The future of finance
THE CEO OF BAHRAIN-BASED COINMENA – WHICH RECEIVED ITS SECOND CRYPTOCURRENCY LICENCE IN THE EU – TELL US WHY THE LONG-TERM OUTLOOK ON CRYPTOCURRENCIES IS VERY BULLISH
How has the cryptocurrency market evolved in the Middle East?
The crypto market has evolved tremendously over the past five years. In the previous 2017-2018 crypto cycle, participants were mainly speculating on new token projects with exploratory use cases or minimal traction. Investors didn’t have reliable on-ramps/off-ramps to deposit and withdraw their local currencies, and crypto events were mainly attracting a small regional audience.
Fast forward to 2022, MENA crypto investors are not only investing in token projects, but are actively participating in various crypto sectors, including decentralised finance (or DeFi), non fungible tokens (or NFTs) and decentralised autonomous organisations (or DAOs). In terms of access to crypto, investors can safely use regulated exchanges such as CoinMENA. Events in Dubai now attract a global audience, and many crypto professionals decided to move to Dubai after attending events here.
There is also great improvement on the funding side, as regional investors are now looking for exposure to crypto and crypto businesses. The regional market has definitely evolved, but relative to progress in other markets, we still have a long way to go which is why it’s so exciting.
Cryptocurrency investors enjoyed a good year in 2021 despite the volatility. What’s your outlook for cryptocurrencies and crypto assets in the year ahead?
First, I’d like to qualify my answer by saying that I’m definitely biased. I’m convinced cryptocurrencies are the future of finance and the long-term outlook is very bullish.
Volatility is a feature and not a bug. Cryptocurrencies are the only truly free markets in the world. If the Nasdaq or any other stock exchange starts to crash, they can simply shut off trading and this happened a few times during the Covid crash of 2020. In crypto, that’s not possible, it’s open 24 hours a day, seven days a week, with no off switch or central authority to control unilaterally.
The second part of the volatility is that we are still in the very early stages of global adoption of cryptocurrencies. Less than 4 per cent of the world owns crypto and around 0.5 per cent of global wealth, so a relatively small number of investors can have an oversized impact on price movement in the short-term. Which brings me to my next point about my outlook, because adoption is still less than 4 per cent, I think crypto assets still have a lot of room to mature and grow as they become a more mainstream asset class.
What differentiates CoinMENA from other crypto exchanges?
We started CoinMENA because we saw a market need for a fully regulated crypto currency exchange that offers financial services built on crypto rails. Regional crypto investors and traders face issues when it comes to fiat to crypto and crypto to fiat on ramp and off ramp, which makes it much harder for the crypto exchange to offer other financial services. Investors lose trust when they can’t deposit and withdraw safely. At CoinMENA, we’ve focused on ensuring the investor journey is smooth. Our interface is simple and client support is definitely one of our strong suits.
As an entity regulated by the Central Bank of Bahrain, we have access to banking and payment rails that allow our users to deposit and withdraw their funds efficiently. The other thing that differentiates us is that we don’t see ourselves as just a crypto exchange only. We aim to establish ourselves as the leading crypto financial service provider. So right now, we function as an exchange where traders and investors can buy and sell crypto, but in the near future, we will start offering financial services built on Web3 (also Web 3.0) rails.
What are some of the most popular cryptocurrencies and assets listed on your exchange?
Currently, we have 13 crypto assets on our platform, and we plan to add a lot more in the near future. Obviously Bitcoin and Ethereum are the most established so they are quite popular. XRP is also popular in the region. We constantly keep adding new currencies based on what our customers want.
We recently added Chiliz, which many of the football club tokens are being built on, and Fantom, which hit a milestone last week by amassing over $12.2bn total value locked, overtaking Solana and Binance Smart Chain. Stablecoins are also quite popular as many users move funds around the world of crypto, using USDT and USDC.
What’s your advice to someone looking to invest in crypto assets?
I would say put some skin in the game – but start small, pay attention, learn more about it and adopt a long-term outlook, as we are still in the early stages of crypto adoption, especially in the region. You should definitely use a regulated exchange such as CoinMENA, to minimise counterparty risk and ensure you can invest safely. Avoid using any leveraged products that are often offered on unregulated exchanges, as they come with excessive risk.
Personally, my investment strategy is simple. I invest a small amount of money into Bitcoin and crypto every week, regardless of the price.
How do cryptocurrency and financial service firms manage risks in an increasingly digital world?
Managing risk is a core part of any financial institution, and it’s even more important when it comes to crypto exchanges. To manage risk, institutions need to work with specialised partners who have in-depth expertise in subsects of crypto and tech, such as transaction monitoring, custody and web infrastructure providers. TRM Labs or Ciphertrace are tools used by crypto institutions for know your transactions (or KYT). This allows exchanges to analyse incoming and outgoing crypto payments on-chain, by seeing if the users interact with any blacklisted wallets or stolen/ reported funds.
In addition to working with specialised partners, institutions need to implement strict information security policies and safe practices for end user devices to ensure cybersecurity risk is managed.
Your company recently integrated Chainlink to bring enhanced transparency to its digital assets exchange. Tell us about it.
While most traditional exchanges rely solely on centralised internal pricing mechanisms, CoinMENA’s integration of Chainlink Price Feeds is an initial step into the world of decentralised finance, as we obtain tamper-proof, decentralised and transparent prices from Chainlink Oracles, a more effective solution when compared to traditional centralised data solutions.
What are your future plans, and how will they add value to investors?
We’ve just obtained our second cryptocurrency licence in the EU, enabling us to expand to more countries and increase the number of financial services we offer our global customers.
As I said earlier, we see ourselves as a crypto financial services company, which means we aim to offer traditional financial services such as borrowing, lending and staking, among others, which are built on Web3 and crypto rails. We see this as the future of finance, and we are extremely excited for how it unfolds.
Our goal is to be the leading crypto financial services in the region and compete on a global scale. We also have a few exciting announcements coming soon.
YOU SHOULD DEFINITELY USE A REGULATED EXCHANGE SUCH AS COINMENA, TO MINIMISE COUNTERPARTY RISK AND ENSURE YOU CAN INVEST SAFELY. AVOID USING ANY LEVERAGED PRODUCTS THAT ARE OFTEN OFFERED ON UNREGULATED EXCHANGES, AS THEY COME WITH EXCESSIVE RISK”