By Sarah Townsend
Kingdom joins GCC race to become fintech pioneer with 'regulatory sandbox'
Bahrain has held talks with Singapore’s central bank as it devises plans for a pilot blockchain project in the Gulf state.
The Monetary Authority of Singapore (MAS), together with Singapore's stock exchange and eight local and foreign banks, in in the midst of a project to use blockchain technology for interbank payments.
Blockchain is an electronic transaction processing and public ledger system that allows parties to record information without the need for third-party verification.
It was originally developed to record transactions made via digital currency bitcoin.
Now, Bahrain is looking to Singapore for inspiration as it develops its own blockchain trial.
Khalid Al Rumaihi, CEO of inward investment agency Bahrain Economic Development Board (EDB), said on Monday the country wants to become a pioneer in the burgeoning ‘fintech’ space, and national adoption of blockchain technology is a key enabler of this.
“We are in talks with a group of people from the central bank of Singapore, which began its own blockchain project for bank transactions 18 months ago and is making huge progress,” Al Rumaihi told delegates at the GCC Financial Forum in Manama.
“The ability for blockchain to be adopted at country level is a huge opportunity for Bahrain to move into the spotlight as a pioneer in this space.”
The whole of the financial services sector is in the midst of "disruption by fintech”, he added, and must adapt to rapidly changing technologies.
“Blockchain will unlock so many different possibilities for business in the way email and internet did years ago. What would prevent Bahrain from becoming a leader in this space in the same way Singapore is?” he said.
Under Singapore’s pilot system, partner banks will deposit cash as collateral with MAS in exchange for MAS-issued digital currency, the central bank’s managing director Ravi Menon announced last year.
The next phase of the project will involve transactions in foreign currency, “possibly with the support of another central bank”, Menon said.
Al Rumaihi gave no firm indication that the Central Bank of Bahrain was angling to become MAS’ proposed foreign partner.
However, he said Bahraini government officials were working to establish a ‘regulatory sandbox’ to allow fintech players to test new business models and products in compliance with Bahrain’s laws.
Among the commercial transactions blockchain could be used to facilitate are real estate sales, including exchanging title deeds, he said.
Also at the conference, Central Bank of Bahrain governor Rasheed Mohammed Al Maraj revealed that the central bank had just completed a white paper on growing the country's fintech sector and is preparing to share it with partners shortly.
Other Gulf states have announced plans to develop the regional fintech ecosystem, such as the UAE, where financial free zone the Abu Dhabi Global Market (ADGM) has unveiled plans to establish a fintech regulator and signed cooperation agreements with fintech players.
Qatar Financial Centre is also developing a strategy to attract more fintech companies to the free zone.