Bahrain on ‘Rain’ alert

Bahrainis are being told to brace for very heavy ‘Rain’ in the coming months with the conditions likely to prevail and get stronger over the Kingdom in due course. The warning says so many people are expected to get their lives better in incidents related to the arrival of this particular ‘Rain’ from the CBB’s Sandbox. It won’t bring chaos, but would rather help many get a slice of the fintech dream gathering force in the Middle East.

Yes, this ‘Rain’ is different and in fact, it’s just started. Bahrain-based cryptocurrency exchange Rain has become the first exchange in the Middle East to receive a regulatory licence. “Rain has acquired the Crypto-Asset Module (CRA) licence from the Central Bank of Bahrain (CBB),” its operators said in a blog post marking the “end of a three-year-long journey to become licensed by the Central Bank of Bahrain.” Bahrain is now among a handful of countries coming up with specific rule books for Digital currencies and allows firms to benefit from it.

Efforts like this, experts view, would shape the development of the global market and pave the way for the growth of industry player, exchange platform to brokers. But what makes Bahrain more attractive than those financial behemoths like London and New York that are already in the fray. To know one needs to understand what they are offering. Experts say they might be attractive to big institutions who like to play on safe grounds but at higher costs and compliance complexity. There’s also another door through the Seychelles and Belize that offers a far easier market, but with less protection.

This is where Bahrain shines. By crafting specific rules for the cryptocurrency sector and providing regulatory security as well as perks like tax breaks, Bahrain is offering investors a place to thrive safely. As said earlier, Rain is just the beginning, as more are on way. Next in line is ZPX, a Singapore-based crypto firm. It will launch a cryptocurrency trading platform, Qume, next month catering to institutional investors such as high-frequency proprietary trading firms and hedge funds, said Reuters. It has decided to base the business in Manama opting against so-called offshore jurisdiction with low or no regulation.

“Such a base could deter big investors as scrutiny of digital coins heats up from global regulators and politicians,” said ZPX’s CEO Ramani Ramachandran. Bahrain launched rules in February for cryptocurrency companies such as trading platforms, including rigorous customer background checks, governance standards and controls on cybersecurity risks.

(http://cbb. complinet.com/net_file_store/ new_rulebooks/v/o/Vol_6- CRA-Feb_2019.pdf) It’s also usually far cheaper in terms of compliance and administration costs to set up in locations like Bahrain than in major financial hubs, said Ramachandran. ZPX estimates such costs would come to around $200,000 a year in Bahrain, versus at least $750,000 a year in London.

Rain with a dream

The focus, however, is now on Rain which claims to be the first firm in the Middle East to receive the licence. Rain, founded in 2016 by four entrepreneurs Yehia Badawy, Abdullah Almoaiqel, AJ Nelson and Joseph Dallago, received the licence following a two-year regulatory sandbox process. During these two years, some more crypto exchanges also joined CBB’s sandbox including Dubai’s BitOasis that  received  preliminary approval from Financial Services Regulatory Authority of Abu Dhabi Global Market Authorities to operate its crypt platform earlier this year and is expected to get a license by the end of the year.

“By becoming a licensed exchange, we can form more lasting relationships with our banking partners and payment processors. This has lead to more stable banking relationships, better pricing, lower fees, and more reliable deposit and withdrawal processes for our customers. We a r e very proud of this accomplishment as it leads to a more stable and safe service for cryptocurrency customers across the Middle East,” Rain in its blog post said.

Shariyah Review Bureau (SRB) after reviewing Rain’s brokerage service said the sale, purchase and custodian activities of Rain comply with Shari’a principles. Rain’s blog post further says it “has closed a seed round of $2.5 million” co-led by BitMEX Ventures, Kuwait-based cryptocurrency fund, Blockwater- a digital asset fund based in Bahrain, Vision Ventures, 500 Startups MENA, and Taibah Valley. Bitcoin developer Jimmy Song and Mike Komarnsky, founder of Cumberland Mining, also participated in the round, among others.

With the seed investment, the exchange said it plans to grow its team and invest in new technology. Arthur Hayes, BitMEX Co-Founder and CEO, said: “As the first licensed cryptocurrency exchange in the Middle East, Rain has an unprecedented opportunity to tap into the incredible potential that cryptocurrency trading will bring to the region. We believe that Rain will bring greater diversification to Middle-Eastern traders with its exchange offering and experienced team, and we are thrilled to contribute to this defining moment.”

Rain enables users to buy, sell and store Bitcoin, Ethereum, Litecoin, and Ripple. The web and the mobile-based platform allow users in Bahrain, United Arab Emirates, Saudi Arabia, Kuwait, and Oman to buy these cryptocurrencies using their bank accounts, debit cards or credit cards.

Rain charges a fee of 1.5% (of transaction value) on purchases made through bank transfers, 4% for the ones made using debit or credit cards and 1.5% of the transaction value a sale. Rain also offers customised cryptocurrency buying, selling, and storage services to businesses, family offices, and high-networth individuals through its institutional accounts. Those with an institutional account get a dedicated account manager.

We are not alone

Meanwhile, the Central banks in the Middle East are continuing to show green lights to fintech development. In December, the National Bank of Kuwait partnered with Ripple for a remittance service, NBK Direct Remit, as a pilot programme between Kuwait and Jordan.

Also, in the neighbouring UAE,  Bithumb joined hands with Nvelop to start a crypto-fiat trading platform. The exchange is planning to utilize the fresh capital to expand its infrastructure, by strengthening the engineering needs and also investing in new technologies.