CRA-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
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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
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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
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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
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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
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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
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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
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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 2023
