In an increasingly interconnected world, markets behave in extraordinary ways at times of crisis. As the MENA’s first licensed cryptocurrency platform, Rain has had a great amount of first-hand insight on the behavior of the diverse and rapidly growing crypto-community in the region. It is a particularly interesting and volatile time for capital and cryptocurrency markets, following the ongoing novel coronavirus pandemic.
The cryptocurrency industry has matured significantly in the past few years. Legal frameworks and regulations around the world have allowed institutional investors to increasingly participate in the market, fundamentally affecting market behavior as the profile of investors changes.
Bitcoin is often seen as a digital gold; often used as a global hedge against financial turmoil. In fact, many hedge funds have historically allocated a small portion of their portfolio for Bitcoin, because it is usually not correlated with other markets and currencies. It was surprising to many enthusiasts when Bitcoin and other cryptocurrencies crashed alongside the global markets on March 12th, 2020.
By way of explanation: According to traders, institutional investors in the cryptocurrency markets overwhelmed the market, creating a sell-off event. Institutional sell-off was mostly caused by the rapid flight to USD liquidity, from professional traders who also trade in other assets, like traditional equities and bonds.
The sell-off created a positive correlation between other markets and Bitcoin that lasted until the end of March (at the time of writing), where we began to see early signs of ‘decoupling’ [and what I mean by this is where the price changes of Bitcoin are no longer behaving in the same way as other markets]. The community is closely watching this, and we’re seeing the early signs of this decoupling right now.
The chart below shows the initial (correlated) drop, and the beginnings of the ‘decoupling’.
A quick history lesson on the birth of Bitcoin: The Bitcoin White Paper was circulated between cryptographers in October of 2008, and the system was up and running four months later in Jan 2009. Bitcoin’s creator left an encoded message in the first record of transactions in the Bitcoin blockchain, “The Times 03/Jan/2009 Chancellor on the brink of a second bailout for banks.”
This is what it looked like:
It was not explicitly stated what this message meant, but it was widely interpreted as a reference to The Times newspaper headline, which acted as both a timestamp to prove that the network had not been created before that date, and as a comment on the instability caused by the global financial systems and (inevitable) bailouts.
Fast forward to over a decade later. Following the impact of COVID-19 on the economy, the U.S. federal reserve has announced unprecedented measures of quantitative easing [that is, rapidly increasing the money supply in the financial system to prop up assets and avoid a downward spiral]. This echoes the 2008 financial crisis, which was when Bitcoin came into being. This relationship was important then, and is just as important now.
No matter what, you cannot change the maximum quantity of Bitcoin available, no matter how much money the central bank prints. Similar to gold, printing more money does not increase the supply of gold (or Bitcoin) available.
As a result, Bitcoin seems to have an increasing appeal at times of crisis, mainly due to its strictly governed, and predetermined, issuance rate. Only 21 million bitcoin will ever exist, and 18 million is already in circulation (and we will not see the remaining 3 million in circulation for decades).
"There is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there's enough cash in the banking system."
- President of the Federal Reserve Bank of Minneapolis, Neel Kashkari on CBS's "60 Minutes”.
While Bitcoin was a result of many years, and perhaps decades, of attempts to create a peer-to-peer secure form of digital money, it is hard not to imagine Bitcoin as being born out of the last global financial crisis of 2008.
Bitcoin’s ‘fixed’ money supply makes it a viable candidate as investors look to hedge against inflation and currency debasement.
While there was much fear behind market movements, the cryptocurrency exchange industry seems to benefit from increased transaction volumes following volatility, with trading volumes increasing globally, including over 200% increase on Rain with GCC pairs from January to March of 2020.
It is too early to tell the ramifications of such unprecedented decisions, ultimately the markets and time will tell.
For us in MENA, what is incredibly clear is that there is more interest in Bitcoin than ever before, as investors in the region look to insulate themselves from inflation.
Rain is a cryptocurrency trading platform in the Middle East, headquartered in the Kingdom of Bahrain. We are licensed and regulated by the Central Bank of Bahrain (CBB). Rain enables you to buy, sell, and store bitcoin and other cryptocurrencies, in a regulated, secure, and compliant way.
We are happy to announce that Rain has acquired the Crypto-Asset Module (CRA) license from the Central Bank of Bahrain (CBB). Rain is the first crypto-asset brokerage to earn a regulatory license in the Middle East and joins an elite group of brokerages internationally. We are now serving customers at www.rain.bh.
In addition to the licensure, we are also pleased to announce that we have closed a seed round of $2.5MM .
Since our co-founders came together in 2016, it has always been our ambition to form a licensed crypto-asset brokerage. We recognized that the cryptocurrency space needed regulation to reach mass adoption and most importantly, keep customers safe. We further recognized that becoming a licensed financial institution was the only way to create a company that would last decades. With a focus on the region, we set out to work with regulators to create a legal framework around cryptocurrency. This achievement marks the end of a three-year long journey to become licensed by the Central Bank of Bahrain.
The Central Bank of Bahrain has put an extraordinary amount of work into releasing a comprehensive set of regulatory standards called the Crypto-Asset Module. 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. This further demonstrates Bahrain’s dedication to being a financial hub in the region. By receiving the Crypto-Asset license, Rain has demonstrated that we comply with the module’s requirements around capital adequacy, cyber security, insurance, reporting, corporate governance, and a number of other factors that ensure that our company is prepared to serve institutional and retail customers.
By becoming a licensed brokerage, we are able to 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 are very proud of this accomplishment as it leads to a more stable and safe service for cryptocurrency customers across the Middle East.
We were not alone in this pursuit. We have received an immense amount of support from the Bahraini ecosystem including the Bahrain Fintech Bay, Bahrain Development Bank, and the Economic Development Board. We are happy to represent the entire community with this achievement. We have also received support from our incredible group of investors. In particular, BitMEX (known as the world’s largest futures crypto-asset brokerage), Blockwater(Kuwait-based cryptocurrency fund), Vision Ventures, 500 Startups MENA, and Taibah Valley.
We are also backed by cryptocurrency heavyweights Jimmy Song, Mike Komarnsky (founder of Cumberland Mining), Aaron Lasher and Aaron Voisine (co-founders of BRD, formerly Breadwallet), Compound.finance, CMT Digital (worldwide commodities trading firm headquartered in Chicago), and the founding team of JMBullion (largest precious metals brokerage in the United States) as investors.
With a license secured and our initial seed capital raised, we believe that this is the foundation of a company that will last for decades. Rain will maintain focus on our mission to create a top international exchange and provide a way to buy, sell, and store cryptocurrency in a regulated, secure, and compliant way. If you are interested in helping us achieve this mission, please send us an email with a cover letter at [email protected]. We are hiring.
We are pleased to announce today our successful Shari’a compliance certification completed by Shariyah Review Bureau (“SRB”). SRB is licensed by the Central Bank of Bahrain as a Shari’a Advisory firm authorized to issue Shari’a compliance certifications.
SRB has reviewed Rain’s brokerage service and has determined that the sale, purchase and custodian activities of Rain are in compliance with Shari’a principles.
Rain aims to deliver more value with a Shari’a compliant crypto-asset brokerage. The Shari’a certification covers a suite of three cryptocurrencies (bitcoin, ethereum, and litecoin). Rain expects to enable top-tier family offices, sophisticated investors and Islamic institutional investors to buy, sell and store cryptocurrency in a Shari’a compliant way.
Rain’s founders said in a joint statement: “This is a historic milestone in the cryptocurrency and Islamic markets. This is the implementation of Rain’s mission to provide the Middle East with a crypto-asset brokerage that meets the highest standards in terms of regulation, accessibility, security and trust. We are excited to open the Islamic markets to cryptocurrency with a Shari’a compliant exchange and a suite of cryptocurrency investment opportunities.”
We are committed to continuing to provide as much value to our customers and the industry as we can. Customers can find the Shari’a compliance issuance on the link attached.
We are pleased to announce the launch of Rain, the most regulated and secure crypto-asset brokerage in the Middle East.
Despite having a developed financial system and extremely tech savvy population, it is still very hard to obtain cryptocurrency in the Middle East. A combination of high fees and pricing, poor user experience, and a lack of clear regulatory standing have made it difficult for consumers and institutions alike to trade cryptocurrencies.
The Rain team was united by the belief that Bitcoin (and other cryptocurrencies) will lead to a financial system that is fast, inexpensive, and accessible to everyone. We hail from the cryptocurrency industry having spent time at Abra, BitGulf, Bitquick, Digital Cotton, Glidera, and Kraken. In order for Bitcoin and cryptocurrencies to reach mainstream adoption, the industry needs brokerages all around the world to provide access to the network. Through our research, we found many companies serving this function around the world; however, it became clear the Middle East was underserved.
Over the last two years we have spoken with regulators, banks, and built Meetup communities in the Middle East to help legitimize this new technology. After conversations with many regional regulators, it was clear to us that the Kingdom of Bahrain is the best home for an early crypto-asset brokerage in the region. We began working closely with the Central Bank of Bahrain (CBB), as well as other forward thinking institutions, such as the Economic Development Board (EDB) and Bahrain Fintech Bay (BFB). In September of 2017, we were invited to join the CBB’s regulatory sandbox. Rain was the very first crypto-asset brokerage to be admitted to the sandbox, a historic moment for the industry and one that we are very proud of.
Since our admission, Rain has been on an accelerated journey. We have secured multiple banking relationships with CBB-chartered banks, served an early cohort of customers from across the region, and built beautiful native applications (iOS, Android, web) for our customers to use.
We allow customers to buy and sell several fiat (BHD, KWD, SAR, AED, OMR, USD) and cryptocurrencies (BTC, ETH, LTC). In the near future we will be introducing Rain Desk, a specialized white-glove OTC service for family funds and institutional accounts across the Middle East. This will include custodial services.
The core of our mission is to create an internationally respected exchange in the Middle East, both in terms of security and pricing. Rain has bank grade security and is within 15–30 BIPS of the international market rate. Our transaction fee is 1.5% on our brokerage and will be 0.25% on our exchange.
Education is a key component of reaching mainstream adoption for cryptocurrencies. We have built an in-person Meetup presence in Bahrain, Saudi Arabia, Kuwait, Egypt, Jordan, Oman, and UAE focused on education. We provide a source of truth for our customers and give them comfort while navigating this new industry, whether in-person or through customer support, research desk publications, and more.
We are dedicated to Bitcoin and the industry built around cryptocurrencies. We believe this technology is going to change the world for the better, very soon. We would like to invite you to join us.
Rain will be making further announcements by 2019.