CRA-15 CRA-15 Digital Tokens
CRA-15.1 CRA-15.1 Digital Token Offerings
CRA-15.1.1
A company must not make an offer or issue a
digital token whose issuance is regulated by the CBB unless it has obtained a written approval from the CBB. Prior to offering a digital token, the digital token issuer must meet the eligibility criteria and requirements set out in this Module.Added: April 2023Digital Tokens
CRA-15.1.2
All offers of
digital tokens which exhibit the characteristics of asecurity are regulated by the CBB.Added: April 2023CRA-15.1.3
While determining whether a
digital token qualifies as asecurity , the CBB will examine the underlying economic purpose of thedigital token , its structure and characteristics, including the rights attached to thedigital token . For the avoidance of doubt, adigital token may be considered:(a) Equivalent of an equity security: where it confers or represents ownership interest in the issuer or gives entitlement to share in the issuer's profit; or(b) Equivalent of a bond or debt security: where it constitutes or evidences the indebtedness of the issuer of thedigital token in respect of any money that is lent to the issuer by thedigital token holder, its maturity is fixed, is redeemable at maturity and gives entitlement to share in interest distributed by thedigital token issuer .Added: April 2023CRA-15.1.4
In order to determine whether a
digital token is considered asecurity , the CBB shall, amongst other things, take into consideration the following:(a) Does it give thedigital token holder an entitlement against thedigital token issuer ? If so, is the entitlement in kind or a monetary entitlement? If it is monetary entitlement, is it profit sharing, a predetermined entitlement, or an undetermined other kind of entitlement?(b) Does thedigital token represent a monetary claim on thedigital token issuer ?(c) Is thedigital token transferable?(d) Does it confer decision power on the project of thedigital token issuer ?Added: April 2023CRA-15.1.5
The guidance provided are indicative and not exhaustive and, the CBB may take into consideration additional factors while assessing an application for issuance of a
digital token . Adigital token shall be considered asecurity if it is either autility token or anasset token and exhibits the following characteristic:(a) Utility tokens: Autility token shall be considered a security if it has an investment purpose at the point of issue or it has the potential to become investment objects. To this end,utility tokens which are transferable shall be considered as securities.
Autility token shall not be treated as asecurity if its sole purpose is to confer digital access rights to an application or a service, and if theutility token can actually be used in this way at the point of issue. In such cases, the underlying function is to grant access rights and the connection and resemblance to an equity security or debt security is absent.(b) Asset tokens: Anasset token shall be treated as asecurity where it:(i) gives rights to financial entitlement and exhibits features of either bonds or equity securities: the former if the entitlement is a predetermined cash flow; and the latter if the entitlement is a share in profit;(ii) gives right to an entitlement in kind, and the token holder holds decision making powers in the project.Added: April 2023Initial Assessment
CRA-15.1.6
Potential
digital token issuers seeking to undertake adigital token offer are encouraged to initiate preliminary discussion with the CBB to determine whether the digital token is regulated by the CBB. As part of the initial assessment, potentialdigital token issuers should provide necessary details, including details about the issuer and description of the project, to the CBB to determine suitability of thedigital token for issuance.Added: April 2023CBB’s Right of Refusal or Restrictions on Digital Token Offering
CRA-15.1.7
The CBB may reject an application for offering of
digital tokens if it is found that the issuance thereof might cause damage or be contrary to the interests of the holders of thedigital tokens or the market in general.Added: April 2023CRA-15.1.8
Where the CBB grants its approval in relation to an offering, it may impose additional conditions, as it deems necessary.
Added: April 2023General Requirements
CRA-15.1.9
The
digital token issuer must meet the following requirements for adigital token offering:(a) Thedigital token issuer must be a legal person duly incorporated under the laws of the Kingdom of Bahrain or a jurisdiction acceptable to the CBB and which is not publicly listed on a stock exchange;(b) Thedigital token issuer must ensure no conflict of interest arises during the issuance ofdigital tokens ;(c) Thedigital token issuer must protect and act in the best interests ofdigital token holders as well as provide equal treatment to alldigital token holders;(d) Thedigital token issuer must adhere to the offering and issuing timetable contained in thewhitepaper , or as amended, subject to the CBB’s written approval;(e) The maturity period of adigital token exhibiting characteristics of a debt security must not exceed 5 years;(f) For any single offering ofdigital token , thedigital tokens must have identical terms and conditions of issuance, including having the same price; and(g) The offer period for adigital token offering must not be less than 10 calendar days after the day of commencement of the offer and must not exceed a maximum period of three (3) months.Added: April 2023CRA-15.1.10
The digital token issuer and the
digital token advisor must fulfil all obligations in their respective capacities in accordance with the signed written agreements concluded between them in respect of thedigital token issue.Added: April 2023Moratorium on Equity Interest
CRA-15.1.11
Founders and senior management of thedigital token issuer must, in aggregate, own at least 50% equity holding in thedigital token issuer , on the date of the issuance of thedigital tokens .Added: April 2023CRA-15.1.12
Post issuance of the
digital tokens , thefounders and senior management of thedigital token issuer are not entitled to sell or transfer their shareholding for a period of 1 year, starting from the date of the issuance of the digital tokensAdded: April 2023Cooling-off Period
CRA-15.1.13
A cooling-off right must be given to an investor who is investing in a
digital token offering, except for where such investor is a shareholder, board member or an employee of thedigital token issuer . The cooling-off period must be not less than two (2) business days commencing from the date of close of the issue. No fee or penalty must be charged to the investor who exercises the right to a refund during the cooling-off period.Added: April 2023CRA-15.1.14
Investors exercising their cooling-off rights must be refunded within five (5) business days. The refund amount must be the sum of:
(a) The purchase price paid for thedigital token ; and(b) Any other charges imposed at the time of purchase of thedigital token .Added: April 2023Soft Cap (Minimum Subscription)
CRA-15.1.15
The
soft cap must not be set lower than 80% of the digital token offer size.Digital token issuers may set a highersoft cap .Added: April 2023CRA-15.1.16
Where a
digital token offer fails to reach thesoft cap as set in thewhitepaper , thedigital token advisor must within five (5) business days from the closure of thedigital token offering:(a) Send each investor a notification about the failure to reach thesoft cap and refund the subscription amount and other charges that the investor paid for thedigital token offer; and(b) Report the failure to reach thesoft cap , the refund made and cancellation of thedigital token offer to the CBB.Added: April 2023Oversubscription
CRA-15.1.17
If a
digital token offering is over-subscribed after the closing of the offering period, thedigital token advisor must make allotment in accordance with the pre-determined basis which must be described in thewhitepaper . Thedigital token advisor must not make allotment in excess of the limit stated in thewhitepaper and any excess subscription amounts received from investors must be refunded to investors within 3 business days from the date of allotment.Added: April 2023Release of Funds
CRA-15.1.18
The
digital token issuer and thedigital token advisor must enter into an agreement with provisions, among other matters, on the schedule of release of proceeds (if stated in thewhitepaper ), the progress report that will be required before each release of proceeds, and that thedigital token advisor will return the said proceeds to the investors in case thesoft cap of thedigital token offer is not reached or in a pro-rata basis in case the project is not completed by thedigital token issuer .Added: April 2023CRA-15.1.19
The banking arrangement for the purpose of managing subscription money between the
digital token issuer and thedigital token advisor must be dissolved upon completion of fund transfer process, unless thedigital token offering failed to meet thesoft cap target or the project is not completed by thedigital token issuer with notification to the CBB.Added: April 2023CRA-15.1.20
If the
digital token issuer is not able to complete the project, the appointeddigital token advisor must:(a) Immediately notify the CBB regarding the non-completion of the project by thedigital token issuer and the reason behind the project not being completed; and(b) Within 5 business days from the date of notifying the CBB, individually notify each investor about the non-completion of the project and refund the remaining proceeds under its care on a pro-rata basis to the investors based on the amount of their investment.Added: April 2023Allotment
CRA-15.1.21
Digital tokens must be allotted to subscribing investors within 6 calendar days of the closing date of the digital token offer in accordance with the allotment basis stipulated in thewhitepaper . The subscription results must be announced on thedigital token advisor’s platform.Added: April 2023Approval Requirements
CRA-15.1.22
A
digital token issuer must submit the application along with the draftwhitepaper and other documents as specified in Paragraph CRA-15.1.28, through itsdigital token advisor , in a form and manner as specified by the CBB, including the liabilities of its signatories and a fit and proper declaration of its board members and senior management.Added: April 2023CRA-15.1.23
The
digital token issuer must demonstrate to the CBB that the gross proceeds to be raised from thedigital token offering would be sufficient to undertake the project or business as proposed in thewhitepaper .Added: April 2023CRA-15.1.24
The CBB will make a decision on the application within 30 working days of receipt of all required information and documents complete in all respect.
Added: April 2023CRA-15.1.25
The CBB’s approval for an offer of
digital tokens does not mean that it has approved the appropriateness of thedigital token issuer’s project or authenticated the financial and technical information presented in thewhitepaper .Added: April 2023Suspension or Withdrawal of the Approval
CRA-15.1.26
Notwithstanding the approval granted by the CBB to the
digital token issuer , the CBB may, at any time during the offer period, or before the funds raised is released to thedigital token issuer , do any or all of the following:(a) Revoke the CBB’s approval;(b) Issue a direction to suspend thedigital token offering; or(c) Issue a direction to defer the implementation of thedigital token offering.Added: April 2023CRA-15.1.27
The CBB may exercise its powers under Paragraph CRA-15.1.26 if the CBB becomes aware of any of the following:
(a) Thedigital token issuer has breached the CBB Law, its regulations, resolutions or directives (including any requirement of this Module or any other applicable Modules of the CBB Rulebook);(b) Thedigital token issuer has failed to comply with any terms or conditions imposed by the CBB and/or thedigital token advisor ;(c) The application, including thewhitepaper , contains any statement or information that is false or misleading or from which there is a material omission; or(d) There is a concern with regards to thedigital token issuer’s corporate governance record or with the integrity of any of thedigital token issuer’s directors and senior management.Added: April 2023Documentation Requirements
CRA-15.1.28
A
digital token issuer , through its appointeddigital token advisor , must provide the CBB the following documents:(a) A draftwhitepaper prepared in accordance with the requirements of this Module;(b) An up-to-date copy of the memorandum and articles of association;(c) A copy of thedigital token issuer’s Board of Directors’ resolution approving the issuance ofdigital tokens ;(d) Copies of audited financial statements. A company that has been established for less than one year must submit projected financial statements whereas a company that has been established for a longer period (more than 1 year) must provide the financial statements for the past financial years going up to a maximum of preceding 3 financial years;(e) Documents proving the establishment of an arrangement that ensures the monitoring and safeguarding of the funds to be collected through thedigital token offering in accordance with Paragraph CRA-15.2.10;(f) A copy of the agreement entered into with the appointed licensed retail bank for deposit of funds to be raised through the digital token offer;(h) All proposed marketing material related to thedigital token offering;(i) A declaration by thedigital token advisor confirming its responsibility for carrying out due diligence on thedigital token issuer and assessing accuracy of the information contained in thewhitepaper and other documents submitted as part of the application (Appendix CRA-2);(j) A declaration by the Board of Directors regarding the reliability and accuracy of the information provided to the CBB as part of thedigital token offering requirements (Appendix CRA-3);(k) A copy of the duly signed declaration by the legal advisor for thedigital token offer, based on a due diligence exercise of all applicable laws, facts and arrangements, including enforceability of the rights relating to thedigital tokens , as appropriate (Appendix CRA-4); and(l) Any other information as required by the CBB.Added: April 2023Registration of Whitepaper
CRA-15.1.29
The final corrected copies of the whitepaper and other documents must be registered with the CBB no later than 2 business days prior to the date of commencement of the offering period.
Added: April 2023Contents of the Whitepaper
CRA-15.1.30
The
whitepaper must contain, in both the Arabic and English language, all the information concerning thedigital token issuer and the proposeddigital token offering that would enable investors to make an informed investment decision and understand the risks relating to the offering. The information in thewhitepaper must, at a minimum, include the following:(a) A detailed description of thedigital token issuer's project, the reasons for the offering and the planned use of the funds raised;(b) Detailed information about the directors, senior management, key personnel and advisers involved in the project’s design and development including the name, designation, nationality, address, professional qualifications and related experience;(c) The business plan of thedigital token issuer ;(d) The key characteristics of thedigital token including the rights, conditions, function and obligations attached to thedigital tokens including any specific rights attributed to a token holder and the procedures and conditions of exercise of these rights;(e) A summary of the legal opinion regarding the priority of the claims ofdigital token holders in the event of insolvency or liquidation of the digital token issuer;(f) A detailed description of thedigital token offering, including but not limited to:(g) The number ofdigital tokens to be issued;(h) Thedigital token issue price;(i) The subscription terms and conditions;(j) The minimum amount necessary to carry out the project and the maximum amount of the offering; and(k) The subsequent use and application of the proceeds thereafter illustrated in a scheduled timeline for drawdown and utilisation of proceeds (“schedule of proceeds”);(l) The technical specifications of thedigital token ;(m) The risks relating to thedigital token issuer , thedigital tokens , thedigital token offering and the carrying out of the project, as well as mitigating measures thereof;(n) A detailed description on the determination of the accounting and the valuation treatments for the digital tokens including all valuation methodology and reasonable presumptions adopted in such calculation;(o) The allotment policy for the digital tokens;(p) A detailed technical description of the protocol, platform and/or application of the digital token, as the case may be, and the associated benefits of the technology;(e) Detailed description of the sustainability and scalability of the underlying business or project;(f) Detailed description of the financial, technical, legal and commercial due diligence and market feasibility undertaken on the project;(g) Financial statements of thedigital token issuer in accordance with CRA15.1.28(d); and(h) The offering timetable.Added: April 2023CRA-15.1.31
The
whitepaper must not include presentation of estimates, projections, forecasts, or forward-looking statements, or overviews, without sufficient qualification, or without sufficient factual basis and reasonable assumptions.Added: April 2023CRA-15.1.32
The information provided in the
whitepaper must be fair, clear, accurate, complete in all respects and not misleading, and must be presented in a concise and comprehensible manner. It must not include any promotional statements to excite rather than to inform.Added: April 2023CRA-15.1.33
The whitepaper must be prepared in accordance with the template provided in Appendix CRA-1.
Added: April 2023CRA-15.1.34
The CBB, prior to approving an application for offering of
digital tokens , shall assess whether the information provided in thewhitepaper is complete and comprehensible. Thewhitepaper should be drawn up by thedigital token issuer under the guidance of thedigital token advisor prior to being submitted to the CBB.Added: April 2023CRA-15.1.35
Along with the
whitepaper , a summary of thewhitepaper must be made available to investors both in the Arabic and English language.Added: April 2023CRA-15.1.36
The
digital token issuer must describe in thewhitepaper the procedures for collection and management of the funds raised through thedigital token offering. Thedigital token issuer must ensure the consistency of these procedures relative to the duration of the offering and the planned use of the funds collected.Added: April 2023CRA-15.1.37
The mechanism for collection of funds must offer sufficient guarantees ensuring its reliability and efficiency. It must have at least the following characteristics:
(a) It must ensure the security of the funds collected;(b) It must ensure that the funds collected are deposited in a CBB licensed retail bank account in Bahrain dedicated specifically to thedigital token offering;(c) It must ensure that the funds collected cannot be transferred to thedigital token issuer unless thesoft cap threshold is reached; and(d) It must ensure that the funds collected can be transferred to thedigital token issuer or used by thedigital token issuer only if the drawdown conditions provided for by thedigital token issuer in thewhitepaper are met.Added: April 2023Responsibility for Reliability and Accuracy of the Whitepaper
CRA-15.1.38
The
whitepaper and the supplementarywhitepaper must include a duly signed Board of Directors responsibility statement. The signature on thewhitepaper and the supplementarywhitepaper by the Board of Directors must be preceded by a declaration specifying that, to their knowledge, the information presented in thewhitepaper corresponds to the facts, there is no omission liable to make it misleading and that they accept full responsibility for the information contained in the whitepaper.Added: April 2023Validity of the Whitepaper Approval by the CBB
CRA-15.1.39
The
whitepaper remains valid for a maximum period of six months from the date of notification of the CBB’s approval. After this period, no person shall offerdigital tokens based on such whitepaper, unless approved by the CBB.Added: April 2023Supplementary Whitepaper
CRA-15.1.40
Where a
digital token issuer ordigital token advisor becomes aware of new facts which have a significant influence on the investment decision, after thewhitepaper has been approved by the CBB, but before the closing of the offer period, thedigital token issuer must immediately notify the CBB and furnish a supplementarywhitepaper to the CBB. At a minimum, a supplementarywhitepaper must be filed with the CBB, upon occurrence of the following:(a) A matter has arisen, and information in respect of that matter would have required by these Rules to be disclosed in thewhitepaper if the matter had arisen at the time thewhitepaper was prepared;(b) There has been a material change affecting a matter disclosed in thewhitepaper ;(c) Thewhitepaper contains a statement or information that is false or misleading;(d) Thewhitepaper contains a statement or information from which there is a material omission; or(e) Where the assumptions based upon which the project or business proposition, the due diligence, or market feasibility were made are no longer valid or reliable.Added: April 2023CRA-15.1.41
Where a
digital token issuer files a supplementarywhitepaper with the CBB, it must immediately inform investors about the filing of a supplementarywhitepaper by announcing it on the digital token advisor’s platform, as well as on its own website.Added: April 2023CRA-15.1.42
The changes made in the amended
whitepaper shall not extend the six-month time limit referred to in Paragraph CRA-15.1.39, unless approved by the CBB.Added: April 2023CRA-15.1.43
A supplementary
whitepaper must conform to the following requirements:(a) The order of the information appearing in the supplementarywhitepaper must be consistent with that of the originalwhitepaper ;(b) Clear identification of the items/paragraphs it supplements or replaces;(c) A statement that it is to be read in conjunction with the originalwhitepaper ; and(d) A responsibility statement from the Board of Directors of thedigital token issuer .Added: April 2023CRA-15.1.44
The CBB shall make its decision with respect to the supplementary
whitepaper , subject to any required changes, within 15 working days from receipt of all necessary documents and information complete in all aspects.Added: April 2023CRA-15.1.45
The supplementary
whitepaper must be published and disseminated in manner as the originalwhitepaper . The document must contain the word “Supplementary Whitepaper” on the first page and describe the changes in relation to the originalwhitepaper .Added: April 2023CRA-15.1.46
An investor may withdraw subscription following publication of supplementary
whitepaper . The withdrawals period of the subscription must be no less than six (6) business days from the date of publication of the supplementarywhitepaper and the refund amount comprising the purchase price paid and any other charges imposed at the time of purchase of the digital token must be made within 5 business days from the date of refund request. No fee must be charged to the investor for the refund.Added: April 2023Dissemination of whitepaper
CRA-15.1.47
Upon approval by the CBB, the
whitepaper must be made available to the investors at least 5 calendar days prior to the commencement ofdigital token offering.Added: April 2023CRA-15.1.48
The
whitepaper must be effectively disseminated by posting it in an easily identifiable and accessible manner on the platform of thedigital token advisor , as well as on the website of thedigital token issuer in a downloadable format.Added: April 2023CRA-15.1.49
The
whitepaper or the supplementarywhitepaper , as disseminated and made available to the public by thedigital token advisor , must be identical to the version approved by the CBB and must not undergo changes by thedigital token issuer or thedigital token advisor subsequent to the CBB’s approval.Added: April 2023Marketing and Promotion
CRA-15.1.50
The marketing material for the
digital token offering must be disseminated only after obtaining the CBB’s approval.Added: April 2023CRA-15.1.51
A
digital token issuer must not engage any third-party individual(s) or entity, other than thedigital token advisor , to endorse or represent thedigital token issuer with the intended purpose of marketing, promoting, gaining publicity or soliciting funds for itsdigital token offering.Added: April 2023CRA-15.1.52
The draft marketing material must be submitted to the CBB for approval and must:
(a) Indicate where the investor can obtain thewhitepaper approved by the CBB by specifying the name of the website(s)/platform on which it is posted;(b) State that investors should read the information contained in the whitepaper prior to making investment decisions;(c) Be clearly identifiable as marketing material;(d) Be fair, clear and not misleading;(e) Disclose the risks related to thedigital token offering; and(f) Contain information that is consistent and does not contradict with the information provided in thewhitepaper .Added: April 2023CRA-15.1.53
If, after the approval of the
whitepaper by the CBB, thedigital token issuer envisages to release marketing material whose content is substantially different from the marketing material submitted to the CBB prior to such approval, it must submit to the CBB the draft modified marketing material for approval.Added: April 2023CRA-15.1.54
Where a supplementary
whitepaper is approved by the CBB, a modified version of the marketing material must be disseminated after seeking the prior approval of the CBB, in instances where the original marketing material is not in line with the changes made by the supplementarywhitepaper .Added: April 2023Fees for Offering of Digital Tokens
CRA-15.1.55
Offering of
digital tokens is subject to fees levied by the CBB, pursuant to Article 180 of the CBB Law and Resolution No. (1) of 2007 with respect to determining fees categories due for licenses and services provided by the CBB. The following table outlines the non-refundable fees payable to the CBB, at the time of submission of an application for adigital token offering:Amount in BD
No. Type of Approval % of Offer Value Min Amount Max Amount 1. Approval of the Whitepaper 0.025% 500 1250 3. Supplementary Whitepaper Fixed 100 100 Added: April 2023CRA-15.1.56
An application for approval of a
digital token offering and review of the documents related to thedigital token offering will not be regarded as complete or submitted until the fee has been paid in full.Added: April 2023CRA-15.2 CRA-15.2 Digital Token Issuers Obligations
General Obligations
CRA-15.2.1
Digital token issuers must meet the following requirements:(a) Appoint adigital token advisor to fulfil the obligations stipulated in this Module;(b) Appoint a legal advisor for carrying out legal due diligence;(c) Ensure that a robust corporate governance structure, which at a minimum includes necessary and appropriate policies, practices and internal controls, is in place to safeguard against unethical conduct, mismanagement and fraudulent activities;(d) Put in place necessary systems and controls for mitigating the risks of money laundering and financing of terrorism. For this purpose, thedigital token issuer must set up suitable organisational structures, internal procedures and a supervision system to address these risks and ensure compliance with its obligations relating to anti-money laundering and terror financing;(e) Provide to the CBB any information or assistance as the CBB deems necessary relating to thedigital tokens ;(f) Retain all relevant documents and agreements related to thedigital token offering for a period of five (5) years; and(g) Be liable towards itsdigital token holders for any damages incurred by them resulting from its wilful misconduct or negligence, including the failure to perform in whole or in part its obligations.Added: April 2023Governance Requirements
CRA-15.2.2
A
digital token issuer must be headed by an effective Board. The size and composition of the Board should be commensurate with the size, nature and complexity of its business.Added: April 2023CRA-15.2.3
The Board is responsible for ensuring that the
digital token issuer complies with the relevant provisions of the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook).Added: April 2023CRA-15.2.4
The Board has, both collectively and on an individual basis, an obligation to acquire and maintain sufficient knowledge and understanding of the
digital token issuer’s business to enable them to discharge their duties.Added: April 2023CRA-15.2.5
The Board must:
(a) Act honestly and in good faith in the best interests of thedigital token issuer and token holders;(b) Exercise reasonable care, skill and diligence;(c) Exercise the powers it has diligently and in line with applicable laws and not misuse such powers;(d) Exercise its powers independently and without subordinating such powers to the will of others;(e) Monitor, on an ongoing basis, the execution of the functions delegated to thedigital token issuer’s employees and be satisfied that they are performing their functions in accordance with their obligations;(f) Identify and manage the risks relating to thedigital token issuer and its activities;(g) Monitor, on an ongoing basis, compliance with the relevant requirements of CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook);(h) Avoid conflicts of interest in so far as it is possible and, where it is not, ensure – inter alia by way of disclosure and internal conflicts of interest management procedures – that investors are treated fairly;(i) Be responsible for thedigital token issuer’s compliance with the AML/CFT requirements; and(j) Adopt a management structure commensurate with thedigital token issuer’s size, complexity, structure and risk profile.Added: April 2023CRA-15.2.6
A
digital token issuer must ensure that its appointed senior management employees:(a) Possess sufficient knowledge and expertise in the field of information technology, blockchain technology, digital tokens and their underlying technologies; and(b) Maintain sufficient knowledge and understanding of thedigital token issuer’s business to enable them to discharge their function in a diligent manner.Added: April 2023CRA-15.2.7
Where a member of senior management leaves the organisation or is removed or replaced, such a change must be immediately disclosed to the
digital token advisor and the digital token holders.Added: April 2023CRA-15.2.8
A
digital token issuer must ensure that its Board and senior management are fit and proper, taking into account the following:(a) They are suitably qualified to assume the position including having the relevant experience and track record in managing the business and affairs of thedigital token issuer ;(b) They have not been disqualified to be a director by a court, regulator or any other competent authority;(c) There is no pending criminal charge against the person in any court of law, whether within or outside Bahrain, for an offence involving fraud, integrity, dishonesty or mismanagement of an entity;(d) They have not had any civil enforcement action initiated against them by any court of law or other competent authority, whether within or outside Bahrain;(e) They have not:(i) Been convicted, whether within or outside Bahrain, of an offence involving fraud, integrity, dishonesty other criminal conduct;(ii) Been convicted of an offence under the securities laws or any other laws within or outside Bahrain relating to the capital market;(iii) Contravened any provision of any law relating to a financial sector or companies in general, whether within or outside Bahrain involving dishonesty, incompetence, negligence, misconduct or malpractice;(iv) Engaged in any business practices appearing to the CBB to be deceitful, oppressive or otherwise improper, whether unlawful or not, or which otherwise reflect discredit in the method of conducting business;(v) Engaged in or has been associated with any other business practices or otherwise conducted himself in such a way as to cast doubt on his competence and soundness of judgement; or(vi) Engaged in or has been associated with any conduct that cast doubt on his/her ability to act in the best interest of investors, having regard to the reputation, character, financial integrity and reliability.Added: April 2023CRA-15.2.9
The
digital token issuer , must submit a fit and proper declaration of its Board and senior management to:(a) The CBB at the time of submitting the application for offering ofdigital tokens ; and(b) Thedigital token advisor for any subsequent appointment to its board or senior management.Added: April 2023Digital Token Advisor Requirements
CRA-15.2.10
Prior to appointing a
digital token advisor , thedigital token issuer should review the ability of thedigital token advisor to provide the service. While determining the suitability of adigital token advisor , thedigital token issuer should consider the following:(a) Historical record and prior performance;(b) Availability of adequate systems, controls and resources to discharge its obligations in accordance with the CBB’s requirement; and(c) Suitably experienced and qualified employees having adequate knowledge and professional expertise to discharge its obligations.Added: April 2023CRA-15.2.11
A
digital token issuer must enter into a formal agreement with thedigital token advisor by way of a signed letter of engagement defining clearly the extent of responsibilities and the terms of the agreement. The scope of the agreement must cover the obligations of thedigital token advisor under the CBB rules in this regard.Added: April 2023Repurchase of Digital Tokens
CRA-15.2.12
If a
digital token issuer has disclosed adigital token repurchase mechanism in thewhitepaper , it may, after itsdigital tokens have been traded for a full year, carry out a repurchase (buyback) of itsdigital tokens , provided that it completes the execution of the buyback within 2 months from the day of making the public disclosure about the repurchase (buyback).Added: April 2023CRA-15.2.13
A
digital token issuer must immediately cancel thedigital tokens that it acquires under thedigital token repurchase plan.Added: April 2023Periodic Reporting Requirements
CRA-15.2.14
Within 45 days after the end of each of the first 3 quarters, a
digital token issuer must prepare a report in accordance with CRA-15.2.17 and publish it on thedigital token advisor’s platform.Added: April 2023CRA-15.2.15
A
digital token issuer must prepare and publish a report, in accordance with CRA-15.2.16, on annual basis. The report must be published on thedigital token advisor’s platform within 60 days from the end of the financial year.Added: April 2023CRA-15.2.16
The
digital token issuer’s reports must contain information on the performance of the underlying business or project, including–(a) Total amount ofdigital tokens issued and in circulation;(b) Status of the utilisation of thedigital token’s proceeds by thedigital token issuer ;(c) Status of the underlying business or project and any deviation from the whitepaper;(d) Types of problems encountered, and the procedures applied or that will be applied to manage and resolve such problems;(e) Risks facing the underlying business or project and measures taken for mitigation; and(f) Unaudited quarterly financial statements reviewed by the external auditor for quarterly reporting and audited annual financial statements for annual reporting.Added: April 2023CRA-15.2.17
The financial statements must comply with International Financial Reporting Standards (IFRS). For Islamic institutions, audited financial statements must comply with AAOIFI standards or where AAOIFI standards do not cover a subject, IFRS must be followed.
Added: April 2023CRA-15.2.18
A copy of the quarterly report and annual report referred to in Paragraphs CRA-15.2.15 and CRA-15.2.16 must be filed with the CBB no later than the date of its publication.
Added: April 2023Disclosure of Material Information
CRA-15.2.19
A
digital token issuer must immediately disclose information regarding any material matter/event on the appointeddigital token advisor’s platform. Information would be regarded as material if its omission or misstatement could change or influence the assessment or decision of an investor relying on that information for the purpose of making economic decisions.Added: April 2023CRA-15.2.20
For the purposes of CRA-15.2.19, the following are examples of events that are to be considered material:
(a) Loss of creditworthiness;(b) Searches and seizures by law enforcement authorities, any litigious or non-litigious matter, administrative disposition, administrative litigation, precautionary injunctive procedure, or compulsory execution, with a material effect on the finances or business or project of thedigital token issuer ;(c) Major decrease in operations or a full or partial work stoppage;(d) A pledge/lien on all or a major portion of its assets;(e) Amendment, termination, or rescission of memorandum and articles of association;(f) A plan for strategic alliance or other business cooperation plan or important contract, or a change in important content of a business plan, or purchase of an enterprise, or acquisition of or assignment to another of patent rights, trademark rights, copyrights, or other intellectual property related transactions, with a material effect on the finances or business or project of thedigital token issuer ;(g) Occurrence of a disaster, protest, strike, environmental pollution event, information security incident, with a material effect on the finances or business of thedigital token issuer ;(h) The resignation, dismissal or appointment of any key Board/management personnel;(i) Material changes to the equity holding held by the board of directors or senior management;(j) Change in the registered office address, legal name, financial year-end, or external auditor;(k) Resolution by the board of directors to repurchase (buyback)digital tokens , expiration of a repurchase (buyback) period, or completion of execution of a repurchase (buyback);(l) Resolution by the board of directors to apply for termination of trading of the issuer'sdigital tokens on the trading platform; and(m) Announcement of suspension or termination of trading of thedigital tokens on thetrading platform .Added: April 2023CRA-15.2.21
To ensure equal access to information, a
digital token issuer must not externally disclose any material information on its own before publishing it on the appointeddigital token advisor’s platform.Added: April 2023CRA-15.2.22
If there is any material change in the development of subsequent events with respect to material information that a
digital token issuer has already published, thedigital token issuer must update or supplement in a timely manner the content of the relevant information in accordance with the procedure under which the information was originally disclosed.Added: April 2023Power of the CBB to issue Direction
CRA-15.2.23
The CBB may at any time issue a direction to the
digital token issuer which must be complied with, if the CBB:(a) is of the view that it is necessary for the:(i) purposes of ensuring fair and orderly market; or(ii) purposes of the protection of the holders ofdigital tokens , or in the public interest; or(b) is of the opinion that the underlying project or business is no longer viable or sustainable.Added: April 2023CRA-15.2.24
A direction issued under Paragraph CRA-5.2.23 may include a direction:
(a) Not to deal or transfer monies or properties to any other person;(b) Not to solicit business from any person;(c) To cease or refrain from committing an act or pursuing a course of conduct or activity;(d) To do any act, in relation to its business, affairs, property, project or digital token as the CBB deems necessary;(e) To give effect to any requirement of the applicable laws, rules and regulations; or(f) Relating to other matter as the CBB considers necessaryAdded: April 2023CRA-15.3 CRA-15.3 Role and Responsibilities of Digital Token Advisor
CRA-15.3.1
This section sets the role and responsibility of a category-3 or category-4
crypto-asset licensee acting as adigital token advisor to adigital token issuer .Added: April 2023CRA-15.3.2
Digital token issuers must appoint either a category-3 or a category-4crypto-asset licensee asdigital token advisor . Thedigital token advisor must ensure that thedigital token issuer satisfies all requirements as prescribed under the CBB Law, its regulations, resolutions and directives (including this Chapter and other applicable rules of the CBB Rulebook).Added: April 2023Independence and Avoidance of Conflict of Interest
CRA-15.3.3
A
digital token advisor must be independent from thedigital token issuer . A confirmation in writing of its independence must be submitted to the CBB. Adigital token advisor will not be considered independent by the CBB if:(a) It has ownership interest in thedigital token issuer or any other company within thedigital token issuer’s group;(b) It has a business relationship with, or financial interest in, thedigital token issuer or any other entity in thedigital token issuer’s group that would give thedigital token advisor , or thedigital token advisor’s group, a material interest in the outcome of the transaction; or(c) A director or employee of the appointeddigital token advisor or another entity in the appointeddigital token advisor’s group, has a material interest in thedigital token issuer or any other entity in thedigital token issuer’s group.Added: April 2023CRA-15.3.4
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digital token advisor’s directors and shareholders must disclose to the investors on its platform if they hold any shares in any of the issuers hosted on its platform.Added: April 2023CRA-15.3.5
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digital token advisor is prohibited from providing direct or indirect financial assistance to investors, to invest indigital tokens .Added: April 2023Obligations of Digital Token Advisor
CRA-15.3.6
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digital token advisor must:(a) Ensure that thedigital token issuer satisfies all the requirements as applicable for offering ofdigital tokens ;(b) Advise and guide thedigital token issuer as to its responsibilities and obligations to ensure compliance with the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook) and all other applicable laws;(c) Exercise its own judgment and carry out assessment on thedigital token issuer’s compliance with the requirements of Chapter CRA-15 including as to whether thedigital token issuer will be able to satisfy the requirement to provide an innovative solution or a meaningful security value proposition;(d) Appoint an eligible CBB licensed retail bank for deposit of all funds raised through the digital token issue;(e) Submit to the CBB all required information and documentation including the documents required for assessment of thedigital token offer , in a timely manner;(f) Carry out due diligence on adigital token issuer including:(i) Understanding and verifying the business and project of thedigital token issuer to ensure that thedigital token issuer does not engage in any business practices appearing to be deceitful, oppressive or improper, whether unlawful or not;(ii) Conduct background checks on the issuer’s board and senior management to ensure “fit and proper” requirements are met by thedigital token issuer ;(iii) Understand the features of thedigital token to be issued by thedigital token issuer and the rights attached to it;(iv) Assess thedigital token issuer’s whitepaper as well as other documents as stated in Chapter CRA-15. In assessing thedigital token issuer’s whitepaper as well as other documents, thedigital token advisor must ensure that the contents of the aforementioned documents include the information required under Chapter CRA-15 and that its contents are fair, accurate, complete, clear, not misleading and there are no material omissions.(g) Disclose to the CBB, without delay, any information or explanations that the CBB may reasonably require for the purpose of verifying any information which should be taken into account in considering an application for registration of awhitepaper ; and(h) Act as liaison between thedigital token issuer and the CBB on all matters arising in connection with the registration of thewhitepaper or the trading of the issuer’sdigital token on thecrypto-asset exchange platform.Added: April 2023CRA-15.3.7
In addition to the obligations set out in Paragraph CRA-15.3.6, a
digital token advisor must:(a) Make thedigital token issuer’s whitepaper accessible to investors through its electronic platform;(b) Must make available through its electronic platform all relevant information relating to adigital token issuer including any material changes that are affecting thedigital token issuer or thedigital token issuer’s project;(c) Take reasonable steps in monitoring the drawdowns bydigital token issuer and that it has been utilised for the purposes stated in thewhitepaper ;(d) Ensure that its electronic platform is operating in an orderly, fair and transparent manner;(e) Have in place rules and procedures for the offering ofdigital tokens on its electronic platform;(f) Ensure that all fees and charges payable are fair, reasonable and transparent;(g) Take all reasonable measures to avoid situations that are likely to involve a conflict of interest with thedigital token issuer and establish and maintain policies and procedures to effectively and efficiently manage actual and potential conflicts of interest, including the management of non-public material information and conflicts with thedigital token issuer ;(h) Ensure that all disclosures are fair, accurate, clear and not misleading; and(i) Provide any information or document to the CBB as it may require.Added: April 2023CRA-15.3.8
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digital token advisor must immediately notify the CBB if any of the following has occurred:(a) Any breach of the provisions of the CBB Law, its regulations, resolutions and directives (including these Rules and other applicable Rules of the CBB Rulebook); and(b) Any material adverse change to thedigital token issuer including, but not limited to, any of the following matters:(i) The discovery of a false or misleading statement in any disclosures in relation to thedigital token offer;(ii) The discovery of any material omission of information that may affect digital token holders; and(iii) There is a material change or development in the circumstances relating to thedigital token offering or thedigital token issuer .Added: April 2023Supplementary Whitepaper
CRA-15.3.9
Where a supplementary
whitepaper has been submitted by adigital token issuer to the CBB, thedigital token advisor must notify the subscribers for thedigital token regarding the filing of the supplementarywhitepaper with the CBB and that the supplementarywhitepaper will be made available on the electronic platform upon approval of the CBB.Added: April 2023CRA-15.3.10
Upon approval of the CBB, the supplementary
whitepaper must be made available on the electronic platform of thedigital token advisor .Added: April 2023CRA-15.3.11
Where a subscriber, pursuant to publication of supplementary whitepaper, wishes to withdraw his/her subscription for the
digital token , the withdrawal period of the subscription and the refund period must be in accordance with Chapter CRA-15.Added: April 2023Register of Initial Digital Token Holders
CRA-15.3.12
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digital token advisor must maintain a register of initialdigital token holders who subscribed for thedigital tokens during the offer period and enter into the register the total amount ofdigital tokens subscribed by each digital token holder.Added: April 2023Record of Digital Token Holders Monies and Digital Tokens
CRA-15.3.13
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digital token advisor must establish systems and controls for maintaining an accurate and up to date record ofdigital token holders and any monies ordigital tokens held in relation to them.Added: April 2023CRA-15.3.14
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digital token advisor must ensure that records pertaining to register of initial digital token holders is maintained in an easily retrieval format for examination by the CBB.Added: April 2023Custody of Digital Tokens
CRA-15.3.15
The
digital token advisor must maintain custody of thedigital tokens issued by thedigital token issuer on its platform. At a minimum, the custodial arrangement must meet the requirements stipulated in Chapter CRA-8 of this Module.Added: April 2023CRA-15.3.16
A
digital token advisor must ensuredigital tokens held under a custody arrangement are properly safeguarded from conversion or inappropriate use by any person, including, but not limited, to implementing multi-signature arrangements.Added: April 2023Investor Money
CRA-15.3.17
Subscription monies received in respect of the
digital token offer must be held in a separate bank account under an escrow arrangement with a licensed retail bank in Kingdom of Bahrain.Added: April 2023CRA-15.3.18
The release of funds to the
digital token issuer must be done in accordance with the provisions stipulated in Chapter CRA-15.Added: April 2023CRA-15.3.19
A
digital token advisor may impose any other additional conditions before releasing the funds, provided that the additional conditions serve the interest of the digital token holders.Added: April 2023Fund Monitoring and Safeguarding Arrangement
CRA-15.3.20
Digital token advisors must have in place a fund monitoring and safeguarding arrangement for the funds raised through thedigital token offering which must include:(a) The subscription money (client money) be received into aclient money account with aretail bank in Bahrain and make clear in the title of the account that the funds in the account belong to one or more clients of thelicensee and not to thelicensee :(i) Held in a segregated client money account;(ii) Held in a fiduciary capacity and must not be commingled with its own funds;(iii) Used only for the purposes for which thelicensee received it from itsclients ;(iv) Not used forlicensee’s own use at any point in time or given as collateral for any purpose to a third party or be subject to any restrictions;(v) Reported separately as on balance sheet item in thelicensee’s financial statements specifying also the nature and purpose for which such funds are held by the bank on behalf of its customers; and(b) Procedures for collection and management of the funds including procedures for the utilisation, refund and release of funds.Added: April 2023CRA-15.4 CRA-15.4 Trading and Settlement of Digital Tokens
CRA-15.4.1
Trading of
digital tokens can be conducted either by:(a) Operating an automated order matching system (exchange type order matching engine) by a category-4crypto-asset exchange licensee, wherein buyer and seller orders are automatically matched by the matching engine and thecrypto-asset exchange does not buy or selldigital tokens over-the-counter (acting as a dealer); or(b) Over-the-counter trading, wherein a category-3 or a category-4 crypto-asset licensee acts as a dealer and provides price quotes, on its trading platform, with its clients for thedigital tokens issued and listed on its platform.Added: April 2023CRA-15.4.2
A
digital token must not be simultaneously listed on the same platform for both types of trading i.e. order matching type market (buyer and seller orders are matched automatically by a matching engine) and over-the-counter trading market.Added: April 2023Over-the-counter Trading
CRA-15.4.3
Category-3 and category-4
crypto-asset licensees must establish written rules for over-the-counter trading ofdigital tokens and publish them on its trading platform.Added: April 2023CRA-15.4.4
The over-the-counter trading rules referred to in Paragraph CRA-15.4.3 must include the trading platform's business days and trading hours, price quote method, trade execution principles, price stabilization mechanism, trading procedures, method for the advance collection of purchase prices and
digital tokens to be sold, upper and lower price limit for trading, conditions under which trading halt (circuit breaker) shall be imposed, and the handling of settlement and default.Added: April 2023CRA-15.4.5
Category-3 and category-4
crypto-asset licensees engaging in over-the-counter trading ofdigital tokens with clients on its trading platform must collect in advance from a client the full amount of the purchase price or thedigital tokens to be sold.Added: April 2023CRA-15.4.6
Category-3 and category-4
crypto-asset licensees undertaking over-the-counter trading ofdigital tokens must open a dedicated account at a licensed bank in Kingdom of Bahrain for the collection and payment of funds.Added: April 2023CRA-15.4.7
Category-3 and category-4
crypto-asset licensees engaging in over-the-counter trading ofdigital tokens must provide two-way, buy and sell, quotes.Added: April 2023CRA-15.4.8
Category-3, and category-4
crypto-asset licensees , undertaking over-the-counter trading ofdigital tokens , must provide reasonable price quotes based on its professional judgment and must efficiently adjust demand and supply in the market depending on the market situation and must not give a quote that deviates from a reasonable price, thereby impairing the formation of fair prices.Added: April 2023CRA-15.4.9
Where a category-3, category-4
crypto-asset licensee engages in over-the-counter trading ofdigital tokens with its clients on its trading platform, the aggregate trading volume of the purchases and sales of any singledigital token on any single business day must not exceed 50 percent of the issued quantity of thatdigital token .Added: April 2023CRA-15.4.10
Category-3 and category-4
crypto-asset licensees undertaking over-the-counter trading of adigital token with its clients on its trading platform, must disclose on the trading platform relevant information to take informed trading decision including price, quantities and other trade information.Added: April 2023CRA-15.4.11
The trade information referred to in Paragraph CRA-15.4.10 must, at a minimum, include the price and quantity of the most recent trade, the cumulative trading volume, and highest, lowest, and weighted average trading price, of the
digital token during the trading hours.Added: April 2023CRA-15.4.12
After the close of daily trading hours, category 3 and category-4
crypto-asset licensees must prepare and disclose the trading volume and weighted average trading price of eachdigital token on that day.Added: April 2023CRA-15.4.13
The CBB may, at any time, by notice in writing to a category-3, category-4, vary any condition or restriction or impose such further condition or restriction as it may deem fit including but not limited to suspension of trading or termination of trading of a
digital token .Added: April 2023CRA-15.4.14
Category-3 and category-4
crypto-asset licensee undertaking over-the-counter trading must adhere to conduct of business obligations as stipulated in Section CRA-12 of this Module.Added: April 2023