digital currency, bitcoin and money-over-ip by jeremy allaire and john beccia
TRANSCRIPT
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
1/36
Digital Currency, Bitcoin and Money-ov
Jeremy Allaire, Circle Internet Financial, Founder & CEO
John Beccia, Circle Internet Financial, General Counsel anCompliance Officer
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
2/36
Agenda
What is Digital Currency and why does it matter?What are the market opportunities for it?
What is Bitcoin, what is its potential, how does it
work, and answers to common questions
What are the legal and regulatory issuessurrounding Bitcoin and digital currency?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
3/36
My Background
20-year Internet entrepreneur in software platforms aonline services
Built and led several leading public-company Internesoftware and online service companies (Allaire,Macromedia, Brightcove)
Founded Circle earlier this year, building products anservices on digital currency platforms
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
4/36
Many attempts since early Internet years
2008: A convergence of trends
- massive global adoption of the internet
- globalization of commerce, communications and c- Social networks and the birth of Global Identity- the birth of the smartphone and global mobile platf- the global financial crisis of 2008 a crisis of trust
What are Digital Currencies and Why Now?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
5/36
Crypto-Currency, Math-Based Currency, Digital Cu
All the same but Digital Currency is the right meme
Crypto Roots- Built on the state-of-the-art in cryptography- Strong Libertarian idealism- But globalist in intention- Deep focus on security and privacy
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
6/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
7/36
Explosion in Digital Currencies
Since 2009, there have been nearly 150 different digital launched, collectively dubbed alt-coins, often based onversions of the Bitcoin open source technology.
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
8/36
The International Dollar Reserve System, QE and theDilemma
Post-2008, a global crisis of confidence in large bankcentral banks
Global social network platforms and the emergence
global identity
Explosive growth in mobile platforms and broadbandplatforms globally
Why is this happening now?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
9/36
What role could Digital Currency play?
Free market innovation and Internet technology disrupt
Radically lowering the cost associated with retail payments anto person (around the world) money transfers
Improving the security and privacy used for payments, reducin
Lowering the cost and complexity of cross-border exchanges
consumers and businesses
Leveraging mobile infrastructure, delivering cost effective anduse financial products to the 2.5B mobile users who are unba
Changing consumers experience of using money
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
10/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
11/36
Bitcoin: What is it and how does it work?
Bitcoin is a set of open standards and open source pas well as a massive distributed network of computin
for issuing currency, making payments and money trand for the secure storage and accounting of digital
Bitcoin is a P2P technology that does not rely open acentralized server to function, and is built on some o
worlds most reliable cryptographic standards for secverification functions.
Bitcoin is to Money what VOIP is to Telephony and SMail --- Money-over-IP
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
12/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
13/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
14/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
15/36
P i t bl Offli P Bit i
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
16/36
Printable, Offline, Paper Bitcoin
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
17/36
What backs the value of Bitcoin?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
18/36
Free-floating exchange with fiat currencies, with value
based on scarcity as well as trade utility
Bitcoin is backed by the real-trade happening withinite.g. the more that Bitcoin is used the more valuablebecomes
Over time, the value of Bitcoin will be backed by thetrade value of the digital economy
What backs the value of Bitcoin?
What is Bitcoin Mining?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
19/36
What is Bitcoin Mining?
Incentive system for operating computers that processconfirm transactions as well as secure the network
Miners earn a bounty in newly issued bitcoin if theysuccessfully find and verify a block of transactions
Dramatic evolution in the computing and processing pothe Bitcoin network over the past 12 months
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
20/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
21/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
22/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
23/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
24/36
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
25/36
How does Bitcoin technology evolve?
http://blockchain.info/nodes-globe -
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
26/36
How does Bitcoin technology evolve?
Open source and open standards technology projec
Thousands of developers actively working on enhanbug fixes, etc.
Examples: active work happening around scalabilitysecurity, payment requests and receipts, and recurri
payments support
This is similar to how virtually every Internet technolowe use daily has developed and matured
Market Opportunities for Bitcoin
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
27/36
Market Opportunities for Bitcoin
Reduce the costs of payments and money transfers g
Increase the ease of use of digital payments
Enhance security and privacy of financial transactionsfraud
Radically reduce the cost and friction of cross-border
Create new options for the global un/underbanked
Enable cost-effective micro-transactions and payment
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
28/36
Recent Events
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
29/36
5/15/13 Operations of largest Bitcoin exchange Mt. Gox (Japanbased) suspended by U.S. government for failing to register as a M
5/28/13 - NY U.S. Attorney charged Liberty Reserve (a large digitacurrency company) with running a $6 billion money launderingscheme (Dept. of the Treasury also named them as a financialinstitution of primary money laundering concern under Section 311PATRIOT Act)
8/7/13 SEC action against a Texas man for conducting allegedBitcoin Ponzi Scheme through a hedge fund (Federal judge ruled tBitcoin is a currency and declared that related investment funds funder U.S. securities laws)
ece e s
Recent Events
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
30/36
8/12/13 NY Dept. of Financial Services issued subpoenasagainst Bitcoin firms to further investigate the related risks
10/2/13 - FBI shut down the illicit website Silk Roadand seizmillions of dollars worth of Bitcoin(website founder wascharged with narcotics trafficking conspiracy, computer hackand money laundering)
10/29/13 UK based exchange Coinfloor launches service,bans U.S. customers due to regulatory concerns
What are the US Regulatory Issues for Bitcoin?
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
31/36
Core issues focused on KYC/AML/OFAC requirementsfor Bitcoin to be trusted and secure
Additional concerns regarding privacy/informationsecurity, consumer protection, taxation and securities
Bitcoin likely to be legal money and be regulated und
all relevant bank and non-bank laws, and taxable inco
g y
Interested Parties
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
32/36
Federal Banking Regulators and Department of Justice Money laundering concerns, impact of Bitcoin on payment system and central
Consumer Financial Protection Bureau
Jurisdiction over an consumer financial product or service as defined (may appwallets and exchanges)
State Banking Regulators and State Attorneys General Money transmitter and consumer protection concerns
Internal Revenue Service IRS has not issued rules regarding Bitcoin (IRS and FASB guidance needed)
Securities and Exchange Commission and CFTC Question of whether Bitcoin is a security or commodity
Congress Senate Committee on Homeland Security and Government Affairs and Senate
expressed interest in hearings
FinCEN Guidance
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
33/36
On 3/18/13, FinCEN issued guidance regarding the application MSregulations to virtual currencies
FinCEN defines virtual currency as a medium of exchange that olike a currency in some environments, but does not have all the attreal currency
The guidance addresses only convertible virtual currency, which an equivalent value in real currency or acts as a substitute for real
Users of virtual currency (i.e., individuals) are not MSBs, but excand administrators of virtual currency are considered MSBs
Global Regulatory Considerations
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
34/36
EU and UK - Bitcoin is currently unregulated See European Central Bank publication on Virtual Currency Sch
(October 2012) no regulation due to lack of widespread use
Germany adopting a progressive and welcoming posture to Bitcoin
China taking a hands-off approach (for now)
Posture unclear in currency-distressed markets (Cyprus, Argentina
Bitcoin has gained popularity in countries that have high inflatdeposits and strict exchange currency controls
Critical to establish International Standards for AML and OFAC
Future potential role for BIS and IMF
g y
Impact of Current Environment On Circle
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
35/36
FinCEN MSB registration along with money transmitter applicationstates (and various international locations, as needed)
Development of a robust AML and Compliance Program, which incKYC requirements, transaction monitoring and regulatory reporting
Ongoing monitoring of rapidly changing legal and regulatory enviro
Dialogue with key stakeholders (regulators, lawmakers, etc.)
Coordination with industry groups such as the Bitcoin Foundation aAsset Transfer Authority (DATA)
p
-
8/14/2019 Digital Currency, Bitcoin and Money-over-ip by Jeremy Allaire and John Beccia
36/36
Digital Currency, Bitcoin and
Money-over-IP
Jeremy Allaire, Circle, Founder & CEO