The launch of a new payment service by Bahrain-headquartered Bank ABC in close collaboration with the Central Bank of Bahrain (CBB) shows the fruits of a long-term plan to modernize Bahrain's financial system.
Arab Banking Corporation, also known as Bank ABC, has become the first Middle Eastern bank to introduce faster cross-border payments for corporates and financial institutions utilizing J.P. Morgan's Coin System.
J.P. Morgan's Coin System serves as a blockchain payment rail and deposit account ledger, that allows participating clients to transfer USD held on deposit with J.P. Morgan within the system, facilitating the movement of liquidity funding and 24/7 instant transfers. The CBB supported Bank ABC with the integration and scaling the innovative blockchain-based solution within Bahrain’s payments landscape.
For many, blockchain technology is a relatively new concept. In simple terms, blockchain is a decentralized network of safe and reliable distributed databases that record and distribute transaction information among numerous computers to prevent data modification. Blockchain is a general word for a chain of information-containing blocks. When a transaction occurs, the relevant data is added to a block. This technology significantly reduces organizations' expenses by reducing reliance on third parties, does not rely on human calculations and increases accuracy and efficiency of transfers. In a blockchain, every transaction is permanently recorded, allowing users to observe and verify the legitimacy of assets by consulting the audit trail.
Blockchain payment systems are harder to attack (by way of hacking, for example) as the data is stored across a large network of decentralized computers as opposed to one central system. As the system is run by algorithms and not people, it would be harder for blockchain to be interfered with and used for personal advantage (including committing fraud) compared to conventional payment methods.
Technology-related businesses are evolving significantly due to the transparency and efficiency of blockchain and due to its many uses and advantages. It is safe to assume that the use of this technology will continue to grow rapidly.
The CBB is considered to be a forward-thinking central bank which fosters a culture of innovation. As a result, Bahrain has become one of the Middle East's leaders in terms of growth of digital banking, financial services and promotion of fintech industry development through a range of innovations and initiatives.
The CBB's launch of a regulatory sandbox in 2017 and introduction of a regulatory sandbox framework in 2021 facilitates fintech firms in testing and experimenting products before those become subject to regulatory requirements. This, much like the introduction of blockchain payments, is an example of the CBB's keen desire to modernize and lead in innovation.