Bahrain Central Bank Issues New Regulations Governing Operations of Crowdfunding Platforms

The Central Bank of Bahrain (CBB) has said new regulations compelling operators of crowdfunding platforms to ensure their products are suitable for clients are set to replace existing rules which were first issued in 2017.

Segregation of Client Money From Platform Operators

The Central Bank of Bahrain (CBB) has issued new guidelines which apply to operators of crowdfunding platforms for the first time since 2017, a statement from the central bank has said. The new regulations cover principles that govern the operations of a crowdfunding platform as well as the rules that apply to offers and disclosures made by a crowdfunding platform.

The new regulations, which are covered under the Crowdfunding Platform Operators Module (Module CFP), also address the “segregation of client money from platform operators and other measures to ensure safe operation of the activity.” Further, the new regulations compel the platform operators “to ensure [the] suitability of the products” that are being offered to retail clients.

In her remarks following the announcement, the CBB’s director of the regulatory policy unit, Shireen Al Sayed, hailed the central bank’s move to improve the provision of financial services. Al Sayed added:

Due to the increased demand for introducing new financing products to serve SMEs and start-ups, the CBB has been keen to review the crowdfunding platform operator regulations to be in line with the economic recovery plan for the financial sector in terms of providing a conducive environment for crowdfunding platform operators.

According to Al Sayed, the new regulations are easy to understand and come with minimum safeguards to ensure the crowdfunding platforms do not pose risks to the financial sector.

Crowdfunding as an Alternative Financing Route

Another CBB executive, Yasmeen Al-Sharaf, the director of Fintech and the innovation unit, is quoted suggesting that crowdfunding avails an alternative funding source for startups.

“Fintech solutions have the potential to enhance capital flows to the economy commensurate with the growth and expansion plans of entrepreneurs through this new source of funding, thereby, helping to develop the businesses of these start-ups,” Al-Sharaf added.

The CBB concludes its statement by asserting that crowdfunding is an innovative way now used by small and medium-sized enterprises, seed capital, and startup companies that want to get funding.

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