Cryptocurrency regulation: the best of both worlds

Caught between two extremes

Cryptocurrencies are still very much an emerging phenomenon, often with unclear legal status. Depending on the country, digital currencies can be either loosely regulated or banned altogether – without a great deal in between. Traditionally, cryptocurrency companies have been forced to choose between major but expensive financial centres like London, or lightly-regulated jurisdictions like Belize. Investors tend to be wary of the latter, due to the increased risk of illegal activities like money laundering.

The best of both worlds

A recent report by Reuters examines how smaller countries like Bahrain, Belarus, Malta and Gibraltar are helping shape the development of the global crypto market by creating regulatory frameworks specifically for cryptocurrencies.

These countries offer the best of both worlds: the security and increased investor protection offered by comprehensive regulation, as well as lower costs, easy market access and other perks provided by smaller jurisdictions.

Sophisticated, bespoke regulation

The Reuters report singled out Singapore-headquartered ZPX, which is launching Qume, their new cryptocurrency company, in Bahrain. ZPX CEO, Ramani Ramachandran, said that the Kingdom’s sophisticated, bespoke cryptocurrency regulation had been a major draw: “As the market matures analogous to traditional capital markets, mainstream institutional capital will increasingly look to come to regulated exchanges such as Qume as opposed to ‘light-touch’ venues in offshore jurisdictions.”

Easy access to Bahrain’s regulators, market and beyond

Ramachandran and ZPX Co-founder, Aditya Mishra, highlighted some of the reasons behind their choice of Bahrain as a launchpad:

  • Close communication with regulators
  • Significantly lower compliance and administrative costs compared to more established financial centres; around $200,000 a year in Bahrain, compared with at least $750,000 a year in London by ZPX’s estimate
  • Bahrain’s easy access to the growing $1.5 trillion Gulf market

Regulatory trailblazer

The Kingdom’s recently-launched cryptocurrency regulation includes rigorous customer background checks, governance standards and controls on cybersecurity risks. In the largely uncharted waters of cryptocurrency regulation, Bahrain is a trailblazer. The island nation has developed a reputation as the region’s testbed for innovative regulation, due to its bold and agile approach. This will serve Bahrain and its investors well, as they navigate, map out, and capitalise on a rapidly evolving industry.

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