Saudi Arabia: Central Bank Of Bahrain (CBB) Launch Regulatory Sandbox For Fintech Firms

Last Updated: 10 January 2018
Article by Rad El Treki

June 2017 witnessed the introduction by the Central Bank of Bahrain ("CBB") of a regulatory sandbox aimed at enabling firms to test and develop their products in a virtual space. The introduction of the regime positions the Kingdom of Bahrain ("Bahrain") as only the second state within the Gulf Cooperation Council to implement such a framework. This article provides an overview of the new framework, including eligibility requirements and the application procedure and timelines.

A regulatory sandbox can be considered to be a framework and process that facilitates and encourages the development of the financial technology ("FinTech") sector in a safe, measured and pragmatic manner. The virtual space created by such a framework provides a safe area in which FinTech businesses (both established and start-ups) can test and refine their technology based innovative products, services and platforms without being immediately burdened by the usual regulatory and financial requirements which would otherwise apply to their activities. The effect is that FinTech firms are able to experiment with their products and services for a specified timeframe within a partially deregulated environment where the firms are able to offer their products and services to customers, but where risks to customers (and to the wider financial system as a whole) are mitigated none the less.

Key characteristics of the Bahrain Regulatory Sandbox

Some of the particularly notable features of the Bahrain regulatory sandbox include the following:-

  • The regulatory sandbox is open to existing CBB licensees as well as to entities or firms which are not currently licensed by the CBB (both Bahraini and foreign). Such non-licensed firms or entities may include financial sector companies as well as technology and telecom companies; professional services firms which partner with or service financial institutions; and any other type of applicant working within the financial services industry and deemed acceptable by the CBB.
  • The regulatory sandbox is open both to existing FinTech solutions which have been tested within a lab environment, as well as to ideas and solutions which are yet to be fully developed and/or tested.
  • The timeframe for any applicant to remain within the regulatory sandbox is a maximum of nine months (with the possibility of an entirely discretional extension of three months).
  • The testing of the product or service by the applicant may be limited by the CBB in terms of the number of volunteer customers and/or the amounts involved.

Eligibility Criteria

The key eligibility criteria to be satisfied by applicants include the following, all of which must be evidentially demonstrated to the satisfaction of the CBB:

  • Innovation. The applicant's product or service (or its use) must be shown to be truly innovative or be significantly different to existing solutions within the Bahrain market.
  • Customer Benefits. The applicant's product or service (or its use) should offer tangible direct or indirect benefits to customers, supported by quantifiable estimates or demonstrations.
  • Technical Testing (for existing solutions). Where the applicant's product or service involves an existing solution, the solution needs to have undergone technical testing with the results to be provided to the CBB. In the alternative, external validation of the technical soundness of the solution from a reputable third party may be accepted.
  • Regulatory testing readiness. Applicants are required to show evidence of a well developed regulatory testing plan, to include highlighting of the key risks the solution poses; details of how these will be mitigated; and details of adequate safeguards to protect customers.
  • Post-testing deployment in Bahrain. The applicant should demonstrate both its intention and ability to deploy the proposed solution in Bahrain by way of submission of a Sandbox exit strategy (to include specific details of proposed scale-up and future deployment).

Application Procedure

Applicants are required to submit their application in writing to the CBB using the template CBB application form, attaching all relevant supporting documentation. The application form includes sections in which applicants must provide details of the following:

  • A description of the applicant's organisation including its corporate structure, key business lines and centres, and its financial standing and technical expertise;
  • The proposed innovative financial solution, and how it satisfies the eligibility criteria discussed above;
  • The information as to the type (and number) of volunteer customers to be included in the applicants sandbox testing; how these will be sourced, and proposals to protect the volunteer customers and their confidentiality;
  • Key performance indicators and targets which will be used to determine the success of the testing whilst in the regulatory sandbox;
  • The cyber security and other relevant measures to be taken by the applicant to maintain security of the solution service or product; and
  • The applicant's exit plan, plans for scale up and deployment strategy, together with a timeline of steps to be taken to meet the additional legal and regulatory requirements to be satisfied after exiting the regulatory sandbox.

The CBB have the right to relax certain requirements on a case by case basis.

Upon receipt of the completed application and all accompanying documentation together with the application fee (current set at one hundred Bahraini Dinars) the CBB will review the application and endeavour to respond to the applicant within fifteen days, either approving or rejecting the applicant's application.

Where approved, the applicant is then able to enter the regulatory sandbox in accordance with the terms and conditions of the framework and the applicant's application and commence the testing of its product or service based solution. The CBB have indicated that arrangements have been put in place with the other relevant Bahraini government authorities (for example, the Ministry of Industry Commerce and Tourism and the Labour Market Regulatory Authority) to enable applicants to, for example, employ and sponsor (for visa purposes) employees in Bahrain during the testing phase. Full details of these arrangements and how they operate are awaited.

Whilst in the regulatory sandbox, applicants are required to adhere to the relevant CBB regulations with regards to Know Your Customer (KYC), Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT). Additionally, in so far as the applicant will as part of its sandbox testing be receiving any money from the volunteer customers, the applicant is required to entrust the handling of these funds to CBB licensed retail banks.

At the end of the designated sandbox period (which as mentioned, is a maximum of nine months with the possibility of an entirely discretional extension of three months) the applicant exits the regulatory sandbox, and may apply for the relevant CBB licence depending on the precise activities of the applicant.

Since the launch of the new framework, two entrants have so far been welcomed into the regulatory sandbox, in the form of London based Tramonex (a forex start-up focused on facilitating conversion and settlement services to automate cross border transaction) and Dubai firm Now Money (one of the first FinTech companies in the Gulf to use mobile banking technology to provide accounts, financial inclusion and a range of low cost money remittance options to low-income workers).

More recently, in October of 2017 the CBB announced the establishment of a dedicated FinTech Unit within the CBB with the mandate of ensuring the provision of the best services to individual and corporate licensees in the financial sector. The FinTech Unit will also be responsible for the approval process to participate in the regulatory sandbox, as well as supervision of licensed companies' activities and operations, including cloud computing, payment and settlement systems, and monitoring technical and regulatory developments in the FinTech field.

The introduction of the new framework and the creation of a dedicated FinTech Unit within the CBB is consistent with Bahrain's continued focus on further developing the Kingdom as the emerging FinTech and financial services hub of the Middle East region, promoting increased competitiveness and the encouraging the embracing of new technologies. At the same time, the safeguards built into the scheme will assist to maintain the required level of consumer protection and regulatory oversight which have long established Bahrain as one of key financial sector hubs in the region.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions