who said the following:
Established in February 2019, the Bahrain FinTech Bay has already hosted about 30 companies dealing with the blockchain, cryptocurrency, digital payments and financial technologies.
Experts opinion about crypto market
Journalist Mouhamad Eid, specialized in economics, financial news and the gulf market, responded to AtoZ Market’s request to comment on the news and said:
“Over the last few years, it became obvious that the demand on using cryptocurrencies has increased, as they were made as a replacement solution for the fiat currency.
People are encouraged to use cryptos as they are safer in circulation as for users, in addition to the complete secrecy where no names are likely to be exposed to the other party in the transaction.
Circulation in cryptos is free and away from dominance, unlike traditional banks.
The other significant factor in making cryptos under high demand is that they are available to all, and can’t be governed by governmental or financial bodies only. For example, the aforementioned translates in the ease of obtaining a cryptocurrency account, which doesn’t need a Central Bank to happen.
On the other hand, investing in cryptocurrencies is not risk-free as well. They are somehow like the ordinary fiat currency, both fall under the market volatility and fluctuation. Hence, traders of cryptocurrencies should keep an eye on the market, to know what is the proper action to take in the right time.”
Bahrain's Economy Was Hit Hard by the Oil Price Drop
Bahrain’s economy, the smallest of the six members of the oil-rich Gulf Cooperation Council, has been hit hard by the decline in oil prices since 2014. The country allies last year pledged $10 billion in aid to support the economy. According to Buheji, the cost of doing business in Bahrain is relatively lower than other countries in the region. As for the other economic sectors of Bahrain, such as stock market, a Reddit user under the name Abu Lahma said that:
“There are some good stocks in Bahrain that give out ridiculous dividends. However, there's a transparency and liquidity issue if you're an individual investing. Good dividend stocks aren't usually up for sale. All the companies seem to only have good news, even while the stock is down 50%. There are ways to get information, but you definitely have to be more proactive than in other stock markets. I'm for the idea of a GCC-wide stock exchange. More liquidity, more options, and Saudi stock exchange are healthier than ours.”
What do you think? Will cryptocurrencies eventually replace cash? Let us know in the comments section below.