The virtual testing space will be open to both local and foreign firms, with each user allowed to test for nine months with a possible three month extension, the bank said.
Solutions to be tested must show innovation, customer benefits, technical testing, and an intention to be deployed in Bahrain after the sandbox period ends, it said.
The bank recently issued a regulatory sandbox framework directive laying out the eligibility criteria, filing requirements and timeline.
The bank hopes to attract fintech businesses from around the world to "expand and thrive in the Gulf, and strengthen Bahrain's position as a fintech and financials services hub in the Gulf Cooperation Council", it said.
The launch is in line with efforts to further develop the Bahrain ecosystem to encourage growth in the fintech industry, the bank said.
The Bahrain Economic Development Board (EDB) recently announced a partnership with fintech incubator and ecosystem builder Singapore Fintech Consortium and asset management and advisory firm Trucial Investment Partners to develop a fintech ecosystem and regulatory framework for the Kingdom, the bank said.
This will lead to increased interaction between fintech firms in the Middle East via Bahrain and those in ASEAN via Singapore and will facilitate the entry of Singaporean fintech companies into the Bahrain, it said.
Singapore and Abu Dhabi also announced collaboration plans earlier this year. The Monetary Authority of Singapore (MAS) and Abu Dhabi Global Market (ADGM) agreed to cooperate on developments and initiatives that nurture financial technology, or fintech, entrepreneurship and support innovation in financial services in both countries.
A cooperation agreement was signed setting out how the regulators will help startups and innovators to understand the regulatory regime in each jurisdiction, and how they will provide support throughout the application and authorisation process, the organisations said.