Bahrain is witnessing accelerated growth in crypto adoption, with an increasing number of retailers accepting consumer payment by crypto-currency. This raises the questions: how does the increased use of crypto as a payment medium enhance the economy? Is it efficient?
To start, the CBB has been a leader in facilitating crypto-asset adoption and approving arrangements to facilitate direct crypto payment similar to fiat currency electronic wallets. Notably, CBB regulations do not recognize crypto-assets as currency (every crypto “sale” is technically bartering). Traditional consumer economics relies on income (e.g. wages) received in cash or in a fiat account, paid in cash or drawn from said account to the merchant and the product or service delivered. Even for foreign currency purchases, a robust external exchange system makes the process seamless using cards and global e-wallets (e.g. ApplePay). Crypto could function the same, if income were received in that denomination; otherwise the issue of loading crypto accounts to rival the flexibility of fiat e-wallets and traditional cards will impede adoption.
So, the apparent next step in a functional cryptocurrency economy must rely on efficient of income generation in a quickly exchangeable crypto-currency (otherwise, why incur time and costs exchanging dinars into XXX coin only to purchase with XXX coin what can be readily bought with dinars). Is this next step possible? Well, sort of. Bahrain regulations require wage payments in dinars or “a legally available foreign currency” – in Bahrain, crypto (currently) fails this definition. But, there is a caveat – in kind benefits are permitted, so a bonus in crypto-assets is similar to a stock option or a company providing lunch. Suddenly, some income by crypto could be possible.
Which employer will start the supply side movement toward a crypto economy by paying employees in crypto? There will be hurdles: social insurance requirements, the wage protection scheme, and most importantly – recognition of fungible crypto as legal tender.
With each new development in the fields of Crypto/Fintech, CBB regulations and Employment law, our team of legal experts are ready to help your along your business journey through the Bahrain legal system.