Palmex, a professional digital asset exchange powered by ArabianChain Technology, has become the first and only cryptocurrency exchange in the Middle East and North Africa to receive a Regulatory Sandbox License.
The Central Bank of Bahrain (CBB) granted the Regulatory Sandbox License to Palmex under the sandbox regulation framework in the Kingdom of Bahrain, setting the stage for much-awaited acceptance by regulators, banks and currency exchange houses in the region that have been wary of transacting with digital currencies.
A regulatory sandbox is a framework and process that facilitates the development of the financial technology (fintech) industry in a safe and calculated way. New business models enabled by fintech can create regulatory ambiguity. Therefore, regulatory clarity is critical to fintech innovators in order to bring compliant services to market.
Commenting on the landmark milestone, ArabianChain founder and CEO Mohammed Alsehli said: “When we launched Palmex, we did so with the conviction that regulatory status is fundamental to our future and the future of the industry. Our team has put in a lot of time and resources into working with regulators to ensure we are compliant, and we are excited to give our users an added level of confidence in using Palmex with this extra layer of legitimacy. ArabianChain will start with a limited number of select users to test and optimize the process and then expand to the rest.”
In effect, the sandbox creates a virtual safe space in which both startups and established businesses can trial and refine innovative products, services, platforms and business models in a live but controlled environment, where risks to customers and the wider financial system are mitigated, giving regulators time to adapt legislation as needed.
Palmex received the coveted license, which goes into effect on July 15, as part of a rigorous application process that verified its security systems, policies, processes, and controls to protect customers. Whilst in the regulatory sandbox, companies are required to adhere to CBB regulations including Know Your Customer (KYC), Anti-Money Laundering and Countering Financing of Terrorism, as well as follow appropriate disclosure, protection and compensation requirements related to their customers.
The approval from the Bahrain Central Bank marks the arrival of a new wave of forward-looking regulation around digital asset trading in the region that is geared toward creating an environment to encourage fintech innovation and inclusion while ensuring the best interests of the nation, the banking system, investors, and customers are protected. Companies will also be able to apply to list their tokens and coins with Palmex and benefit from the compliance of the exchange.
Alsehli added: “As the only regional digital asset exchange with a Sandbox license, we expect to see a significant rise in awareness and adoption, driving a huge spike in the number of trades and token-based fundraising across the region while maintaining the safety of the financial system. The wild fluctuations and a phenomenal surge in valuation of cryptocurrencies like Bitcoin have continued to drive exponential growth in demand to trade and issue digital assets. The region has been eagerly waiting for a regulator-approved platform that makes it possible for them to buy and sell in a secure environment. Palmex is set to play a key role in disrupting the traditional financial system as we continue to fuel the region’s innovation-driven economy and the global blockchain industry.”