LaraontheBlock interviewed the CEO of recently UAE licensed crypto exchange M2, Stefan Kimmel who had a lot to say on the future plans of M2, their product growth, partnerships, acquisition appetite, Bitcoin ETFs and license plans.

Why Abu Dhabi

According to Kimmel, launching a fully regulated, transparent clean startup from Abu Dhabi ADGM ( Abu Dhabi Global Market) was because the FSRA ( Financial Services and Regulatory Authority) in ADGM is one of the oldest most respected and esteemed regulatory authorities when it comes to virtual assets and crypto. FSRA as Kimmel explains has been around for five years and has a comprehensive solid framework. He stated, “ After all that has happened in crypto over the past few years, everyone is looking for a safe protected transparent exchange, and this is what we are offering from ADGM.”

M2 Strong liquidity

Another strong feature that M2 has is its strong liquidity which is essential for the success of any crypto exchange. As Kimmel explains, “ Liquidity is super important for successful crypto exchanges, and this is why we have partnered with global leading market makers, have tight spreads, and in terms of depth of key markets we are right up there with all the top players. Liquidity is key for good trading experience for investors and that is why we are connected with the largest global market makers and have deep liquidity especially on large crypto asset pairs.”

M2 investors

Speaking on M2 investors and whether the company will be seeking further investment, Kimmel replies that M2 is not seeking to raise capital any time soon. According to Kimmel, M2 is lucky to have an equity investment of $300 million which will give them a long run rate. According to Kimmel, “Our strategic key investor is Phoenix Group but we also have investment from several Abu Dhabi family offices.”

However for those who have asked or been interested in investing in M2, Kimmel states they have the option of investing in Phoenix Group which is now trading publicly on the ADX exchange in Abu Dhabi or they can buy the M2 MMX token on the M2 exchange and Uniswap.”

Noteworthy is that while Phoenix Group is a strategic investor in M2 it also partners with M2 on Bitcoin mining and Hashrate mining.

Acquisition appetite

As for M2’s acquisition appetite, Kimmel admits that if they find well regulated transparent crypto exchanges in countries of interest they would seek to acquire them. On whether M2 would be interested in Binance, he replies, “First Binance is not up for sale, and secondly we are on the lookout for fully regulated exchanges, as we want to be regulated, transparent and clean in everything we do. So we would have to choose an exchange that is in the same direction.”

The U.S. market

At the moment M2 is not interested in the U.S. market given the unclear regulatory situation. Kimmel states, “We will be staying outside of the USA unfortunately, given its current regulatory state. There are no rules we can apply or abide by currently in the USA only enforcement.”

However M2 is very keen on Europe given that Europe has come out with its MICA regulations for crypto service providers. He states, “Our next intention after receiving several regulatory licenses from ADGM and a license from the Bahamas is to acquire a license in Europe and we have filed for one in Spain.”

After Spain, M2 plans to apply for a license in the United Kingdom.

Bitcoin Earn Yield Product

The first product launched by M2 was Bitcoin Earn product. The product was launched in partnership with Phoenix crypto mining group and offers yields that reach up to 10.5%.

The pair designed a product that utilizes Bitcoin mining to offer genuine returns for investors. Most investment platforms that offer yield returns on crypto provide it through one of two routes. M2 are generating returns predominantly with Bitcoin mining, which underpins the M2 Earn product

Kimmel admits that the appetite for the M2 Bitcoin Earn product has been fantastic. He states, “This has been one of the most debated topics inside the M2 because a large share of deposits goes to the Bitcoin Earn product. 10.5% is amazing given that it is hard to earn decent returns on Bitcoin.”

According to Kimmel it is not that difficult to offer 10.5% returns because as he notes, “Given that we are partially owned by Phoenix Group, we reinvest in Bitcoin mining which offers higher returns than 10%, the other two angles is on platform lending which is over collateralized and fully on platform, and a small percentage goes into Proprietary Trading (Prop Trading) market making and basic arbitrage, but no big exposures, as we are not trying to take on risks.”

According to Kimmel even if the crypto markets are not doing well since the investment is in Bitcoin and the interest return is in Bitcoin, then there is no FX market exposure.

Future product offerings partnerships

Kimmel is excited about the future of M2 after going live and ensuring that the processes in place are scalable and robust. Next up are more product offerings, partnerships, and maybe an ETF.

Kimmel explained, “In Q1 of 2024 we will be coming out with a crypto payment card. We will also be offering fiat on and off ramp with one of the banks in the UAE. In addition we have partnerships coming up with big retail names in the country to reach a bigger customer base.”

When asked about the potential of a Bitcoin ETF product, Kimmel confesses that this is absolutely on the radar. He says, “We are already having initial exploratory discussions on it.”

Outlook on crypto exchanges and DeFi

In terms of the bigger global situation when it comes to crypto exchanges, competition and DeFi, Kimmel believes that given that today there are around 600 crypto exchanges globally, we will definitely see some closing down because of the regulatory requirements, others being bought because the market cannot accommodate so many crypto exchanges. He explains, “ We will not only see consolidations in the UAE as crypto exchanges struggle to meet tighter regulatory environment, but there will also be eliminations as market gravitate towards the stronger players.”

In terms of centralized crypto exchanges versus decentralized using DeFi, Kimmel believes that for mass adoption to take place, centralized exchanges are a must. Kimmel, “As we drive for mass adoption the vast majority will struggle with decentralized user experiences, such as managing wallets, on and off ramp, which is hard, in addition we also have governments and regulators who struggle in DeFi, where it is anonymous and users as well may not subscribe to that ethos. For institutional adoption this can only happen in centralized platforms.”

On the launch day of M2 crypto exchange and custodian the exchange which is fully regulated by ADGM (Abu Dhabi Global Market) is the first to serve retail clients in the UAE.

Abu Dhabi headquartered M2, which is licensed by the FSRA in the ADGM, has been recognized as a fully regulated Multilateral Trading Facility (MTF) and Custodian and is now able to on-board UAE residents and institutional clients.

M2 will be able to offer best-in-class trading products targeted at both retail and institutional investors in the UAE. The services coming soon will include, virtual Asset Custody where Investors will be able to manage their Virtual Assets in M2’s custodial wallets and offline storage facility, conveniently and securely with the easy-to-use on ramp and off ramp mechanism.

In addition clients will be able to trade AED to BTC & ETH . M2 will shortly be able to offer institutions and retail clients the ability to trade AED with leading cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH).

AED Fiat On/Off-Ramp: Allow the on/off ramp of AED with ease through its partnership with a local bank.

While other crypto exchanges have received licenses from ADGM none of them have been allowed to cater to retail clients or have they partnered with a UAE Bank.

Designed with regulatory compliance and customers in mind, M2 adheres to strict regulatory requirements set by ADGM in relation to consumer protection, technology governance, custody and all its trade activities such as market surveillance, transparency, settlement, and transaction recording.

The ADGM has been recognized as being one of the most respected regulated jurisdictions of virtual assets globally.  Taking its first steps on the journey to becoming a global FinTech champion for Abu Dhabi, and in line with Abu Dhabi’s Economic Vision 2030, is live and the team is setting its sights on being a leader in innovation whilst always maintaining regulatory compliance.

Stefan Kimmel, M2, CEO, comments: “We take pride in being a Abu Dhabi headquartered platform, licensed by the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM). This recognition underscores our commitment to our customers and to the FSRA’s notably high and sophisticated regulatory standards. We look forward to offering crypto investors in the UAE the opportunity to utilize our platform, including the ability to trade on/off-ramp AED and to trade market leading cryptocurrencies such as BTC and ETH by the end of the year.”

He added: “As positive sentiment returns to the crypto market, we want to offer crypto investors a trusted place to buy, sell and custody crypto assets. Regulation is our routine, and we will continue to demonstrate our commitment to compliance and regulatory excellence.”

Arvind Ramamurthy, Chief of Market Development at ADGM said: “We are delighted to welcome M2 to ADGM. We are confident that ADGM’s dynamic ecosystem and progressive regulations will enable M2’s vision, ADGM is the largest regulated jurisdiction of virtual assets in the MENA region and M2’s innovative solutions will add to our vibrant and trusted ecosystem of virtual asset trading venues, global exchanges and service providers.”

Notably M2 will be having its launch party today and will be featuring the Mayyas Dance show and superstar singer Guy Manoukian as they reimagine the future of digital assets.

The article was updated at 11:51 am GMT+2 removing ADCB bank reference.

UAE based M2 crypto exchange and investment platform has partnered with UAE crypto mining Group Phoenix, to offer crypt investors with Bitcoin and Ethereum yields that reach up to 10.5%.

The alliance brings together the innovative UAE based entities and will reduce the level of counter party risk and in turn minimize volatility for investors wanting to gain exposure to cryptocurrency.

Stefan Kimmel, M2, CEO, said: “The industry leading collaboration between M2 and Phoenix Group has allowed us to design a product that utilizes Bitcoin mining to offer genuine returns for investors. Most investment platforms that offer yield returns on crypto provide it through one of two routes. The first route is proof of stake, which can result in some modest returns, alternatively the mechanic involves lending it out, and this incurs a considerable amount of counter-party risk. In our case, we are generating our returns predominantly with Bitcoin mining, which underpins the M2 Earn product.”

M2’s financial protocols are capable of reconciling client and M2 funds in near time, providing the highest levels of transparency to regulators and ensuring liquidity remains in place at all times.

The partnership with Phoenix Group empowers M2 to offer investors the assurance of investment yields based on real returns, which are generated via a 725MW Bitcoin mining operation. Founded in 2017 by Bijan Alizadeh and Munaf Ali. Phoenix aims to be the first privately owned crypto and blockchain entity to be listed on a Middle East stock market.

Bijan Alizadeh, Phoenix Group, Co – Founder and Group CEO M2, Founder and Managing Director “Phoenix vision was to set up and build an established UAE Crypto exchange, with full services for both retail and institutional investors and seeing this come to fruition is a very proud moment for us. With this strategic partnership we are in a position to provide unparalleled returns backed by the worlds largest bitcoin mining operations. We are delighted to announce this partnership which further cements the M2 and Phoenix proposition towards a collective vision, building the future of finance on secure and regulated investment products for all investors.”

“M2 has obtained a Bahamas License issued by the Securities Commission of the Bahamas (SCB), which enables it to offer the M2 Earn product to a global audience. M2 is also actively pursuing licenses in several European countries and navigating the Markets in Crypto Assets (MiCA) licensing process.

M2 Group’s  commitment to the UAE is further showcased by our two other entities: M2 Limited and M2 Custody Limited (M2 ADGM). Both are headquartered in the Abu Dhabi Global Market (ADGM).

M2 is also working towards obtaining the necessary regulatory approvals to allow UAE residents to onboard, in addition to M2, with M2 ADGM which will be regulated by the Financial Services Regulatory Authority (FSRA) of ADGM. M2 ADGM will be going live at a later date with their ADGM license.