Regulatory Sandbox - 270218 FINAL - 2

Bahrain’s Regulatory Sandbox
WHAT IS A REGULATORY SANDBOX?
A safe space in which businesses can test innovative

products, services, business models and delivery
mechanisms without immediately incurring all the
normal regulatory and financial consequences of
engaging in the activity in question.
2
WHY DID BAHRAIN CREATE A REGULATORY
SANDBOX?
Regulatory Sandboxes are an attempt to address the frictions between regulators’

desire to encourage and enable innovation and the emphasis on regulation.
Promote Effective Encourage Improve Customer Embrace New

Competition Financial Inclusion Experience Technology
CBB
“These new initiatives are a

continuation of the CBB’s efforts to
provide the right mix of policies
and products to develop and
enhance the quality and
competitiveness of services in the
financial sector. We are living in
an era of unprecedented changes
mainly brought by technological
advancement, where we are
witnessing how technology is
defining financial services and
CBB remains at the forefront of
these developments to enable the
industry to advance similarly.” -
H.E. Rasheed Mohammed Al
Maraj
4
Who, What and How?
WHO ?
Existing CBB licensees (financial institutions with Fintech Initiatives) and

unlicensed companies (local + foreign).
WHAT ?
Eligible Sectors:
Financial Services
Technology & Telecom Companies
Professional Service Firms
Others accepted by the CBB
Continued…
HOW ?
Applicant must satisfy the following eligibility criteria:
Consumer Benefit
Genuine Innovation Application Fee: 100 BHD

Testing Period: 9 Months
Readiness for Testing + 3 Months Extension
Deployment Post-Testing
Financial Conduct Authority - 2015
Sandbox eligibility criteria:
• Offers genuine innovation — either groundbreaking or significantly

different
• Creates a measurable benefit to consumers — either direct or indirect
• Is intended for the UK financial services market
• Needs to be tested in the sandbox alongside the FCA
Monetary Authority of Singapore – 2016
Sandbox eligibility criteria:
• Financial service includes new or emerging technology

• Financial service addresses a problem or brings benefits to consumers
• Ability to deploy the financial service in Singapore
• Test scenarios and expected outcomes are clearly defined
• Appropriate boundary conditions
• Significant risks assessment and mitigation plan
• Exit and transition strategy
Applicant must adhere to …
Legal and • CBB consider relaxing Legal and Regulatory

Regulatory requirements.
Requirements • Case by case basis.
• Confidentiality of customer information, KYC,

CBB Regulations AML, CFT.
• Follow measures to provide appropriate levels

Customers of disclosure and risk mitigation to their
customers.
Filing Requirements
1. Description of organization, financial standing and expertise.

2. Description of the proposed financial service.
3. Description of satisfying the Eligibility Criteria.
4. Disclosure of boundary conditions – ex. Dates, target customers, etc.
5. Assessment of Applicant’s readiness for testing – ex. Customer safeguards, testing plans,
etc.
6. Description of volunteer customer communication plan (risk disclosures + material
disclosures).
7. KPIs to measure success.
8. Cyber security and other measures to maintain safety of solution.
9. Description of third party outsourcing arrangements.
10. Assessment of exit plan, scale-up and deployment strategy .
Regulatory Sandbox Timeline
EXIT?
Evaluation End of End of Sandbox

Application 15 D 3M
and 9M Sandbox
Submission extension period
Assessment period
Applicant submits CBB evaluates the As Sandbox period Upon expiry of the
Sandbox application application and expires applicant Sandbox extension
including all required approves for either (1) applies for period the applicant
documents. admission to the license (2) exits (3) either (1) applies for
Sandbox or rejects. applies for extension. license (2) exits.
Early Exit from the Sandbox
• Intended test outcome is unlikely

CBB
• Progress is unsatisfactory
• Critical flaw Applicant may
• Terminate upon discovery of any appeal to CBB
material breach of the application appeal committee
• Give one month notice to CBB

Applicant
Applicant’s Customers
 Applicant’s follow appropriate disclosure, protection and compensation requirements.
 Applicant’s must clearly communicate in writing the key risks and obtain their confirmation.
 Abide by CBB regulations regarding customer data confidentiality.
 Applicant fulfills its existing obligations incase of early termination.
 Disputes governed by bilateral contract/ understanding between the two parties.

- CBB may receive customers’ complaints about Applicants’ service/solution, but does
not provide any formal redressal mechanism or interferes in legal actions.
Fintech Regulatory Sandbox Approved Companies
as of 31st December 2017
No. Name Type of Activity Date of Address

Approval
1 Tramonex Limited UK 17 Jul. 2017 23-24 Smithfield Street
ECIA 9LF
London, UK
2 Nowex W.L.L. 3 Aug. 2017 Astrolabs, Cluster R

Jumeirah Lakes Tower
P.O.Box 3368531
Dubai
UAE
3 Rain Financial Sandbox Ancillary Service 25 Sep. 2017 DLA Piper Middle East LLP
Provider- Money Changer P.O.Box 65137
Manama
Kingdom of Bahrain
4 Wahed Inc. Sandbox Investment Advisor 27 Dec. 2017 45 Rockefeller Plaza, Suit
2000
New York
USA
5 Belfrics Bahrain Sanbox Ancillary Service Provider 27 Dec. 2017 Belfrics Malausia Sdn Bhd
– Exchange B1-16-6, Soho Suits @KLCC
Jalan Perek, Kuala Lumpur
Malaysia - 50450
6 BitArabia Digital Sandbox Ancillary Service Provider 27 Dec. 2017 Manama

Assets – Exchange Kingdom of Bahrain 14
REGULATORY SANDBOXES
Dubai DIFC
2017
Netherlands
2017 Thailand
2017
Canada
2017
UK
Hong Kong 2015
2016
Australia Taiwan
2017 2017
Singapore
2016
Abu Dhabi ADGM

2016 Brunei
2017
Middle East Fintech Sandbox Comparison
ADGM Free Zone DIFC Free Zone Bahrain
Fintech Initiative RegLab launched in 2016 FinTech Hive initiative Regulatory Sandbox
launched in January 2017 launched in June 2017
Support Available Co-working space, Same as ADGM. Access to virtual working

established financial space. Assignment of
institutions and investors, Workspace in DIFC for two CBB contact person
mentors from professional employees throughout throughout the process.
service firms program.
Licensing Period Up to 2 years (extendable) 6 to 12 months 9 months (extendable 3

(extendable) months)
Fees $6,800 for 2 years No fees BHD 100
16
Continued…
ADGM Free Zone DIFC Free Zone Bahrain
Eligibility - Promotes innovation - Minimum alpha or beta - Customer benefit

requirements - Promote growth/ risk product to demonstrate - Genuine innovation
management/ choices and prepare to share - Readiness for testing
- Proposal at an access to program - Post deployment
advanced stage of partners
development - Senior team commit to
- Deployment in ADGM being based in Dubai
and UAE for the 12 week
program
17
Thank you!
CONTACT
Legal Enquiries:
[email protected]
18

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Bahrain’s Regulatory Sandbox

WHAT IS A REGULATORY SANDBOX?

A safe space in which businesses can test innovative

Regulatory Sandboxes are an attempt to address the frictions between regulators’

Promote Effective Encourage Improve Customer Embrace New

“These new initiatives are a

Existing CBB licensees (financial institutions with Fintech Initiatives) and

Genuine Innovation Application Fee: 100 BHD

Sandbox eligibility criteria:

• Offers genuine innovation — either groundbreaking or significantly

Sandbox eligibility criteria:

• Financial service includes new or emerging technology

Legal and • CBB consider relaxing Legal and Regulatory

• Confidentiality of customer information, KYC,

• Follow measures to provide appropriate levels

1. Description of organization, financial standing and expertise.

Evaluation End of End of Sandbox

• Intended test outcome is unlikely

• Give one month notice to CBB

 Applicant’s follow appropriate disclosure, protection and compensation requirements.

 Abide by CBB regulations regarding customer data confidentiality.

 Applicant fulfills its existing obligations incase of early termination.

 Disputes governed by bilateral contract/ understanding between the two parties.

No. Name Type of Activity Date of Address

2 Nowex W.L.L. 3 Aug. 2017 Astrolabs, Cluster R

6 BitArabia Digital Sandbox Ancillary Service Provider 27 Dec. 2017 Manama

Abu Dhabi ADGM

ADGM Free Zone DIFC Free Zone Bahrain

Support Available Co-working space, Same as ADGM. Access to virtual working

Licensing Period Up to 2 years (extendable) 6 to 12 months 9 months (extendable 3

Fees $6,800 for 2 years No fees BHD 100

ADGM Free Zone DIFC Free Zone Bahrain

Eligibility - Promotes innovation - Minimum alpha or beta - Customer benefit

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