▶ Founder and chief ex­ec­u­tive of the ex­change, Monark Modi, tells Alice Haine he pro­vides a plat­form for peo­ple to trade in lo­cal dirham cur­rency

The National - News - - BUSINESS -

If en­tre­pre­neur Monark Modi could do it all over again, he would have rolled out his cryptocurrency trad­ing plat­form, Bitex UAE, a year ear­lier than its Novem­ber 2018 launch.

That is be­cause at the start of Novem­ber 2017, vir­tual money Bit­coin was trad­ing at about $6,500 (Dh23,875) each to rise to a peak of around $20,000 in De­cem­ber 2017, but even­tu­ally crashed to around $10,000 by the end of Jan­uary 2018.

“Yes, the re­sponse would have been very dif­fer­ent if we launched a year ear­lier,” says Mr Modi, 24, the founder and chief ex­ec­u­tive of Bitex UAE, which of­fers cus­tomers a se­cure cryptocurrency wal­let and on­line trad­ing plat­form.

“But we were not ready be­fore and now we are, so it was still the right time for us.”

Bit­coin – which be­gan cir­cu­lat­ing in 2009 as an elec­tronic cur­rency op­er­at­ing out­side the tra­di­tional bank­ing sys­tem spawn­ing nu­mer­ous copy­cat cur­ren­cies – to­day trades at around $4,000.

Mr Modi, from In­dia, is con­fi­dent his ven­ture will be a suc­cess as the lower prices present an op­por­tu­nity to make a profit – as long as users can wait for mar­ket con­di­tions to im­prove be­fore sell­ing.

“When we launched in Novem­ber, prices were at one of the low­est pric­ing points in 14 to 16 months, so we thought the cur­ren­cies won’t be go­ing lower than this,” he says. “Even the UAE govern­ment is now putting in place its own cryptocurrency poli­cies and they have al­ready part­nered with dif­fer­ent coun­tries for cross-border re­mit­tances, so it holds value and it has a mean­ing.”

Last year, Abu Dhabi Global Mar­ket, the emi­rate’s in­ter­na­tional fi­nan­cial hub, was the first in the re­gion to launch a frame­work to reg­u­late spot crypto-as­set ac­tiv­i­ties, a step to­wards de­vel­op­ing a safer mar­ket­place for dig­i­tal cur­ren­cies in the emi­rate.

The reg­u­la­tions to gov­ern the dig­i­tal as­sets will over­see ac­tiv­i­ties un­der­taken by ex­changes, cus­to­di­ans and other in­ter­me­di­aries, ADGM said last year. In

Jan­uary, the cen­tral banks of the UAE and Saudi Ara­bia said they planned to pi­lot a shared dig­i­tal cur­rency for cross-border bank trans­ac­tions.

The move could rev­o­lu­tionise the re­mit­tance in­dus­try and build in­vestor faith in cryp­tocur­ren­cies.

Mea­sures like these are among the rea­sons the en­tre­pre­neur chose the UAE to set up his busi­ness. “It felt like a pos­i­tive en­vi­ron­ment to move into,” says Mr Modi, whose com­pany is li­censed by the De­part­ment of Eco­nomic De­vel­op­ment in Dubai.

De­spite many in­vest­ment ex­perts shun­ning cryp­tocur­ren­cies, there is cer­tainly an ap­petite for the dig­i­tal form of money in the UAE. Mr Modi says the com­pany “re­ceived an over­whelm­ing re­sponse” when they first launched – to a level he had not ex­pected.

The com­pany has 3,000 sub­scribers and 1,200 ac­tive users. While the com­pany trades vol­umes of around 600 Bit­coins daily, up from lev­els of about 80 at the end of its first trad­ing month. Mr Modi says the aim is a vol­ume of 1,800 to 2,000 Bit­coins. As well as Bit­coin, Bitex UAE users can also trade Ethereum, Lite­coin, Rip­ple and Bit­coin Cash, an up­grade al­low­ing for faster, more re­li­able and less ex­pen­sive trans­ac­tions.

Mr Modi’s mo­ti­va­tion to set up the com­pany came dur­ing a stint work­ing in the US fol­low­ing his stud­ies. Dur­ing his re­search into the UAE, one as­pect stood out – the na­tion’s obsession with cash.

“There are a lot of in­vestors who want to in­vest but they do not have a plat­form and don’t have an ex­change where they can ex­change cryptocurrency for lo­cal cur­rency,” he says.

As well as al­low­ing in­vestors to buy in dirhams or ex­change their cryptocurrency hold­ings for the lo­cal cur­rency via debit card, credit card or a bank trans­fer. Mr Modi had another of­fer­ing he thought would ap­peal to the mar­ket – a cash-de­posit ser­vice.

If they want to buy, cus­tomers can re­quest an agent to col­lect cash from their home, or if they want to with­draw from their dig­i­tal wal­let, an agent will de­liver the cash to them.

‘This is a new con­cept for the mar­ket here,” says Mr Modi. “It’s a cash-ori­en­tated coun­try. I was liv­ing in the US and there is no real use of cash there, but when I moved here I saw the mar­ket. There is a lot of cash so that’s the rea­son we came up with the idea.”

Mr Modi be­lieves this gives him the edge over com­peti­tors that also al­low cus­tomers to use flat cur­ren­cies such as dirhams to buy cryp­tocur­ren­cies, with only un­der a third of all with­drawals and de­posits at Bitex made through the cash ser­vice. He also be­lieves the com­pany’s three­key, multi-sig­na­ture on­line wal­let gives it an edge over com­peti­tors.

In Jan­uary last year, hack­ers stole about $530 mil­lion worth of cryptocurrency from the Coincheck ex­change in Ja­pan. Such events put in­vestors on edge.

“There have been a lot of is­sues with ex­changes [around the world] where money has been stolen and web­sites hacked,” says Mr Modi.

“So when we started, the first thing I had in my mind was to make it as se­cure as pos­si­ble.”

Ev­ery user stores funds in a multi-sig­na­ture wal­let, a dig­i­tal wal­let that records the trans­ac­tions on the blockchain – an elec­tronic trans­ac­tion pro­cess­ing and ar­chive sys­tem and the un­der­ly­ing tech­nol­ogy on which cryp­tocur­ren­cies such as Bit­coin op­er­ate.

To with­draw or de­posit funds the cus­tomers need at least two of the three keys – a so­phis­ti­cated form of cryp­tog­ra­phy that al­lows a user to ac­cess their wal­let – which the com­pany pro­vides to make a trans­ac­tion.

Un­like wal­lets with two keys, if one key is mis­placed or lost, users will still have ac­cess to their wal­lets and funds.

While one key is se­curely stored at the ex­change, the sec­ond is with Bitex UAE’s wal­let part­ner and the third is a re­cov­ery key.

The min­i­mum amount cus­tomers can de­posit is Dh200, with the min­i­mum with­drawal the same amount.

“There is no time­line. They can keep the wal­let and the coins will be in there for

when­ever they wish to with­draw them,” says

Mr Modi.

So far the com­pany says its clients are all UAE based with Emi­ratis and Egyp­tians the most prom­i­nent na­tion­al­i­ties to trade on the plat­form.

“About 70 to 72 per cent are per­sonal in­vestors – they are in­vest­ing from their per­sonal sav­ings,” says Mr Modi.

“We have also re­ceived feed­back from in­sti­tu­tional in­vestors – some pri­vate in­sti­tu­tions want to part­ner with us to pro­vide a ser­vice to their end users.”

Mr Modi has am­bi­tions to ex­pand the com­pany into the wider re­gion and be­yond.

While he has self-funded the ven­ture with $1m in sav­ings of his own and from his fam­ily, in the long-term the com­pany may con­sider ex­ter­nal fund­ing.

“We are cur­rently re­search­ing some re­gions in Europe,” he says, adding that he is also ex­pand­ing his team of eight. But the Mid­dle East is his first tar­get.

“We get a lot of en­quiries from coun­tries around the Mid­dle East that don’t have many ex­changes for their lo­cal cur­ren­cies,” says Mr Modi.

“Now that in­vestors know there is an ex­change deal­ing in lo­cal cur­rency in the UAE, they want one in their own coun­try too.”

Reem Mo­hammed / The Na­tional

Monark Modi is con­fi­dent Bitex UAE will be a suc­cess as the rel­a­tive lower prices of Bit­coin present an op­por­tu­nity to make a profit

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