In the Persian Gulf, both Bahrain and Abu Dhabi (UAE) are competing to be known as the premier crypto hub in the region. Their strategies to succeed differ remarkably, as the former relies on their Central Bank and the latter has chosen to depend on the free market.
The achievement caps a three-year quest by the Central Bank to put Bahrain on the cryptocurrency map.
Meanwhile, Abu Dhabi continues to aggressively court investors with lucrative tax incentives and low startup costs.
If all goes as planned, Rain will be instrumental in helping Bahrain officials jumpstart a cryptocurrency ecosystem within the country.
The startup has been thoroughly prepped by Bahrain’s Central Bank to attract institutional investors.
Accordingly, the Central Bank is one of the few exchanges to be successfully certified as Shari’a compliant.
The Central Bank coordinated support from regional players to bolster their efforts, obtaining significant financial support from the Bahrain Development Bank, the Economic Development Board, and Bahrain’s FinTech Bay (a financial technology firm co-working space and accelerator).
With smaller public and private players on board, the Central Bank efforts came to resemble a nation-wide effort.
Indeed, Rain’s success is a major milestone for Bahrain itself. Government regulators are collaborating closely with the Central Bank to help the country become the region’s premier cryptocurrency hub.
Working together, they’re finding ways to support promising cryptocurrency entrepreneurs – particularly those located in FinTech Bay.
Firms licensed by Bahrain’s Central Bank are also given more leeway to expand their operations into other Gulf countries.
While policymakers and banking officials have the last word in this arena, their efforts are far less directive than collaborative.
For instance, Bahrain’s Central Bank famously created a virtual regulatory sandbox program to help cryptocurrency firms test and develop their products.
For entrepreneurs, this virtual program serves as an appealing alternative to regulatory edicts. It also makes regulatory compliance far easier.
Thus, by forging a highly regulatory environment conducive to innovation, Bahrain’s soft-glove approach appears to be paying dividends.
Financial free zones
In stark contrast to Bahrain is Abu Dhabi. Located with the United Arab Emirates, Abu Dhabi serves as the regional center for capital investment.
The city showcases the Abu Dhabi Global Market, a financial free zone offering attractive investment opportunities. Cryptocurrency firm startup costs are less than a third of those found in London.
Although the term “financial free zone” appears to suggest a regulatory-free zone, the city retains a Financial Services Regulatory Authority that oversees cryptocurrency regulations.
Earlier this year it gave three cryptocurrency exchanges – BitOasis, MidChains, and Arabian Bourse – in-principle approval to operate.
However, its light touch toward financial services has little in common with how Bahrain might operate.
In addition, efforts to make Abu Dhabi a regional-crypto hub have been more organic than strategic. That is, they’re reliant on ground-floor efforts.
And while UAE’s government has allowed state-owned companies to invest in cryptocurrency, its been relatively uninterested in attracting cryptocurrency investment as a policy matter.
Bahrain appears to have the upper hand In the race to become a regional crypto-hub.
While not nearly as rich as Abu Dhabi, Bahrain’s effort to attract cryptocurrency investment appears to resemble a national goal.
Like Malta, Bahrain’s government is taking a proactive approach towards attracting cryptocurrency investment.
As such, their actions create a confidence-building environment for cryptocurrency investors.