INTRODUCTIONS
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• Digital Currency Group• Coin Center
• IDFPR and Blockchain Initiative• Silvergate Bank
• Chainalysis• Elliptic• Unocoin
WHY WE ARE HERE
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• Digital currencies represent a $94 billion market –explosive growth (10x over past year)
• On average, 2-3 billion USD of digital currencies traded daily
• Significant structural challenges in market infrastructure leading to centralization and delays
• Institutional, corporate, and investor interest growing exponentially
WHY WE ARE HERE
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• Need more banking partners to enable companies to:üAccess operating and transactional accounts
üEnable users to move from fiat to digital currencies more easily
üExtend digital currency infrastructure to accommodate growth
üBuild robust applications of top of the existing digital currency exchange infrastructure
WHY WE ARE HERE
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• This isn’t just about digital currencies – digital assets and digital fiat are coming!
• We need much more coordination within both the existing digital currency exchange ecosystem and the companies bridging these currencies to the traditional financial system
• Opportunity to create new business partnerships and collaboration structures to fuel growth
DIGITAL ASSET INFRASTRUCTURE
Bank A Bank B
Payment CoPayment Co
Exchange ExchangeWallet Wallet
WalletWallet
Mining Network
Blockchain Protocol (Public or Private)
FIAT
DIGITALASSET
EXCHANGE
PROTOCOL
Compliance (KYC / AML)Audit & Tax
Security SecurityIdentityIdentity
USER LAYER
Digital Currency: Alice Sends Bob $5
Electronic Communication Network
Risk MonitoringReserve Monitoring
Liquidity and Working Capital ManagementCustodian Services
APPLICATION LAYER
Asset Issuance
Digital Asset: Bank A sends B CDS Contract
GOALS
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• Discuss key themes and trends in digital currency ecosystem
• Hear from banks and companies about current state of banking digital currencies
• Understand your perceptions of digital currencies and your concerns about banking companies touching digital currencies
• Identify how the group gathered here could work together to help more banks in the state engage with digital currencies and set an industry example
MORNING AGENDA
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• Coin Center | Intro to Bitcoin & Digital Assets• DCG | How Bitcoin is Being Used
• Silvergate & DCG | Current State of Bitcoin Banking• Coin Center | Overcoming Obstacles
• Discussion | What Keeps You from Banking Bitcoin
MORNING AGENDA
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• Coin Center | Intro to Bitcoin & Digital Assets• DCG | How Bitcoin is Being Used• Silvergate & DCG | Current State of Bitcoin Banking• Coin Center | Overcoming Obstacles
• Discussion | What Keeps You from Banking Bitcoin
STORE OF VALUE
Digital currency can be an electronic store of value, especially in countries where local currencies are volatile or losing value
ATTRIBUTES
Limited Supply ü
Easy to Move ü
No Storage Cost ü
Durable ü
Highly Divisible ü
USE CASE
OTHER DIGITAL CURRENCIES
Over 600 digital currencies and many different types of blockchain technologies have been created for specific reasons
Currency Key Use Cases
• Store of value• Payment network• Distributed ledger
• Smart contracts• Programmable transactions• Distributed applications
• Real time settlement• Cross currency transactions• Transaction fees destroyed
Key Features
• Supply fixed at 21 million bitcoin• In existence since 2009• Public – anyone can access
• Supply not fixed, 1-2% inflation• In existence since 2014• Public – anyone can access
• Supply fixed at 100 billion XRP• In existence since 2013• Native asset for Ripple protocol
We believe in a future where many digital currencies and assets will serve many different purposes
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• Holds ~1% of all bitcoin
• 834th largest out of 1909 ETFs
• 36th best performing out of 1909 ETFs
BITCOIN INVESTMENT TRUST
$0
$70
$140
9/25/13 3/25/14 9/25/14 3/25/15 9/25/15 3/25/16 9/25/16
Mill
ions
Assets Under Management
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PAYMENT RAIL
Digital currencies can be used as a global payment rail, without exposing either the sender or receiver to the underlying asset
• Fast transaction times – 10 min• Low network fees• No banks or intermediaries needed
EXAMPLE: SENDING MONEY VIA BITCOIN NETWORK
Wallet
Bank Account
Bill Pay or Credits
P2P FX Teller
Payment Network
Agent
Payout Options
ON AND OFF RAMPS ARE CRITICAL
Bitcoin payment applications require a robust, integrated exchange ecosystem to create an open financial network
CROSS BORDER PAYMENTS VIA BITCOIN
Source: Proprietary Data from DCG Portfolio Company Analysis (Incl. BitPesa, Korbit, Veem, Wyre)
MONTHLY VOLUME CUMULATIVE VOLUME
$0
$25
$50
Jan-16 May-16 Sep-16 Jan-17
Milli
ons
$0
$175
$350
Jan-16 May-16 Sep-16 Jan-17
Milli
ons
Infrastructure (Protocols, Mining, Exchanges, Wallets, Processors)
Security, Trading, Institutional Tools
Identity & Compliance
2009 20152012 2013 2014
Early Experimentation
Currency
Payments 2.0
Asset Registry
Smart Contracts
Blockchain Application Ecosystem
EVOLUTION OF BLOCKCHAIN
USE CASES FOR THIS TECHNOLOGY
Digitizing Identity and
Assets
Distributed Ledger / Registry
Smart ContractsPayment Rail
Proof of Ownership for Digital Content
Decentralized Patient Records Management
Decentralized IoT
Digitization of Documents & Contracts and Proof of Ownership for Transfers
Enable Authenticity of a Review or Recommendation
Decentralized Prediction Market for Financial Markets, Politics, etc.
Escrow and Custodian Service
Provide Digital Identity that Protects Consumer Privacy
Improving Anti-Counterfeit Measures in Digital and Physical Assets
Digital Security Trading Ownership & Transfer
Decentralized Storage of Data Using A Network of Hardware
Decentralized Internet and Computing Resources
Smart Contract IT Portal Executing Order Fulfillment
Liquidating Rewards Points Across Platform
Blockchain Use Cases
Asset Class
CORE INFRASTRUCTURE
ENTERPRISE BLOCKCHAIN
PAYMENTS 2.0TRADING & TOOLS
BLOCKCHAIN REGISTRYIDENTITY & COMPLIANCE
YOURS
DCG PORTFOLIO BY THEME
AFTERNOON AGENDA
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• DCG | Educating Your Board on Bitcoin• Silvergate | Bitcoin Banking Practices
• Chainalysis | Monitoring Network Activity• IDFPR | Regulatory Perspective
• Discussion | Next Steps and Commitments
PROCESS
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• 15 min
• To be covered by Silvergate
• Educating companies and providing a checklist of “minimum standards” and business processes, technology, and staff they should have in place
MONITORING ACTIVITY
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• 15 min
• To be covered by Chainalysis
• Working with blockchain network monitoring companies to conduct KYC / AML on this new asset class
NEXT STEPS
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• 60 min
• To be moderated by Cab / Jennifer / Meltem
• Outline key next steps to move project forward and solicit commitment. Set goal for the year to deliver “success story” to position IL banks as leaders in this space, and clearly outline how we’ll continue to collaborate and communicate with the group.