Written by: David Parker
The recent Memorandum of Understanding between Digital Jersey and the Bahrain Economic Development Board shows that isolationism in the financial services sector is a thing of the past, says David Parker, Executive Director of Business Development – Financial Services, Bahrain Economic Development Board
The Central Bank of Bahrain finalized rules for regulating and licensing cryptocurrency asset services in February – a Middle East first. It can be seen through the lens of innovation, central to the kingdom’s aim to be a regional hub for all things crypto and blockchain.
We at the Bahrain Economic Development Board have worked hard to position our historically strong financial services sector as the go-to destination for digital disruptors and start-ups. And with an expanding and increasingly vibrant digital economy, a developing tech community, and a rapidly growing fintech ecosystem, recent initiatives mean we have never had more to offer.
In 2017, the Central Bank of Bahrain (CBB) established the region’s first onshore regulatory sandbox. A framework to provide a virtual space for companies to test their technology-based innovative solutions, it provides an opportunity for companies to launch products into the market relatively risk-free.
We’ve already had successes. The region’s first Sharia-compliant cryptocurrency exchange, Rain, graduated from the CBB’s sandbox this year and is in the final stages of the application process for obtaining a full operational license.
Tarabut Gateway, the sandbox’s first graduate, has just signed an open banking technology agreement with the National Bank of Bahrain, taking advantage of new open banking reforms.
Joining forces with Jersey
Yet, while we are making good progress in digitizing our financial services industry, we recognize the need to internationalize our outreach, cooperating with established markets to learn more and adapt initiatives accordingly.
It’s against this backdrop that representatives from Bahrain’s financial services sector visited the UK, to attend Innovate Finance’s Global Summit, and Jersey, to sign a Memorandum of Understanding (MoU) with Digital Jersey.
In many ways, Jersey and Bahrain are natural partners. Both are agile, nimble, and innovative financial services hubs that understand that cooperation is crucial. The MoU is designed to enhance mutual learnings and deepen ties between the jurisdictions. It will give fintech companies in Jersey unparalleled access to, and cooperation with, the Bahrain fintech ecosystem and facilitate the exchange of information to drive growth and job creation.
MENA Research Partners forecasts that investment in fintech firms will rise from $150m to $2bn over the next decade, as increasing interest in digital offerings from banks and government initiatives – including accelerator programs in Bahrain, Dubai, and Abu Dhabi – support the market.
So the benefits of sharing knowledge and expertise are clear to both parties. The Middle East’s first, and still largest, fintech hub – Bahrain FinTech Bay – is a good example of this. Bringing together experts from technology and financial services in a structured and coordinated way can benefit all those involved and the broader fintech ecosystem.
An evolving sector
Such a comprehensive agreement between two leading jurisdictions in the fintech sector is a significant development in the world of financial services – but not just in Jersey and Bahrain. It also demonstrates that there is no doubt the financial services sector has changed.
It is no longer the place of ruthless competition that undoubtedly contributed to the global financial crisis of 2008. It has evolved into a world where the terms ‘partnership’ and ‘collaboration’ are commonplace.
Bahrain has certainly recognized the importance of collaboration, particularly on an international scale. The CBB already works alongside the Jersey Financial Services Commission in the Global Financial Innovation Network.
This international partnership between regulators from over 16 jurisdictions – including the UK, Guernsey, US, Australia, and Hong Kong – is working to design supportive fintech regulatory pilot schemes. And Bahrain has signed a similar MoU with Singapore.
Like Jersey, Bahrain aims to be a regional trendsetter when it comes to all things fintech. The MoU not only solidifies a burgeoning relationship, but it also opens the door for joint projects and further agreements in the future. In particular, it encourages more women to join the sector, which is an initial focus of our cooperation.
Looking forward, I can’t help but feel that, for us, collaboration might just be the key to many more opportunities and initiatives in the world of fintech.