 From Bahrain, it's theCUBE. Covering AWS Public Sector Bahrain. Brought to you by Amazon Web Services. Okay, welcome back everyone, it's theCUBE coverage. We are here in Bahrain for AWS Summit where cloud computing is changing the game. It's the Fintech panel discussion, Yasmin Al-Sharif, head of Fintech Innovation Unit, central bank of Bahrain, thank you for joining us. Thank you for having me. Madhula Almoyad, who's the founder and CEO of Almoyad Technologies, thank you for coming on. Thank you for having us. So we were a very robust conversation before they turned on the cameras, Fintech is hot, obviously in global Fintech, everyone knows what that is. But it's interesting because entrepreneurship and innovation is not just for startups, it's for countries and here in Bahrain, this ecosystem and the mandate to go cloud first has had a ripple effect. We were talking about open banking, mandate open banking versus regulation, chasing innovation and holding it back. You guys are taking a different approach. Take a minute to explain the philosophy. Yeah, I think there's benefits to being late adopters to the game. I think in the case of Bahrain, it's been a very interesting journey. I think we started with the whole AWS, but if you look at the prerequisites of technical adoption and creating data pools for analytics to run on, I think what's interesting about Bahrain is it's really led by regulation. If you look at the prerequisites of creating a digital economy, what's happening in financial services or the digitization or openness of financial services is really one context of the bigger picture of Bahrain's digitization plan or the economic strategy. And really what happens here is if you look at first built the data pools and or the data centers, bring AWS in and create the data centers, number two is create a data or cloud first policy, move the entire government onto the cloud, and then give the ownership of the data to the people by implementing the Bahrain personal data protection laws. Once you've done that, then you've given the ownership to the people and you've created what we have as we started with a unique identifier. So the citizens of the country or the residents of the country have a unique identifier number where they're known by. Once you've done that and then you start mandating certain sectors to open up with API integrations, you're creating a very, very interesting value proposition. It creates a much faster, you leapfrog a generation of technology. You're going from the classic screen scraping technologies or whatever to a very completely open infrastructure and open API where things are cryptographically signed, people are in control of their data, people can control the mobility of their data and you're really creating a very robust data pool for a lot of algorithms to sit on. You know what I love about this, Yasmin, we were talking before he came on camera is that you guys are thinking holistically as an operating system, as being a geek that I am, I love that, but it's not just one thing you're doing, it's a system and it's a modernization view. Now we all know that financial systems power economies and FinTech innovation unit that you're in, this is important, you gotta have that leg of the stool, that pillar working, you have a sandbox, you have technology mechanisms to roll in tech, move things quickly, you're moving fast, what's the strategy, what are some of the key things, what's the sandbox? Let me start by saying that the Kingdom of Bahrain has always been considered as a center of excellence, as a financial center of excellence and we do realize at the central bank in order for us to maintain that position we have to innovate, we have to remain dynamic and agile enough to make the necessary reforms within our regulations to meet the dynamics of this digital economy. Technology is changing the paradigm of the financial system and the change is happening extremely fast. Regulators have had to come up with a mechanism whereby they can harness and test the feasibility of these innovations whilst putting the risks in a controlled environment. As regulators, we're not typically assigned to host incubators, to host startups, however because of all this change in technology, it has become extremely essential that we come up with a regulatory approach to enable startups as well as existing financial institutions to test out their innovative financial solutions in a controlled environment. So a sandbox is really a controlled, live-bound, time-bound environment enabling startups as well as existing financial institutions to test out their innovative solutions under the strict supervision of the regulator without being required to abide by full regulatory requirements directly with volunteer customers. I mean you have to put the strict standards down but I mean sandbox is what developers know. It's a collaborative approach. You're not being an incubator but you're setting up a rules of engagement for startups to take what they know how to do, stand up sandboxes in the cloud. That's what everyone does. Absolutely and our journey with the sandbox has been very successful. We've launched our sandbox back in 2017. Up to date we have 35 companies that have been admitted into the sandbox. We have been able to graduate two companies successfully. One of them has been licensed as a crypto asset provider. The other as an open banking service provider. We have four other companies in the pipeline ready to graduate. I think all in all our experience with the sandbox has enabled us to grow and develop as regulators. It has enabled us to maintain open communication with innovators to come to learn the needs of innovators and to enable innovators to get familiarized with the regulatory environment of the kingdom of Bahrain. You know you guys are doing some really pioneering work. I would just want to say it's really commendable. I know it's fast and new but if you look at the United States with Facebook they're now asking to be regulated. Regulation if it comes too late is bad because things can get out of control and if you're too early you can put a clamp down and stifle innovation. So the balance between regulation and innovation has always been an art if you will. Exactly. What do you guys, how do you view that? What's the philosophy? So from a regulatory perspective we think that regulation and innovation goes hand in hand and we have to embrace innovation openheartedly. However, having said that, regulators have to run all common sense checks meaning that we don't accept an innovation that will potentially pose more harm to the financial stability of the economy as opposed to the advantages that pose us. We've passed a number of different regulations to support innovation in the financial services sector dating back to 2014 when we first issued our payment service provider licenses allowing more competition and innovation within the payments sector. We've issued crowdfunding regulations. We've issued robo advisory regulations. We've issued insurance aggregator regulations, crypto asset service provider regulations, open banking regulations, just to name a few. And I think that each of the regulations that we have issued solves a specific pain point whether it's to enhance financial inclusion, whether it's to empower customers by retaining ownership back of their financial information and data, whether it's to also empower startups and to enable them to gain access to funding through digital platforms. I have to allow me to get you in here because as an entrepreneur I'm like, I love all that, great. I just want to get funded. I want to bring my product to market. I need a capital market that's going to be robust and I need to have those capital providers say venture capital or private equity supporting their limited partners. So I want to see that. I don't want to be standing there when I need gas for my car. I need fuel. I got to get to the next level. This is what entrepreneurs want and they need it. Spot on. I think the one thing, John, that is very important that people look at in the context of fintech today, raising money, investing into fintech, regulatory uncertainty is one that defines scalability today. Once your technology is proven where you go next really is dependent on the regulator that you'll be dealing with in the context of that specific activity that you'll be performing. In the case of Bahrain, I must say we were blown away by the receptiveness. We... In what way? Yasmin mentioned open banking, for example. We got into the regulatory sandbox, which you hear a lot about sandboxes all around the world. We got into the sandbox with an idea of building an accounts aggregator, direct API integration to these banks and we got into the sandbox. There were no regulations at the time. They liked the idea. We started bouncing ideas back and forth on how to develop it. We developed the technology. We started piloting the technology. We integrated to 15 banks in the country on a sandbox environment. The white paper on open banking was listed. They sent it out for consultation. We integrated on a production environment to more than 70% of the banks in the country. The central bank of Bahrain mandated open banking across the entire nation with every retail bank all in a period of less than 18 months. That's insane. That's the kind of context. So as an investor, exactly. So as an investor or as an entrepreneur that looks at the sector, the question is here, if anything, I think the regulator in Bahrain is the one that's leading the innovation and these are the benefits of being late adopters. We get to test out and see what's going on in the rest of the world and really develop great regulations that will embrace and foster innovation. I love the liquidity conversation because it goes to the next level. Liquidity is a wonderful thing because startups want to go public. That's what happens in the US, mergers and acquisitions. We have an incubator that we're going to interview here. Flat six labs just had one of their companies got sold to match.com. So you're seeing a lot of cross-border liquidity. This is a new dynamic. It's only going to get stronger. More companies are going to come out of Bahrain in the region. Liquidity is important. So how do you guys want to foster that? What's the strategy? Continue to do the same? So from a regulatory perspective, again, we don't really host incubators or accelerators, but what we do is we refine our regulations to support startups to gain access to liquidity. For example, our crowdfunding regulations that have been passed in 2017 and they support both equity as well as financing, crowdfunding, including conventional, as well as cherry-eyed compliant crowdfunding transactions. We're also currently working on refining our regulations for enabling venture capitalists to take roots in Bahrain and to support these startups. Yeah, I think, John, you mentioned two things. You mentioned regulation-leading. When you mandate something like open banking, you are ultimately pushing the entire sector forward, saying you better innovate as fast as possible. And there's a gap that you need to basically bridge. And that really loosens up a lot of liquidity when it comes to partnerships, when it comes to acquisitions, when it comes to these banks ultimately looking for better solutions. So that's the role of the regulator here. We are seeing a lot of VC activity come to the region right now. The region is only starting to open up. AWS just went live a few months ago. We're seeing the cloud adoption start to really take effect. And this is where you'll start seeing real scalability. But I think the most compelling thing here is previously people would look at the Middle East with a bit of skepticism. How much innovation can really take place? And the reality is here, there are a few prerequisites that have been put in place. Foreign ownership is at 100%, cloud-first policy. There's a lot of things that can really foster innovation. And we're, I mean, we're, as an entrepreneur, we're a living proof of this whole team, Bahrain Initiative, of the fact that you can get in, you can build an accounts aggregator in a country that never even had the regulations to adopt it, to mandate it. And to be ultimately, I think Bahrain will become the global reference point for open banking very soon because it has mandated a regulation of open APIs with cryptographic signatures, ultimate security frameworks with a robust infrastructure across an entire nation. And don't forget, we still have a population of below the age of 30, 70% of our population below. So it gives a very compelling story to test your technology. And then what we end up saying is, once you're on AWS or any cloud for that matter, then the scalability of the technology just depends on where you want to go next. There's no doubt the demographics are solid here. And I love the announcement here, the bachelor's degree in cloud computing. We've seen some data science degrees, so new skills are coming on. My vision is interesting. I think that what interests me about the region of Amazon being here is, these regions create revitalization. You guys are in perfect position with this modernization trend, it's beautiful. Not only to be a template for the world, but a center for global banking. So I think to me is that I'm trying to put together and connect the dots of where this goes in the next two decades. I mean, if the cryptocurrency market continues to get matured and stabilized, that's still flowing with a lot of money. A lot of money in the region. Absolutely. So it's not just the region business to do here for companies to come here. It's you guys playing a role in the global financial system that's of interest to me. What's your vision for that? Absolutely. I think that regulators around the world are starting to realize the importance of collaborating together to try and work on policy challenges in line with innovation within the financial services sector and to share experiences, to share lessons learned. At the Central Bank of Bahrain, we're a member of the Global Financial Innovation Network, which is an initiative that has been passed by the FCA in the UK. Again, we're also a member of the Fintech Working Group of the GCC. And through these two different initiatives, we work alongside other regulators to collaborate on solving policy issues, to share experiences and knowledge, and to try and harmonize our regulations because at the end of the day, startups and innovators ultimately will want to scale up and want to serve customers across different jurisdictions. So it's important to have that kind of harmonization in terms of regulations to foster innovation as well as to safeguard the overall security of the international financial economy. What key partnerships do you guys need to do to kind of go global on this 20-year vision? Is there other things that have to fall into place that need to happen? I think 20 years is a long time. I'd say in the next, let's take five years, for example, if you say in the next five years and where I see this going, the question is what do entrepreneurs and startups need to look at a jurisdiction and say, that's where I want to test my technology? You need a robust infrastructure, you need a regulator that embraces you, you need technical subsidies and financial subsidies that are available, and then you need an independent arm that can really handhold you and take you through that process. Trust is critical. Trust in money-making capability. Just to add to that, in Bahrain we take great pride in our human capital, which we believe is one of our biggest assets. And today, with having Amazon Web Services in Bahrain, this has enabled training of young Bahrainis for the data and knowledge economies, which is expected to create around 5,000 jobs within the coming five years through different schemes such as Amazon Education, for example. This is super exciting, I wish we had more time. Congratulations, love the vision. Again, entrepreneurs like to make money. They want an environment that's going to be trustworthy and some scalability behind it. So good luck, we're behind you, we'll keep following up. Thanks for that. Thank you for having us. Thank you for having us. It's theCUBE coverage here in Bahrain for AWS, I'm John Furrier. Stay tuned for more after this short break. Thank you.