The Central Bank of Bahrain (CBB) said new rules that force crowdfunding platform operators to ensure their products are suitable for customers will replace existing rules first published in 2017.
Segregate client funds from platform operators
For the first time since 2017, the Central Bank of Bahrain has issued new guidelines for operators of crowdfunding platforms, according to a statement from the Central Bank of Bahrain (CBB). The new regulations cover the principles governing the operation of crowdfunding platforms, as well as the rules applicable to crowdfunding platform offerings and disclosures.
Covered in the Crowdfunding Platform Operators Module (CFP Module), the new regulations also address “segregation of client funds from platform operators and other measures to ensure the safe operation of campaigns”.In addition, the new regulations force platform operators to “ensure that [the] Suitability of products offered to retail customers.
In remarks following the announcement, Shireen Al Sayed, head of the regulatory policy department at CBB, welcomed the central bank’s move to improve the provision of financial services. Al Said added:
Due to the increased demand to introduce new financing products to serve SMEs and start-ups, the CBB has been keen to review crowdfunding platform operator regulations to align with the financial sector’s economic recovery plan in terms of providing an enabling environment for crowdfunding platform operators.
According to Al Sayed, the new regulations are easy to understand and provide minimal safeguards to ensure crowdfunding platforms do not pose a risk to the financial sector.
Crowdfunding as an Alternative Funding Route
Another CBB executive, head of fintech and innovation, Yasmeen Al-Sharaf, said crowdfunding provides another source of funding for startups.
Al-Sharaf added: “Fintech solutions have the potential to help these start-ups grow their businesses through this new source of funding, increasing the flow of economic capital commensurate with the entrepreneurs’ growth and expansion plans.”
The CBB concluded its statement by asserting that crowdfunding is an innovative method now used by SMEs, seed capital and startups looking to secure funding.
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