Cryptocurrency is decentralised digital money that is based on blockchain technology (see Practice Note on Blockchain).

It was designed to be used as electronic cash, but up until now cryptocurrency is not commonly used as ‘cash'. Therefore, central banks use the term crypto-asset instead of cryptocurrency; the two terms are used interchangeably.

The Central Bank of Bahrain (CBB) defines cryptocurrency as virtual or digital assets or tokens operating on a blockchain platform and protected by cryptography. Hence, there is no difference from a legal perspective between cryptocurrency, virtual currency and digital currency.

The legal status of cryptocurrency in most countries is still unclear due to the lack of regulatory framework. As a result, cryptocurrencies became an interest for those willing to commit illicit actions such as money laundering.

Therefore, to minimise the risk of financial crime and illegal use of cryptocurrency, a legal framework had to be introduced.

In February 2019, CBB issued its rules regulating crypto-asset services and crypt-asset exchanges. The regulatory framework has been included in Volume 6 of the CBB Rulebook that governs Capital Markets under the title ‘Crypto-Asset Module.'