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Bahraini start-up cryptocurrency firm Rain graduated from the Central Bank of Bahrain (CBB) regulatory sandbox and went live at the beginning of this month, becoming the first cryptocurrency exchange in the Middle East to earn a regulatory license.
The firm, which also closed a BD1 million funding round in the same week, provides a platform for individuals and institutions to buy, sell and store cryptocurrency in a regulated, secure and compliant environment.
Rain, founded in 2016 by entrepreneurs Yehia Badawy, Abdullah Almoaiqel, AJ Nelson and Joseph Dallago, plans to use this round of funding to invest in new technology and new team members to meet growing customer support and engineering needs.
In previous comments to the GulfWeekly, Abdullah has said: “Rain is incredibly excited to watch the cryptocurrency continue to evolve. As one of the founders of a neutral cryptocurrency exchange, we are poised to grow as the global and local demand for cryptocurrencies grows.”
While significant for individual investors, the CBB regulatory approval could prove to be an unprecedented boon for regional institutional investors who want to add a cryptocurrency hedge to their portfolios.
The piece of the puzzle that has so far been unaddressed by cryptocurrency funds and exchanges is Sharia compliance. This may be a minor added-value factor globally but to the regional sovereign funds and family offices, it is of paramount importance.
By securing the crypto-asset module licence from the CBB, Rain becomes subject to the capital reserve requirements, cybersecurity requirements and banking compliance standards set forth by the CBB, including Sharia standards of investment.
Abdullah said: “Sharia compliance is very important to the firm because of its interest to our customers. Whether a cryptocurrency is Sharia compliant would absolutely be a factor in our assessment.”
By becoming a licensed brokerage, the firm is able to build lasting relationships with banking partners and payment processors as it becomes part of a global market projected to reach USD1.4 billion by 2025. That is if it were to continue to grow annually at a conservative rate of 6.18 per cent.
A restraint worldwide has been the lack of certainty on the regulatory front, which Bahrain seeks to overcome, in order to maintain its position as a financial hub in the region.
The CBB has put significant effort into releasing a comprehensive set of regulatory standards for cryptocurrencies. In doing so, the CBB has joined a group of progressive regulators, which includes the Financial Conduct Authority in London (FCA) and The New York Department of Financial Services (NYDFS), to issue crypto-friendly legislation.
Seeing the massive payoff that could come with being a first mover into this regional market, the most recent round of funding included investors like BitMEX Ventures, Kuwait-based cryptocurrency fund Blockwater, 500 Start-ups MENA and Taibah Valley.
BitMEX Ventures, the investment arm of BitMEX, a crypto derivatives giant providing “the next generation of BitCoin Trading products,” in particular stands to gain from increased interest and activity in the crypto sphere.
BitMEX cofounder and chief executive Arthur Hayes said: “BitMEX Ventures is devoted to encouraging greater global access to cryptocurrency trading as we start to see the maturation of cryptocurrencies as a legitimate asset class. 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. We are thrilled to contribute to this defining moment.”