Generation Start-up: Bitex UAE lets cryptocurrency investors trade in cash

The cryptocurrency wallet and online platform went live in November 2018, almost a year after Bitcoin hit its price peak

Monark Modi, co-founder and chief executive of Bitex UAE, says he was not ready to launch his online trading platform when cryptocurrency prices were at their peak. Reem Mohammed/The Nationaln

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 before rising to a peak of around $20,000 in December 2017 and then crashing spectacularly 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.”

When we started, the first thing I had in my mind was to make it as secure as possible.

Today Bitcoin - which began circulating in 2009 as an electronic currency operating outside the traditional banking system spawning numerous copycat currencies - 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 firm 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 UAE 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 three-key, 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 have had some feedback from institutional investors – some private institutions want to partner with us to provide a service to their end users.”

However, 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 researching some regions in the Europe," he says, adding that he is also expanding his current 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."

Q&A: Monark Modi, chief executive and founder of Bitex UAE

You are only 24 and funded your company with $1m of your own savings. How did you achieve that?

A bit of it was family savings and I had also worked for a while, so it was a mix of my savings and my family’s savings.

Has your age been an issue at all?

Because of my age I’ve had a lot of issues with people trusting me, so I've had to learn to get people on board and to get people to trust me and trust the company. Some people think a little more experience would be good before they work with me.

Have you launched a business before?

Yes, I worked on location-based credit card service for international travellers. It meant regular travellers never experienced a failed transaction because their location was known wherever they were, even if they are travelling without prior notice. It launched in 2016 but is not operating now, as I had visa issues in the US. I had to put an end to it.

What already successful start-up do you wish you had started?

An online marketplace like Souq. The market is becoming digital and moving towards online shopping so the response would have been phenomenal.

What’s the biggest Bitcoin transaction recorded so far on the exchange?

The highest order we had was 7.5 Bitcoins.