Yehia Badawy, Co-Founder Rain: “Our areas of focus are emerging markets”

When was rain creating? Who was the company founder?

So, the company started, its four of us that co-founded this company – Joseph Dallaglio, AJ Nelson, Abdullah Michael and myself Yehia Badawy. Funnily enough, we each had an idea for  this company separately. So I was working on creating something similar in 2014, actually speaking to the central Bank of Egypt and trying to get this working. It started the Cairo Bitcoin meetup after having lived in the US in San Francisco and attending the San Francisco Bitcoin meetup. Joseph and AJ are traveled  friends and they had started at the company and they were looking for their next project and crypto picked  their interest and soon they got jobs in the industry and we actually got to talking online. Abdullah similarly, has been involved in crypto since 2013, and he, for the very long time that was the face of crypto in Saudi and even interface with the Saudi central bank as early as 2013 around the topic. We met online and we work together online for two years, actually before we met in real life. We met the night before we were presenting to the central Bank of Bahrain in real life, and that’s how the company started.

Can you tell more about your project and what is all about.

Of course, we believe that crypto assets or cryptocurrencies are going to change the way people transact and more value on the internet. It’s a  quite a revolutionary concept. We were lucky enough to be in the right place or to connect with the right people and learn about this early on. So our mission when we got together, we very early on, we had aligned on how we wanted to bring this innovation to the region. We had two two options. One was to start immediately without including the regulators, the banks and the ecosystem in the conversation where we would structure our company offshore and serve the region remotely. The other route was to work with regulators and try to get this industry recognized one way or another from legal and regulatory perspective, because we believe that is more stable, more sustainable, more realistic approach. Actually, if you really want this industry to grow, you cannot avoid working with regulators or banks. You can do that until you get to a certain size and then reality will hit you. So at our core, we believe that this company exists to support this ecosystem through working with regulators, and that’s why we tried with several central banks in the region until we had an introduction of the central Bank of Bahrain in 2017. At our core, we allow people to buy, sell and store crypto assets or cryptocurrencies. And our mission is to continue doing that by working with the regulators in the region and working with them to regulate and license and recognize this industry. And that’s the path we’ve been on.

Ok, in your mind at what state of development is the company right now?

I’m quite ambitious, so I’m always thinking that there is a lot to do and that we sometimes need to take time to recognize where we have been. The experience with Bahrain, with the central Bank of Bahrain, that was the starting stage for the company where we found a regulator that was open to the concept itself and willing to work with it. It did take us time and took us longer than anyone expected. That was the first lesson we learned that it takes a lot of time to bring all the stakeholders on board. We exited the sandbox and acquired the license, and that was the first lesson into what does it take to actually acquire a financial institution license and what goes into making that happen? We thought that having the license would be the end of the road and we would be happy and that was it. But then we figured out that that’s just the beginning of the next chapter, which is working with the regulator to have a commercially viable business through our collaboration with the central Bank of Bahrain. We were able to grow the company and start serving clients not only in Bahrain, but in the region. Now we’re in the stage where we’re looking to expand and grow and replicate this success in the countries in the region. Every single country and the foundation of our business is working with the regulator, working with the banks to ensure that a safe and licensed and regulated ecosystem exists for local participants to be able to capitalize on this new innovation. I don’t think there is a specific size, but what I would say is the COVID 19 accelerated the growth of the company. It was very good, despite everything that came with it, it was good for our business, good for our industry, and the company has grown quite a bit. So we’ve tripled more than tripled actually in one year in terms of our team members and now where we’re very focused on growing and regionally expanding and then also adding additional products and services to our offer.

Now we see that more and more companies entering the market from Bahrain. What do you think about the conditions for doing crypto business in Bahrain?

So we expected that to happen as a trailblazer, we are creating a path and that other people will have an easier time. So, I see that as recognition of the efforts and the work that we invested, working with the regulators when you were the first and no one else is having the same discussions that you are with your counterparts in the regulators and the banks. You have to work on validating what you’re saying and bringing in external context and allowing them to understand that what you’re saying is for the benefit of the industry and not just for the benefit of your company. Now I’m really glad that Bahrain is able to launch such an industry. I’m not sure how familiar with the region, but historically, in the 80s, Bahrain was actually the financial hub of the region for Dubai came and then took over. So, they were trying to reach a certain milestone with fintech and hoping to relaunch there, let’s say, prominence through fintech. I think they’re doing that quite well, and the numbers are quite impressive. So I see that being a positive sign for Bahrain and for the region and obviously for our industry as well.

Your company you’ve mentioned about that your company was the first one to get the license in the Middle East and tell us how difficult it was and which obstacles did you meet on this way?

I’m not sure we’ll have enough time, but I can summarize some of the things and get to the main highlights.

Just to highlight the most.

You have to understand that crypto assets and cryptocurrencies are very, very different to anything that the regulators have worked with in the past. So we had an interesting role where at certain points we were interfacing with them as our own regulator, but then also as counterparts trying to find collaborate to find a path for success because it is in our best interest of Bahrain has a successful licensing regime. We want this to be something that stands the test of time and that is actually robust. So that comes with a lot of discussions around how do you implement the traditional mechanisms that existed within the traditional banking and financial services ecosystems into crypto assets? The crypto assets are not tangible in terms of they’re not physically tangible you. They’re decentralized in nature. So we’re trying to apply. A centralized form of regulation to decentralized asset comes with its own challenges. The second thing would be working with other ministries and regulators. So, for example, in the Ministry of Commerce, there was no designation of crypto asset activity as in a commercial license. So working with those entities to recognize this industry. So I think overall you never really understand the full scope or breadth of the task at hand until you look back and you realize that there were a lot of moving parts that needed to be figured it out. And it’s our role to continue supporting the regulators in understanding what that is. What’s the best way to do it, introduce our industry expertize and bring it to the table. But ultimately, it’s up to the powers that be in every country to decide that this is something that is of nationalist, is of economic benefit and is something that will help the local economy grow. So our role is also in showcasing those benefits and helping the regulator and the different stakeholders understand those different benefits.

Thank you, so some crypto companies based in the Middle East positioned themselves as Sharia, I believe. What’s your position in regards of Sharia law?

I’m not going to talk about Sharia law that’s perhaps outside of the the scope, but I’ll talk about Sharia compliance because those are two maybe different things. Sharia compliance here is an important element when a lot of investors look at investment products. It is a main point of consideration now being from the region and serving the region for the region. We decided that if this is something that’s important to people, then we should bring it on board, and we were one of the very first companies in the world to acquire Sharia compliance certification for the crypto assets that we offered and for the way that we offer this service. Now, whether or not this will continue to be a point of interest. Time will tell. But as of today, we understood that this is something that matters to our clients and that it’s important to bring on board. So we worked with some of our partners to achieve Sharia compliant certification.

You’ve mentioned above, that range management cryptocurrency platform has been in the crypto market for several years, but user base has grown nine times in the first half of 2020, compared to the same period in 2019 and 90 times in 2021. Yeah, it’s the last two years you have been expanding by giant leaps. What’s the reason?

I’m commenting today as part of Green Group and this I’ll be talking about our operations in Bahrain, but also regionally as well. I think that at its core this region was lacking in terms of available options, safe, secure, fairly priced services. Those didn’t exist prior to today to give you an example. On average, it costs someone eight to 10 percent commission to actually acquire a crypto asset here in the region prior to bringing their own pricing, which was one-point five percent. There were no regulations whatsoever. A lot of people unfortunately had to pay the price. Any growing industry going through several cycles of innovation. There are lessons that will be learned, and we came in with a very secure, regulated and user-friendly offering and that supported our growth. Additionally, I would say globally, people became more aware of what this industry is, and it’s gone through several iterations. I’ve been in this industry since 2012, and I can tell you there are several chapters that this industry has gone through. And right before the pandemic, people were starting to again recognize the value and instead institutionalize the value that’s being created by this industry. Once COVID 19 hits, I think people had a lot of time to reexamine their life, but also to think about investments and how they work and what do they want to do. And I think the prominence of the digital world or the metaverse became even more pronounced and people started to realize that physical assets are not the only way value can be exchanged. And I think coupled the pandemic, coupled with our user-friendly offering and our regulatory compliance or security, we were able to see that growth.

Are most of your clients private or corporate?

In terms of numbers, the majority are retail clients, but we are seeing substantial interest from institutional clients or legal entities. Those can be companies that offer their products or service in return for crypto or companies that want to diversify their own assets into crypto. More investment or fund manager types of companies.

Can you describe your average customer in corporate and in the private sector?

In the corporate sector, I think to answer that question, we have to recognize the change or the evolution that’s happened in the past few years. A customer that signed up on rain in 2018 is a little different than a customer that’s signing up on rain today. I think in those three years, as we’ve discussed in earlier conversations, a lot has changed in the industry. And I think those that came in 2018 were early adopters and they were companies that were driven or managed by people that understood this industry quite well. So this is more of a push factor. Today, for example, we have a client that is offering real estate in Dubai and selling the real estate and crypto assets, and they typically and originally weren’t doing that. But then they started offering that when the market started showing that there is demand and this is more of the pull factor. And so I think it’s a mixture of market dynamics awareness. On the institutional side. What we’re seeing is an evolution into the traditional fund managers that want exposure for alternative assets in their portfolios and for their clients on the retail side. There is more awareness around what crypto assets are, what are their risks, and globally they were part of a lot of conversations. I mean, Elon Musk’s musings on Twitter and those conversations helped drive adoption one way or another. Twitter announcing that they would accept tipping in bitcoin. And leaders in those companies talking about these things drove awareness beyond just the in crowd or the tech driven crowd, and it’s more mainstream. I think the mixture of retail clients is becoming more and more mainstream rather than more focused on tech.

Your website states that you work not only with dollars and cryptocurrencies of the Gulf countries, but also that your clients can use Visa and MasterCard payments systems to buy cryptocurrencies to. However, just the other day, a representative of MasterCard say that they are trying to block crypto purchases. Why are they more lenient in this question when it comes to your region

My opinion is based on what’s publicly available. If you visit the MasterCard website in February 2021, there was a post about how they are going to start embracing crypto and working with it. As a participant in the industry for the last nine years, I can tell you that the discussion has shifted quite a bit from the early days of 2012- 2013, when MasterCard and Visa weren’t very friendly towards the industry. I think that took a turn around 2018, initially with Visa and then with MasterCard. When both companies recognized the value of this industry, they recognized the immense demand that their own clients and users have for this industry and they are now very friendly towards. They each have programs for crypto companies. They’re reaching out to companies like us to work with us on different product offerings, and even some of them even have crypto teams working internally and crypto incubation programs as well. So from our vantage point, them, given what’s being publicly discussed by those companies, their stance is quite positive.

What is the share, how many of the cost of services in your business structure?

We don’t disclose publicly any specific numbers around those things, but what I can tell you is we’ve noticed a lot of trust from our users for our customer service, given that we are licensed here locally. So actually, what some users do is they store their crypto assets with us and because of the trust that they have, some of them want to buy certain crypto assets that are not offered on rain today. But they then choose to convert those assets into assets that are offered by and costly to them or store them with us. So we take that as a sign of trust into our services and the license that we have.

And what are your plans for the coming year? Are there any metrics for your specifically look at, for example, numbers of users’ turnover, et cetera?

We’re primarily driven by the same mission, which is enabling the people in the region to have access secure, user friendly, safe access to crypto assets, whether that’s buying, selling or storing. So that’s one of our first points of focus. And in order to do that as Raine Group, we want to expand in multiple countries. Our areas of focus are emerging markets. So that’s North Africa, even sub-Saharan Africa, GCSE, Lavonne, Turkey, Pakistan. Those are the kinds of countries where we’re looking at today. We want to have relationships with local regulators in all those countries. We want to make sure that the point of view of the industry is brought to those regulators in order for them to create regulations and licenses for companies like ours, or at least enable them to see a path where we can work together. So that’s our first point of focus. Secondly, is working on education and being a knowledge base for the region. We believe that it’s important for everyone to understand the benefits of crypto assets and where they are today and how they can impact their lives. And that’s the second point of focus for us.

All the other players in the industry and how do you see yourself working together to achieve regulations in the space?

I think it’s very important for there to be a united front within a specific legal framework. Obviously, there are certain considerations like antitrust and other things that need to be kept in mind. But ultimately, there needs to be collaboration between all the players in the industry to bring a united voice to the regulators because this benefits everyone. If there is a common understanding between the participants in the market with the regulators and the other partners in the ecosystem, this creates a successful outcome for everyone. So we continuously welcome collaboration and cooperation with other companies in the region and globally, and the industry has gotten a lot better in exchanging information around best practices and promoting a global voice for crypto.

What, in your opinion, is potential for the crypto industry development in the Gulf countries?

I think at the base level, it’s going to be further recognition by other regulators. You’re seeing CBB or Central Bank of Bahrain issuing their own regulations. Here in the UAE there are multiple regulations which is a unique case  in the in the global world and the global scene. But then what I see happening is further understanding by other G6E countries further collaboration, potentially a crypto task force similar to what was established in the US between these two countries and further understanding what you all see as positive developments for the industry.

The Gulf region has a highly developed business sector with a strong money flow. But it’s yet to take full advantage of DeFi capabilities. Do you have any plans for these blockchain industry area?

DeFi is very early on, I would say globally, there isn’t a region or a country that has fully embraced DeFi to two substantial levels where it’s comparative to traditional banking and financial services. As a company, our focus is on our main mission, which is enabling people to continue buying and selling crypto assets. Working with governments and regulators to create those common frameworks that we discussed for to enable this industry. So that will continue being our focus for some time.

Do you have any plans to expand to other countries in the region? And what about your plans to step outside the region?

Yes, I believe we touched on that in an earlier answer, but happy to touch on here on a tour again. We think that this is just the beginning for us and we’re very positive on the regions we can target. We believe we’ve developed a unique understanding for the complexities of emerging markets and economies that might not be as developed as other economies, which come with their own challenges with regards to crypto assets. And this is where we want to continue growing our presence. So as I said, Middle East, North Africa region, Levant, Turkey, Pakistan, those are the kinds of countries or regions we’re looking at.

And how do you forecast the development of cryptocurrencies, blockchain technology in general? So is it the fight between the regulators and the blockchain industry, what will be the result of this fight?

I think there was never a fight, and I don’t think there ever will be. I think what was there in the beginning and this goes back to the different chapters of revolutions that I touched on in the beginning, there was a lot of misconception and a lot of misunderstanding on what this is. Coupled with the fact that this industry in its earlier stages was not as substantial as it is today. So a lot of regulators globally chose to either ignore this industry or refuse to interact with participants from this industry that then evolved into further understanding, whether driven by the need for tax revenue and certain countries created tax regulations for crypto assets before they created other regulations because the tax revenue was an end for them. Others saw that there needs to be an upgrade in their capabilities and their understanding of this industry and how they handle it, and how they can apply the traditional frameworks of AML and CFD to this industry. Today, I think you hear about the US announcing the crypto task force, you hear about the EU setting up specific task forces with the influx of CBDCs and all the other trends that we’re seeing. I see a very positive outlook for crypto assets. I think there is a lot more collaboration and understanding from the regulators side of what this industry does. You’re seeing people who are experts in this industry being employed by those regulators. So if anything I see, further collaboration, further understanding and a positive outlook.

OK, and my last question, I’m asking you to the most of my respondents working to crypto. First of all, I would state that it’s very honorable to be a pioneer. And you are the pioneers working in the field and you are creating the real future for the human beings. And my question is, let’s imagine what could you say to your grandkids many years after this period about this time of your life? What was the most exciting part of your current period that you can share with your grandkids? So maybe to take a step back. I’ve always enjoyed trying new thing. I don’t want to call it the company on the first project when I was 14 years old, I was assembling desktop computers and selling them to some of my friends. And since then, it’s consistently made a lot of lessons and I’ve had a lot of failures. But I’ve consistently learned the value of going after something that you really believe in and very cliché, but challenging this, that’s school. And I think this is something that I would not just tell my grandkids, but actually do with them and have them actually do it. So rather than doing what I’ve learned is it’s important to be a role model and act in a way that you want, children or younger family members to act rather than tell them. Telling them doesn’t really deliver the message. People copy what you do, not what you say. So I would actually continue to support them to go after whatever it is that they want not to stick to any traditional parts or choices that exist and that it’s OK to explore as long as you believe in something. Keep going after it and then keep trying. So you will try to share your broadness about what’s happening right now in your life.