A taste of Freed­ium

In an ex­clu­sive in­ter­view, the founder, chair­man and CEO of Mil­len­nium Fi­nance Cor­po­ra­tion, Keba Keinde, talks to Gulf Busi­ness about his new ven­ture into cryp­tocur­rency and why his Freed­ium coin could change the lives of 6 bil­lion peo­ple world­wide

Gulf Business - - CONTENTS - Neil King

In an ex­clu­sive in­ter­view, the founder, chair­man and CEO of Mil­len­nium Fi­nance Cor­po­ra­tion, Keba Keinde, re­veals how his new ven­ture Freed­ium could change the lives of 6 bil­lion peo­ple world­wide

WHEN THE GOVERNMENT of the UAE an­nounced last month that it aims to use blockchain for half of its trans­ac­tions by 2021, it was the lat­est in a long line of state­ments to con­firm the grow­ing im­por­tance and im­pact of the data­base tech­nol­ogy – not just in the re­gion, but across the world.

Since its in­ven­tion by Sataoshi Nakamoto in 2008 to sup­port cryp­tocur­rency bit­coin, the in­cor­rupt­ible dig­i­tal ledger of eco­nomic trans­ac­tions has evolved to be­come a highly sought af­ter tech­nol­ogy for busi­nesses – so much so that the Mid­dle East and Africa spend­ing on blockchain is ex­pected to more than dou­ble this year, ac­cord­ing to con­sul­tancy firm In­ter­na­tional Data Cor­po­ra­tion.

In Dubai es­pe­cially you don’t need to look far to ap­pre­ci­ate the bur­geon­ing in­flu­ence of blockchain. The emi­rate es­tab­lished the Global Blockchain Coun­cil, in­tends to use the tech­nol­ogy for all government doc­u­ments by 2020, and plays host to two ma­jor events – the Fu­ture Blockchain Sum­mit, tak­ing place this month, and the World Blockchain Fo­rum, which was held at Mad­i­nat Jumeirah in April.

It was dur­ing the lat­ter event that a new prod­uct was of­fi­cially launched that show­cases the power and po­ten­tial of blockchain tech­nol­ogy – a dig­i­tal cur­rency that could change the lives of bil­lions of peo­ple world­wide: Freed­ium.

Based out of the Dubai Multi Com­modi­ties Cen­tre, Freed­ium is the first com­modi­ties-backed dig­i­tal sta­ble cur­rency, using blockchain tech­nol­ogy to pro­vide fi­nanc­ing to com­mod­ity own­ers in emerg­ing mar­kets – par­tic­u­larly in Africa, but also in

“I b e l i eve that tech­nol­ogy to­day, w i t h the blockchain, can al­low us to reach the nex t l evel o f un­leash­ing the po­ten­tial o f Af r i c a – to be able to t rans­act ef­fi­ciently with the rest o f the wo r l d and be con­nected with the global fi­nan­cial mar­ket .”

Latin Amer­ica, Asia and the Mid­dle East.

With plans to be op­er­a­tional by the third quar­ter of this year, the firm ex­pects to is­sue its first Freed­ium coin in Q4, and aims to free de­vel­op­ing coun­tries from con­straints linked to volatile cur­ren­cies, lim­ited ac­cess to bank­ing ser­vices and for­eign ex­change scarcity.

The cur­rency is the brain­child of Keba Keinde, founder, chair­man and CEO of Dubai-based in­vest­ment bank Mil­len­nium Fi­nance Cor­po­ra­tion, and now founder and chair­man of Freed­ium.

We meet a day be­fore his launch an­nounce­ment at the World Blockchain Fo­rum, and as we talk his ex­cite­ment for the po­ten­tial of Freed­ium is pal­pa­ble.

“In Africa, tech­nol­ogy has shown that it can have a fan­tas­tic im­pact and al­low the con­ti­nent to leapfrog,” he says.

“The clos­est ex­am­ple of what we're try­ing to do is with mo­bile telecom­mu­ni­ca­tions. Around 20 years ago in Africa only 1 per cent of peo­ple had ac­cess to a tele­phone. Can you imag­ine? Only 1 per cent could be con­nected to the rest of the world.

“With the in­tro­duc­tion of mo­bile telecom­mu­ni­ca­tions to­day in Africa you have 50 per cent – in some coun­tries 60 to 70 per cent – of the pop­u­la­tion that has ac­cess to the rest of the world on mo­bile phones.

“They have ac­cess to in­for­ma­tion, they know what is hap­pen­ing, they can be con­nected to the rest of the world. That has com­pletely trans­formed Africa and it's po­ten­tial and we have seen Africa be­come the sec­ond fastest grow­ing re­gion af­ter China for the last 10 years – to a large ex­tent due to this new tech­nol­ogy that al­lowed this vi­brant pop­u­la­tion to fi­nally get con­nected to the rest of the world.

“Be­cause the African bank­ing sec­tor is ex­tremely weak, Africa is the world leader in terms of mo­bile money. You have the largest amount of mo­bile wal­lets in Africa – twice as many as the United States and grow­ing twice as fast. We went di­rectly from no bank ac­count to mo­bile bank­ing. And that has had a tremen­dous im­pact on the con­ti­nent.

“I be­lieve that tech­nol­ogy to­day, with the blockchain, can al­low us to reach the next level of un­leash­ing the po­ten­tial of Africa – to be able to trans­act ef­fi­ciently with the rest of the world and be con­nected with the global fi­nan­cial mar­ket.”

Freed­ium works by invit­ing cus­tomers to get liq­uid­ity from their com­modi­ties in Freed­ium coins, de­posit­ing their com­modi­ties in a ware­house as col­lat­eral.

“We take that com­mod­ity and we de­velop a hedg­ing strat­egy that al­lows us to lock the value of this com­mod­ity,” says Keinde.

“We take that value, cut it into small pieces – the Freed­ium coin – and is­sue them to your dig­i­tal wal­let. It is is­sued with the full back­ing of your com­mod­ity and sta­ble to the dol­lar, thanks to our sta­bil­i­sa­tion mech­a­nism that al­lows us to track the dol­lar within plus or mi­nus 5 per cent. It is glob­ally ac­ces­si­ble on any de­vice, and you can use it to make in­ter­na­tional or na­tional trans­ac­tions with­out hav­ing to go through cor­re­spond­ing banks.

“It is also pro­tected against Black Swan events be­cause we have a bas­ket of com­modi­ties back­ing the cur­rency, so the prob­a­bil­ity that all of the com­modi­ties will drop at the same time is al­most nil.”

Avail­able to all de­vel­op­ing and emerg­ing economies, Freed­ium has the po­ten­tial to reach 6 bil­lion peo­ple, or 85 per cent of the world's pop­u­la­tion. That rep­re­sents some 60 per cent of global GDP.

Keinde says Africa will be the ini­tial fo­cus be­cause “this is where the pain points are most acute”, and iden­ti­fies four main chal­lenges sti­fling the con­ti­nent's growth: Low bank­ing pen­e­tra­tion, weak and volatile cur­ren­cies, the lack of ac­cess to dol­lars, and price ex­ploita­tion by in­ter­na­tional com­mod­ity trad­ing com­pa­nies.

And he ar­gues that Freed­ium can help over­come these chal­lenges in a num­ber of ways.

“Now that this cur­rency ex­ists you can do so many things,” he says.

“Take re­mit­tances. You have $50bn worth of re­mit­tance com­ing into Africa ev­ery year. Around 11 per cent of those go to the likes of Western Union and banks via trans­fer fees, and for­eign ex­change fees. We can do it for free with Freed­ium coin. It's on your phone, so if I'm here in Dubai and I want to send it to my sis­ter in Sene­gal, I press a but­ton and she re­ceives it with­out any­one else get­ting in­volved. It will cut down the cost of re­mit­tances to Africa from 11 per cent to less than 1 per cent.

“Take another ex­am­ple: trade. You have $1.5 tril­lion worth of trade each year in Africa, of which 70 per cent is not fi­nanced by banks – it is on a cash ba­sis. It's some­one in Africa who has money and wants to go buy com­put­ers in China to come back and sell them at home.

“If, I am a trader let's say in Nige­ria, I would take my naira, go to the black mar­ket, change it into dol­lars, take a plane to China, change it into yuan, go to Guangzhou, buy my com­put­ers, fly back with them.

“Now I can sit in my liv­ing room and en­ter into a smart con­tract with the sup­plier. The sup­plier knows I have the money be­cause it's dig­i­tal and the money is blocked. He knows that once he ships the goods and that a third party says the prod­uct is shipped, he's go­ing to get paid. He has zero risk. From the per­spec­tive of the Nige­rian trader, he knows he's go­ing to pay only when the

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