Generation Start-up: Cryptocurrency asset trading platform Rain is riding high on Bitcoin boom

It has been an eventful week for the world’s largest cryptocurrency Bitcoin. On Friday, it rallied above $52,000 to achieve a record market capitalisation of $1 trillion and cap off a spectacular week. Fuelling the digital asset’s surge are endorsements from billionaires such as Elon Musk and Jack Dorsey and an announcement by electric car maker Tesla that it invested $1.5 billion in the cryptocurrency. Tesla said it would accept Bitcoin as payment for its cars while PayPal said last year it would promote Bitcoin transactions through its platform – giving credence to a currency once considered a pariah by the mainstream financial services industry. For Yehia Badawy and his Bahrain-based FinTech Rain Management – a crypto asset trading platform that he founded with Abdullah Almoaiqel, A J Nelson and Joseph Dallago in 2017 – Bitcoin’s rally is welcome news. "Crypto is starting to become, once again, part of mainstream news," he tells The National . “What we are seeing [now] is a more mature interest – more from an institutional side.” Rain appears to be well-placed to tap into the Bitcoin boom. In a nascent industry, which is still prone to fraud, money laundering, hacking and other forms of crime, the start-up is one of the few crypto asset platforms to have secured a licence from a regional central bank. CoinMena, another Sharia-complaint exchange in Bahrain, also offers cryptocurrency trading services. Rain was licensed by the Central Bank of Bahrain and provides a platform for customers to buy and sell four digital currencies – Bitcoin, Litecoin, Ethereum and Ripple’s XRP. It also offers custodian services to hold crypto assets. Users who seek to transact through Rain would need to complete a “know-your-customer” application form. The company earns a small commission when transactions take place. Mr Badawy did not disclose the value of transactions traded on Rain’s platform, but he said the FinTech has benefitted largely from Bitcoin’s rise and a growing understanding of cryptocurrencies. “We have been breaking our internal records almost month over month for the last four to six months,” he says. “We have seen months where our user base has doubled. So, this should give you an idea of the kind of growth that we are experiencing.” The coronavirus pandemic has been a boon to crypto traders, with many investors now flocking to Bitcoin, which they view as a haven owing to dollar weakness, a low interest rate environment and general market uncertainty. “I think what the pandemic did is just create awareness around this asset class ... and that helps increase the numbers,” says Mr Badawy. However, in an interview with Bloomberg TV last week, Nouriel Roubini , a professor at New York University's Stern School of Business and a fierce critic of cryptocurrencies, said Bitcoin's surge was a result of "a massive amount of manipulation". He said the digital currency had no value and described its gains as a “bubble”. Mr Roubini said Bitcoin was not a currency or a unit of account. “It is not a scalable means of payment [and] it is not a stable store of value ... the Flintstones had a better monetary system than Bitcoin,” Mr Roubini said. “These are not currencies. Calling them cryptocurrencies is a misnomer; they are not even assets.” Rain’s founders were all early believers in cryptocurrencies. They met online in 2016 and bonded over their shared passion. Before this, Mr Nelson and Mr Dallago worked at a crypto trading app in Silicon Valley while Mr Badawy and Mr Almoaiqel were active in regional crypto trading circles. The crypto trading platforms in the region were still growing but the four saw a gap for a licensed exchange that could attract more mainstream investors. “We could basically take this two ways. One way was ‘let us not worry about regulations [and] find a creative way to avoid regulations’ by, for example, basing our company somewhere outside the region in an offshore jurisdiction and serve the region remotely,” says Mr Badawy. While that would have been financially lucrative, it would not have “served the long-term benefit of the industry, which is what we were more interested in”, he says. The partners chose the less trodden path and began to work on securing the necessary regulations for an exchange. It was not simple – the volatility of Bitcoin and other cryptocurrencies they were looking to trade posed various challenges. “At that time, it was much more difficult to even get a conversation started about crypto.” Things turned a corner in 2017 when they were invited by Bahrain’s central bank to join its regulatory sandbox. “We were the first crypto company to enter, we were actually the second company overall in that sandbox and we spent [time], until February 2019, working with them on how to basically identify the different rules and laws and how this industry would be regulated,” says Mr Badawy. Rain Management graduated from the programme in February 2019 and received a crypto asset licence later that year. Funding also became a little easier once they received the central bank’s nod. While Rain’s founders initially relied on friends and family for the initial capital, the company had begun to garner interest from investors during its time in the regulatory sandbox. In 2019, the start-up raised $2.5 million from BitMex Ventures and Bahraini cryptocurrency fund Blockwater. Bitcoin enthusiast and developer Jimmy Song, Cumberland Minings’ Mike Komarnsky and Aaron Lasher and Aaron Voisine, founders of cryptocurrency wallet BRD, also participated in the round. Asked whether raising funds was challenging due to the nature of their business, Mr Badawy says: “If you are a big believer in the [crypto] industry, those things [volatility] don’t tend to faze you as much because you see the long-term potential.” But as times changed, so have Rain’s investors. The start-up recently raised another $6m in a round led by Middle East Venture Partners, the region’s largest venture capital firm, with participation from Coinbase Ventures, Vision Ventures, CMT Digital Ventures, Jimco and the DIFC FinTech Fund. Mr Badawy and his team plan to use the funds to hire more engineering talent to fuel the start-up’s expansion. “We have a few other products and services in the pipeline, and we want to be able to bring those to market,” he says. Rain also intends to expand outside Bahrain. While its current licence allows it to provide brokerage services across the Gulf, the company hopes to be licensed by authorities across the Middle East. “This will help us serve our clients better in different ways,” says Mr Badawy. Currently, customers elsewhere in GCC are required to transfer their funds to Bahrain to begin trading on Rain’s platform. The founders hope that having a local presence in each Gulf country will help Rain to provide a better user experience. Mr Badawy says the start-up is also evaluating opportunities in Turkey and Pakistan and efforts are under way to iron out regulatory requirements. “We are working on building relationships with other regulators in the region and making sure that we achieve our objective of having licences in [several] jurisdictions.” Understanding what being regulated means and how to deal with regulatory authorities in general. I would say [I have learnt about] sticking to our vision, despite all the different turbulence that we have experienced throughout the journey. Working in a regulated industry is quite different to anything else I have done in my past. So, I have learnt everything that goes with being regulated – legal requirements, audit requirements, enforcing certain rules and regulations and dealing with different stakeholders to make sure that we are all aligned with them and everyone is happy. Shortly before we started, there was what we call a bear market for some time and it was not the easiest time to start something in this field. But time is not really something you can control, and I think we did our best with the information we had. Ideally, we would have liked to move faster. But we understand that these things [take time] since, you know, we are setting a precedent here to have a central bank issue regulations for crypto [platforms] and acquire that licence and be the first one in the region to do that. That is no small feat. So, I think it is always easier for the second and third [companies] that follow. Being the trailblazer, you sometimes doubt yourself and question whether you are moving on the right path and it is not easy, especially if you are the first one trying to do something. As of right now, since we recently closed [a] round, there are no immediate plans to raise funds. So, we are only focusing on executing the plans that we have been building.

Generation Start-up: Cryptocurrency asset trading platform Rain is riding high on Bitcoin boom

Bahrain-based FinTech aims to be licensed across the Middle East