Bahrain authorises UK firms to test blockchain solutions
The UK-based Fasset will be testing the tokenization of hard assets in the country’s regulatory sandbox
The Central Bank of Bahrain has authorized Fasset, a fintech firm based in the UK, to start testing the tokenization of hard assets in Bahrain’s regulatory sandbox.
The firm has managed to raise around $4.7 million in a pre-seed round from “strategic backers” in Saudi Arabia, the UAE, Bahrain, Singapore and Kuwait.
This follows an announcement from Fasset regarding the launch of its flagship crypto exchange, FEX, in Bahrain next year. The announcement also stated that it would be open to investors from Kuwait, Qatar, Oman, Saudi Arabia and the UAE. However, it did not provide details as to whether Fasset would acquire any additional permits.
Traditionally, the region mandates that these platforms first acquire a certification from the Shariah Review Bureau, a Bahrain-based entity that certifies these firms can abide by the tenets of Islamic law. Examples of these include bans on gambling and taking interest on loans, among others.
Many businesses outside the region see this as an unnecessary step. However, the certification does provide an advantage because it allows businesses to unlock a network of investors observant of Islamic financial policies. This is a sizable benefit—according to a study conducted in 2017 by the Malaysia International Islamic Financial Center, investments from networks that adhere to Sharia law are worth more than $70 billion.
While local laws in the Middle East region have presented challenges for the growth of the cryptocurrency industry, countries such as Saudi Arabia, the UAE, and Bahrain have been working on making the environment more welcoming.
Part of the motivation behind their efforts stems from the fact that these countries are home to a significant number of expatriates that come from developing markets. The development of blockchain technology for this demographic could greatly improve remittance fees.
Examples of this manifesting within the region have been taken on by RAKbank, a UAE-based retail bank that has adopted Ripple’s blockchain technology in order to widen its remittance routes. The bank’s new capabilities now allow its clients to send quick cross-border payments to India and Bangladesh.
The Saudi Arabian Monetary Authority (SAMA), which is the central bank of the country, is also reported to be working on several blockchain initiatives, including the use of blockchain technology to deposit funds to local banks.
With Fasset’s launch of the FEX as well as its access to Bahrain’s regulatory sandbox, the firm may soon start competing with Rain, another crypto exchange, for the local market. The latter is already fully licensed from the central bank and is operating within the country.