Central Bank of Bahrain allows yield-bearing approved stablecoins

The Central Bank of Bahrain (CBB), having issued a consultation paper on stablecoins back in October 2024, has now issued the full stablecoin regulation on July 2nd, 2025. The CBB is offering licenses to stablecoin issuers and custodians for fiat-backed stablecoins that could be either in Bahraini Dinar or United States Dollars or any other fiat currency acceptable to the CBB.

The Central Bank of Bahrain noted that following the consultation with the industry, the CBB is hereby issuing the Module and its appendices under CBB Rulebook Volume 6 (See Module SIO and its appendices attached). The CBB noted that the new module will be effective immediately.

CBB allows yield-bearing approved stablecoins

Moreover, the Central Bank of Bahrain is allowing stablecoin issuers to issue yield-bearing stablecoins that pay passive returns to their clients only from either interest or rewards (for Sharia-compliant stablecoins), which is earned from the investment of the reserve assets.

The CBB adds that stablecoin issuers offering a yield-bearing approved stablecoin must set the yield rate or reward rate at a level that is reasonable and does not adversely affect the stability of the approved stablecoin, as well as the financial health (going concern) of the stablecoin issuer.

CBB sets stringent requirements for stablecoin issuers

As per the module, issuers seeking to offer stablecoins, control their total supply, or mint and burn, as well as manage and safeguard reserve assets and custody of stablecoins, will need to meet the requirements set out.

Central Bank of Bahrain regulation calls on current licensed entities who wish to offer regulated stablecoin services to seek written approval from the CBB before offering the service. The document states, “Stablecoin issuers must provide the CBB with a detailed description of the new services, the resources required, and the operational framework for such service.”

All service providers need to be licensed before undertaking stablecoin services.

The CBB notes that part of the approval of a stablecoin will include looking into the quality and liquidity of the stablecoin, as well as credit and concentration risk reserve assets in those currencies. It also notes that the Central Bank may reject an application for issuance of a stablecoin if it determines that the issuance thereof might cause damage, dilute, or be contrary to the interests of national economy, the holders of the stablecoin, or public investors in general.

Stablecoin reserves are cash reserves in Banks with AA ratings

In terms of reserve asset composition, stablecoin issuers can only keep reserves in cash and deposits with Banks rates at a minimum of AA- or equivalent, or debt securities with the central bank, or repurchase agreements backed by short-term government money market funds.

Also, applicants must have at least a three-year track record in issuing stablecoins or working in the crypto asset domain. As for the license fee, the CBB has initiated a variable annual license fee payable by stablecoin issuers, which is 0.25% of their relevant operating expenses, subject to a minimum fee of BD 5000 and a maximum fee of BD 12,000.

The CBB also details the requirements for governance and compliance and places strong emphasis on this. As noted by the CBB, stablecoin issuers must have adequate and appropriate systems and controls, in accordance with the requirements of the Anti Money Laundering and Combating of Financial Crime (AML) Module, CBB Rulebook Volume 6, to prevent, detect, and combat money laundering and terror financing.

Bahrain Central Bank regulations go much further than the UAE Central Bank stablecoin regulations

The new stablecoin regulations set by the Central Bank of Bahrain far exceed the stablecoin regulations set by the UAE Central Bank. While the UAE only allowed AED stablecoins to be considered as methods of payment within the country, the CBB has allowed both Bahraini Dinar as well as USD stablecoins, and even Sharia-compliant ones to be issued.

Another noteworthy difference is that CBB has allowed for yield-bearing stablecoins, something that the UAE Central Bank did not mention in its regulations.