Cryptic desire: Heads of two Gulf cryptocurrency exchanges hopeful on new legal frameworks

Cryptocurrency exchange start-ups in the Gulf Cooperation Council (GCC) region are hopeful that the region’s financial authorities will eventually find ways to regulate trading in crypto asset businesses, the founders of two such entities have said.

In the GCC region, very few markets have formally indicated a desire to regulate cryptocurrency trading, with Abu Dhabi Global Market (ADGM) being an exception. It launched a Crypto Asset Regulatory Framework in June last year to provide a set of rules governing spot trading of crypto assets by exchanges, custodians and other intermediaries.

However, in other markets, several banks in the United States, the United Kingdom and India also issued regulations that restricted or banned trading in cryptocurrencies.

Ola Doudin, the CEO and co-founder of Dubai-based cryptocurrency exchange BitOasis and Yehia Badawy, one of a team of four founders of Bahrain-based cryptocurrency exchange Rain, both told Zawya at the Step Conference in Dubai on Wednesday that they remain hopeful about GCC countries’ plans with regards to regulating crypto assets.

“Things take time. To build something meaningful, it takes time... If you look at any of the payment systems, any of the credit cards’ systems, they were not built in one year and I think people have this expectation that all those magical solutions will come out very quickly but they do take time because of conversations with regulators, because you are figuring out the technology and at the end of the day you are handling people’s money, so you need to make sure it is as safe as it can be,” Badawy said. “And I am actually very optimistic about the industry.”

Badawy said education is required for the business of cryptocurrency trade to be fully adopted in the region, adding that Rain currently has a sandbox licence from Bahrain Central Bank - a temporary licence that allows it to carry out regulated financial activities under supervision.

Doudin is currently working on acquiring a cryptocurrency trading license. She told Zawya in an interview last year that she plans to intensify efforts to help authorities in the UAE issue regulations for trading in digital currencies. Doudin’s BitOasis currently holds a commercial licence.

Scaling and expansion

Doudin said the fact that each country has its own legal stance and rules on cryptocurrency exchange platforms and fintechs poses a challenge to her company’s plans to scale.

“It is obviously a challenge for a fintech company because the way you would do it is that you will acquire a licence for each and every country that you need to operate in,” Doudin told Zawya, speaking in a joint interview with Badawy.

Speaking about her expansion plans, Doudin said: “(As for) scaling in the GCC, the biggest one is Saudi…. So for us… We are looking to cover Saudi Arabia, go to Egypt and then Turkey and Pakistan.”

She said this year, she is talking to regulators in the kingdom in a bid to enter the Saudi Arabian market, and will look into opportunities in Egypt next year. Other countries are in the pipeline for later dates, Doudin said, without specifying a timeline.

Asked if the newly-adopted value-added tax (VAT) that has been implemented in Saudi Arabia, the UAE and Bahrain over the past two years is applicable on the company’s trade transactions, Badawy said: “The VAT is still an ongoing discussion in all countries… it is still not 100 percent clear to everyone how it is to be applied.”

Asked if any consolidation of cryptocurrency trading platforms in the region is on the horizon, Badawy said: “I think there is enough space in the market for different companies to achieve their vision.”