What is the world of cryptocurrency like in the Middle East? How does it differ from other markets, and what challenges and opportunities arise from dealing with the industry in that region? Forecast.News Editor-in-Chief Angie Lau sits down with Joseph Dallago, Co-Founder and CEO of Rain, the first Bahrain-based digital currency exchange, in order to learn more.
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- “There are actually a lot of strong parallels between the Middle East and the ethos of cryptocurrency.”
- “You have a very mobile, penetrated region. You have a very young demographic… it’s a very internet-centric culture… It’s also very progressive… if you look at all the regions in the world, I’d say [the] Middle East is one of the most progressive in terms of looking at new technologies and trying to adopt new industries.”
- “We’re ultra-focused on the Middle East as a market. We’re completely localized to Arabic, we make sure to support all of the local payment schemes. We’ll be adding other languages in the future and localizing the product with other languages. We accept Arabic identification documents as well as provide really good Arabic support. We just know this market really well and we stand to improve on the competition on every measurable vector, really.”
- “We’re not trying to be the exchange that is listing thousands of different tokens. We’re trying to be the exchange that lists a few amount of trusted, reputable cryptocurrencies that stand to provide long-term value to our customers.”
- “The ADGM in the UAE has also come up with a legal framework around cryptocurrency exchanges as well.”
When one thinks of cryptocurrency hotspots, one’s first thought is not of the Middle East. Joseph Dallago, Co-Founder, and CEO of Rain, the first Bahrain-based digital currency exchange, aims to change that. Rain provides people with easy access to the world of cryptocurrencies, promising regulatory safety while offering exciting new investments. It targets the Middle Eastern market by being localized to Arabic, providing customer support, and tailoring registration to Arabic documents. Furthermore, it has received a regulatory license from the Bank of Bahrain, working with the central bank to introduce cryptocurrency to a larger audience.
As the technological hub of the Middle East, Bahrain is a prime space for innovation. Dallago describes the Bank of Bahrain as being particularly enthusiastic in developing regulation and investing in cryptocurrency. The population too is ready for change: its young demographic and Internet-centric culture goes a long way towards the possibility of easy adoption of blockchain, and its history of progressive innovation – having been the first in the region to adopt Internet, Uber, telecom, and more – point to a promising future. As the first crypto exchange in the region, Rain is poised to become a trailblazer for like-minded startups.
Angie Lau: Welcome to Word on the Block, the series that takes a deeper dive into the topics we cover right here on Forkast News. I’m Editor-in-Chief Angie Lau. And today we take a closer look at blockchain and cryptocurrency potential in the Middle East.
Now, in Egypt, there are now talks about rules to regulate cryptocurrency that’s a far cry from the fatwa issued last year, that forbade cryptocurrency under Islamic law. Over in the UAE, well, it’s set a goal to adopt blockchain for at least half of all government transactions by 2021. And now the Central Bank of Bahrain has issued a regulatory license to a cryptocurrency exchange. Blockchain in both government and commercial enterprise is expanding in the Middle East like never before. Let’s find out why.
Right now I’d like to welcome Joseph Dallago. He’s CEO and Co-Founder of Rain, the first cryptocurrency exchange to get regulatory license from Central Bank of Bahrain.
It’s the first of its kind in the Middle East, and Joseph and Rain are making a bet that cryptocurrency is an asset class that’s only going to grow around the world, and especially in the Middle East. So, thanks Joseph for joining us today.
Joseph Dallago: Absolutely, thanks for having me.
Angie Lau: Joseph. You’ve been building there in Bahrain for the past three and a half years. You relocated from Chicago, San Francisco and then in Bahrain. Why the Middle East? What are the dynamics there that makes it uniquely interesting for you?
Joseph Dallago: Yeah, great question. So I’d say there are two main things, one we’re really excited about the Middle East and we think it’s a really progressive region that is making huge strides in the area of technology and finance. And two, the business partners; we’ve found two really incredible business partners in the Middle East and my long-term business partner and I, as well as our two partners in Middle East came together, work really well together. We’re really excited about the space and really passionate about Bitcoin and cryptocurrency. And the four of us were just really excited about the region, we felt like it was really underserved in the cryptocurrency space. We’ve been working the last three years to just really bring cryptocurrency to the Middle East in a big way.
Angie Lau: Well, you’re right, when you think about cryptocurrency and blockchain, you don’t necessarily think about Middle East. Predominantly that action is taking place in the US, Europe, and in Asia, but increasingly it’s happening in Africa and the Middle East. Why the Middle East though? What are the demands of that region that make it really interesting for cryptocurrency and interesting for blockchain projects? What is the political, the economic environment right now that needs this technology?
Joseph Dallago: Absolutely. There are actually a lot of strong parallels between the Middle East and the ethos of cryptocurrency. So just to dig in we can talk about the country of Bahrain specifically for a moment.
Bahrain is historically a financial hub in the region, and it’s largely considered the Islamic finance hub of the world. It’s got some 400 financial institutions in its borders, so the regulators here are very good at regulating financial institutions. They understand how these businesses work and they understand how to put the proper controls on these types of businesses for consumer safety and also for the maximum amount of benefit to society. And also to serve the region, as well. A lot of the banks in Bahrain serve a number of different countries within the Middle East, so finance, in general, is just a well-understood industry in Bahrain. And I guess one last point: that the people of Bahrain are very well educated with finance. A lot of people work at banks and work at financial institutions, so it’s a great group of talent when it comes to starting a cryptocurrency exchange.
So to zoom out to the region and at large, you have a very mobile, penetrated region. You have a very young demographic. I’m forgetting the exact stats right now, but if you look up the amount of people under 30 in the Middle East is actually quite high. It’s a very internet-friendly society. A lot of people use Instagram for not only personal reasons, but for business reasons as well. A lot of people have adopted YouTube, and influencers are really large in the Middle East, so it’s a very internet-centric culture.
It’s also very progressive. The Middle East, historically, has been a huge contributor to the oil industry in the world and the Middle East at large looking for a lot of new industries to invest time and money in. So if you look at all the regions in the world, I’d say Middle East is one of the most progressive in terms of looking at new technologies and trying to adopt new industries. So there’s a lot of excitement about new industries in the Middle East, specifically the cryptocurrency industry in our case.
Angie Lau: Well to your point, Saudi Arabia’s Saudi Vision 2030 is a re-envisioning exercise for the entire nation, and of course we know it includes plans to integrate blockchain technology into its national policy. Do you see more aptitude and excitement for blockchain projects as a result of this? And is that expanding not only from Saudi Arabia and its vision for 2030, but also as it ripples out into the rest of the region?
Joseph Dallago: Definitely. So, I want to hone in on the specific part of the industry that our company focuses on. This industry has gotten quite large and there’s a lot of different things that people are working on all under the same umbrella, and our company likes to be very explicit on what our focus is, and what we’re trying to do. So we really were excited about this industry from the early days back in 2013, about the use of this technology as money and we’re still very focused on making that possible and that reality happen. Starting with Bitcoin, and then we’ve seen a lot of other great projects as well that all serve to attempt to use this technology as money.
The dream of a global, decentralized, fast, free form of money still doesn’t exist today. So our company along with a lot of other companies in the world are still trying to make that dream happen. An internet of money, if you will. So when we talk about blockchain, we just like to be very focused on what this industry means to us, and what we’re working on. We’ve worked the last three years with the Central Bank of Bahrain to help create regulation around this industry and that cause.
Angie Lau: Well, tell us a little bit more about Rain as a cryptocurrency exchange. Is it very different from other exchanges and if so, how?
Joseph Dallago: Yeah, it absolutely is and it isn’t at the same time, and I’ll explain the different aspects of it. I would say that in the ways that it’s the same, it provides a similar function to large companies like Coinbase and Kraken and Gemini and Bitstamp in that it allows people to access cryptocurrency, in some cases for the first time. You can go onto our web or mobile applications, you can sign up for the service, fund your account using bank or local payment methods, you can then purchase Bitcoin or other cryptocurrencies as well, and also store that cryptocurrency. So in that sense, it provides a lot of the same functionality as other cryptocurrency exchanges worldwide. So that’s how we’re the same.
How we’re different, is we’re ultra-focused on the Middle East as a market. We’re completely localized to Arabic, we make sure to support all of the local payment schemes. We’ll be adding other languages in the future and localizing the product with other languages. We accept Arabic identification documents as well as provide really good Arabic support. We just know this market really well and we stand to improve on the competition on every measurable vector, really. The fact that we have, since the beginning, gone the trusted regulated route means that over time we will adopt the best partners, the best banking partners, the best payment processing partners. We’re providing the best customer support, we really take pride in the design and user experience of our products, so we spend a lot of time just improving our products and capturing user feedback and information with regard to our products. In addition to that, we have the best prices in the region. We’ve made the correct partnerships to be able to obtain the best pricing, and the best fees as well, in the Middle East.
Angie Lau: How are you doing that?
Joseph Dallago: Some of it is a little bit of secret sauce on our end, but at the end of the day, we just can purchase cryptocurrency in the least expensive ways that are available via the industry today.
Angie Lau: What’s the market potential from customers in the Middle East providing liquidity to a cryptocurrency asset class?
Joseph Dallago: Yeah, that’s a great question, I think that we don’t really know for sure. We are taking a bet that it’s quite large and given the fact that there are 500 million people in the Middle East and the economic part that a lot of these countries play in the world economy, we believe that it’s a really great opportunity. And what’s more important for us is that, as we mentioned earlier, we really felt going into this mission that the Middle East was really underserved in the market. In the US, Europe, and China you have these really big exchanges that have good user experience, have good banking partners, have filled a great need, and are well-designed products. In the Middle East we felt like there was a big gap to be filled.
Angie Lau: I want to get back to the Saudi Vision 2030 because it does, in my mind, correlate to the enthusiasm for crypto because, at the end of the day, if a lot of these blockchain projects potentially might rise and create a utility token, they will need a market. That market might exist in the Middle East if people are more interested in it. Are you creating a platform potentially for future blockchain projects that are being birthed out of the Middle East, maybe some utility tokens, to provide a platform in which they can either raise money or have access to liquidity? Any thoughts about that?
Joseph Dallago: Yeah, I’d say that I want to totally accept the fact that in ten years, developments could happen that we don’t yet understand or having planned for. But at least for right now we’re really focused on the most trusted regulated cryptocurrencies that are generally used for storing value as opposed to ICOs or different assets of that nature.
So there are really large exchanges like Binance that already fill that need really well for smaller projects like ICOs to be able to raise money. We don’t really feel the need to fill that gap, and the fact that we’re regulated also means that we’re held to a much higher standard about the cryptocurrencies we can list. We’re not trying to be the exchange that is listing thousands of different tokens. We’re trying to be the exchange that lists a few amount of trusted, reputable cryptocurrencies that stand to provide long-term value to our customers.
Angie Lau: And so it really sounds like this is about cryptocurrencies that already are a mainstay, high liquidity, high volume, already internationally, and viewing this as an asset class, as you said, money, a digital asset.
I want to bring it back to the Central Bank of Bahrain. How are they thinking about crypto as an asset class and why do they want to participate in it, and how did they see the future of crypto as it sits alongside the future of the Central Bank of Bahrain?
Joseph Dallago: Absolutely. So we met with the Central Bank of Bahrain in early 2017, we thought the meeting was going to be about an hour; it ended up being three hours long. We thought there were only going to be a few people in the meeting; it ended up being 26 of some of the highest-ranking executives in the Central Bank of Bahrain. So we received a really great reception from them. It’s very clear to me at this point that the Central Bank of Bahrain is really interested in innovating. In their own words, Bahrain is a small country and in order to compete globally they need to move quickly and they need to adopt progressive and new technologies as they’re proven globally. So I think that they’re very excited about not only the cryptocurrency space, but also any new progressive industry that stands to create a lot of benefit to the world. And they’ve been really receptive to learning more about the industry and helping us launch this exchange in Bahrain.
Angie Lau: Globally, we’re watching monetary policy from around the world and there really seems to be a thought that at least one central bank, if not more, will launch its own central bank-backed cryptocurrency. Has that ever been a conversation out of the Middle East? Has that been something that Bahrain is even thinking about?
Joseph Dallago: That has not been a conversation with Bahrain specifically. UAE and Saudi both have had talks about that type of technology, but Bahrain has not released conversations around that.
Angie Lau: Politically, are you seeing that conversation increase and intensify in the Middle East? And why do you suppose that is?
Joseph Dallago: I wouldn’t say we’ve seen it increase, it’s definitely been mentioned a number of times. I would expect a pilot to come out in the next year or two, but so far we haven’t seen an implementation of that type of technology yet.
Angie Lau: You started in 2013, you’re a guy from Iowa from the Midwest, and now you’re in the Middle East. I guess it’s a really kind of poetic journey for you.
Joseph Dallago: From Iowa to Manama.
Angie Lau: Very well said. You take a look at what’s happening in the US and you see a lot of the regulators from CFTC to SEC, from the state level to the federal level, and it seems very fragmented. And then there you are in Bahrain, there you are in the Middle East, how would you describe the regulatory environment there, and the understanding of crypto and digital assets and blockchain?
Joseph Dallago: I think that the regulators in the region have definitely taken a wait and see approach. In Bahrain they’ve definitely been a lot more proactive and as historical context, Bahrain was the first country to adopt the internet. They were the first country to bring Uber to the Middle East; they were the first country to bring telecom and telephone lines to the Middle East. So, they’re historically a very progressive country, and the rest of the region, I would say, is definitely taking a wait and see approach. I think that there are different initiatives that they’re focusing their time on and cryptocurrency is still very much growing, still very much in its infancy in our understanding of the technology and how it’s going to impact the world. So I would say that Bahrain is definitely the trailblazer. And then I’d also point out that the ADGM in the UAE has also come up with a legal framework around cryptocurrency exchanges as well. So that’s also a very exciting movement on the regulatory front.
Angie Lau: You ask the average person on the street there, what is the real-world perception of cryptocurrency in their lives? Are they using it in stores, in business transactions, what’s their perception? Or are they viewing it as a store of value?
Joseph Dallago: Definitely, so I think you would get as I mentioned, I feel like this technology is still very much in its infancy, even though it’s been 10 years. I look at it very much as an infrastructural technology similar to the internet or similar to telecom, where it’s going to take potentially decades for it to really create a lot of benefit and be used for everyday purposes in the world.
But that being said, to answer your question, I would say that some people wouldn’t understand it. Everyone has probably heard of it at this point globally, a great majority of people. I would say they’ve had exposure to Bitcoin, it’s very rare that I talk to someone these days that hasn’t heard of Bitcoin or cryptocurrency. I would say that there’s a chance that they don’t quite fully understand what it is yet, and understand the idea of a global decentralized currency.
But I think we’re making a lot of progress, and I think that the people who are using it, who do understand it and may either own a small bit of cryptocurrency or plan on owning it, I would say that they’re very much using it either as a store of value, or for speculative purposes. And the way I like to look at those two, is they’re kind of two sides of the same coin. If you’re speculating on something, then chances are, you don’t have the idea that it’s going to go down in the near term future. If you’re speculating on something, and you’re holding it for a long time, that’s just another way of saying that you believe in its future value and it’s a good store value, because as we all know, something that loses value over time isn’t a good store of value.
So I think those are two sides of the same coin. A lot of people think that it’s being used for speculative purposes right now, but I think you could make the argument that the same number of people are using it for a store of value as well. It stands to be much in my opinion of a much better store value than a lot of other assets in the world.
Angie Lau: Well, you’re also making a very big bet as well, you’re basing your energy and your vision, and you’re basing your team out of Bahrain. What’s the product roadmap? When can we see Rain to market for the Middle East, for that part of the world? And what do you think that the potential could be in terms of the role of the Middle East to provide liquidity for a global cryptocurrency market?
Joseph Dallago: The two parts of that question are, when will Rain be launched, and we’re already launched as of last week. We received the regulatory approval from the Central Bank of Bahrain, so we’ve now gone fully public. You can sign up for Rain at rain.bh. We support Bitcoin, Litecoin, Ethereum, and XRP and you can also access us via the web as well as both on iOS and Android. So people can absolutely use us today.
And then secondly, the part that the Middle East plays in the global cryptocurrency community and economy: We really think that the Middle East could be a big part of that community over the long run, and that’s really our big bet, and we feel that the region has been underserved in the past and given a good way to access cryptocurrency, we think that it be it’s gonna play a large part in the growing cryptocurrency economy.
Angie Lau: Well, that, that was extremely insightful as to what’s happening not only in Bahrain, but across the region there. And good luck to Joseph, who is building his business, the first cryptocurrency exchange in the Middle East. Thank you, Joseph, for joining us. That was so enlightening and insightful of you to share exactly what’s happening in the Middle East and the potential of that region in the entire industry. So thank you, Joseph, and thank you, everyone, for joining us on this latest episode of Word on the Block right here on Forkast.News. I’m Editor-in-Chief Angie Lau. Until the next time.