Palmex received the licence from the Central Bank of Bahrain
Palmex, a cryptocurrency exchange launched by Dubai-based blockchain startup ArabianChain Technology, has become the first in the MENA region to receive a regulatory sandbox licence.
A regulatory sandbox is a framework and process that regulates the development of the financial technology (fintech) industry.
Palmex received the licence from the Central Bank of Bahrain (CBB), following a “rigorous application process” that verified its security systems, policies, processes and controls to protect customers, a statement said.
The licence goes into effect on July 15.
While 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, and follow appropriate disclosure, protection and compensation requirements related to their customers.
Companies will also be able to apply to list their tokens and coins with Palmex and benefit from the compliance of the exchange.
ArabianChain founder and CEO Mohammed Alsehli said: “Our team has put in a lot of time and resources into working with regulators to ensure we are compliant. ArabianChain will start with a limited number of select users to test and optimise the process and then expand to the rest.”
The sandbox creates a ‘virtual safe space’ in which both startups and established businesses can trial and refine new products, services, platforms and business models in a live but controlled environment. It helps minimise risks to customers and the wider financial system, giving regulators time to adapt legislation as needed, the statement said.
The move is hoped to lead to more regulations around digital asset trading in the region, giving a boost to fintech innovation and inclusion.
“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,” Alsehli said.
“The wild fluctuations and 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,” he added.