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  • CRA-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 a digital token advisor to a digital token issuer.

      Added: April 2023

    • CRA-15.3.2

      Digital token issuers must appoint either a category-3 or a category-4 crypto-asset licensee as digital token advisor. The digital token advisor must ensure that the digital 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 2023

    • Independence and Avoidance of Conflict of Interest

      • CRA-15.3.3

        A digital token advisor must be independent from the digital token issuer. A confirmation in writing of its independence must be submitted to the CBB. A digital token advisor will not be considered independent by the CBB if:

        (a) It has ownership interest in the digital token issuer or any other company within the digital token issuer’s group;
        (b) It has a business relationship with, or financial interest in, the digital token issuer or any other entity in the digital token issuer’s group that would give the digital token advisor, or the digital token advisor’s group, a material interest in the outcome of the transaction; or
        (c) A director or employee of the appointed digital token advisor or another entity in the appointed digital token advisor’s group, has a material interest in the digital token issuer or any other entity in the digital token issuer’s group.
        Added: April 2023

      • CRA-15.3.4

        A 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 2023

      • CRA-15.3.5

        A digital token advisor is prohibited from providing direct or indirect financial assistance to investors, to invest in digital tokens.

        Added: April 2023

    • Obligations of Digital Token Advisor

      • CRA-15.3.6

        A digital token advisor must:

        (a) Ensure that the digital token issuer satisfies all the requirements as applicable for offering of digital tokens;
        (b) Advise and guide the digital 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 the digital token issuer’s compliance with the requirements of Chapter CRA-15 including as to whether the digital 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 the digital token offer, in a timely manner;
        (f) Carry out due diligence on a digital token issuer including:
        (i) Understanding and verifying the business and project of the digital token issuer to ensure that the digital 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 the digital token issuer;
        (iii) Understand the features of the digital token to be issued by the digital token issuer and the rights attached to it;
        (iv) Assess the digital token issuer’s whitepaper as well as other documents as stated in Chapter CRA-15. In assessing the digital token issuer’s whitepaper as well as other documents, the digital 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 a whitepaper; and
        (h) Act as liaison between the digital token issuer and the CBB on all matters arising in connection with the registration of the whitepaper or the trading of the issuer’s digital token on the crypto-asset exchange platform.
        Added: April 2023

      • CRA-15.3.7

        In addition to the obligations set out in Paragraph CRA-15.3.6, a digital token advisor must:

        (a) Make the digital token issuer’s whitepaper accessible to investors through its electronic platform;
        (b) Must make available through its electronic platform all relevant information relating to a digital token issuer including any material changes that are affecting the digital token issuer or the digital token issuer’s project;
        (c) Take reasonable steps in monitoring the drawdowns by digital token issuer and that it has been utilised for the purposes stated in the whitepaper;
        (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 of digital 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 the digital 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 the digital 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 2023

      • CRA-15.3.8

        A 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 the digital 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 the digital 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 the digital token offering or the digital token issuer.
        Added: April 2023

    • Supplementary Whitepaper

      • CRA-15.3.9

        Where a supplementary whitepaper has been submitted by a digital token issuer to the CBB, the digital token advisor must notify the subscribers for the digital token regarding the filing of the supplementary whitepaper with the CBB and that the supplementary whitepaper will be made available on the electronic platform upon approval of the CBB.

        Added: April 2023

      • CRA-15.3.10

        Upon approval of the CBB, the supplementary whitepaper must be made available on the electronic platform of the digital token advisor.

        Added: April 2023

      • CRA-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 2023

    • Register of Initial Digital Token Holders

      • CRA-15.3.12

        A digital token advisor must maintain a register of initial digital token holders who subscribed for the digital tokens during the offer period and enter into the register the total amount of digital tokens subscribed by each digital token holder.

        Added: April 2023

    • Record of Digital Token Holders Monies and Digital Tokens

      • CRA-15.3.13

        A digital token advisor must establish systems and controls for maintaining an accurate and up to date record of digital token holders and any monies or digital tokens held in relation to them.

        Added: April 2023

      • CRA-15.3.14

        A 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 2023

    • Custody of Digital Tokens

      • CRA-15.3.15

        The digital token advisor must maintain custody of the digital tokens issued by the digital 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 2023

      • CRA-15.3.16

        A digital token advisor must ensure digital 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 2023

    • Investor 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 2023

      • CRA-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 2023

      • CRA-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 2023

    • Fund 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 the digital token offering which must include:

        (a) The subscription money (client money) be received into a client money account with a retail 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 the licensee and not to the licensee:
        (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 the licensee received it from its clients;
        (iv) Not used for licensee’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 the licensee’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 2023