Bahrain – The Central Bank of Bahrain (CBB) has released new regulations applicable to crowdfunding platform operators following a comprehensive review of existing regulations, which were first published in 2017.
The new regulations contain rules regarding equity-based crowdfunding and funding-based crowdfunding and are covered by the Crowdfunding Platform Operators Module (CFP Module). The CFP module can be found under CBB Rulebook – Volume 5: Type 7 – Ancillary Service Providers.
The new regulations include principles governing the conduct of operations by the platform, rules on platform offerings and disclosures, prevention of conflicts of interest, due diligence of borrowers/issuers via Know Your Customer (KYC), separation of customer money from platform operators and other measures. to ensure the safe operation of the activity.
In addition, the new regulations oblige operators of crowdfunding platforms to ensure the suitability of the products offered on the platform to retail customers, a statement said.
Director of the Regulatory Policy Unit, Shireen Al Sayed, said: “The CBB endeavors to continuously review all regulations and guidelines relating to the provision of financial services in the Kingdom of Bahrain in order to bring them up to date. and to improve them according to the evolution of the financial sector.
“Evolving business models such as crowdfunding will potentially provide new alternative sources of funding for new businesses and start-ups and serve as a catalyst for the growth of these businesses. The new regulations are principle-based, simple, easily understandable and contain minimum safeguards to ensure that crowdfunding platforms do not pose excessive risk to the financial sector.
Yasmeen Al-Sharaf, Head of FinTech & Innovation Unit, said: “Crowdfunding offers a viable alternative to tap into a new source of funding for start-ups and new businesses. FinTech solutions have the potential to improve the flow of capital to the economy based on the growth and expansion plans of entrepreneurs through this new source of funding, thus contributing to the business development of these start-ups. CBB will continue to explore and develop new financial tools for emerging business models to keep pace with local market needs, as well as support and encourage efforts to create new services that match emerging trends. developments in the field of financial technology. ”
Many international jurisdictions view crowdfunding as an innovative way to facilitate financing for small and medium-sized enterprises and seed capital for start-ups, with the aim of promoting economic growth. Additionally, other benefits of crowdfunding can include:
• Convenience of the online platform;
• Lower cost of capital/high returns;
• Profitability of a relatively simple infrastructure;
• Diversification of the portfolio; and
• Increased competition in a space traditionally dominated by a few suppliers.
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