Moderator: Tom Maher, DQ Advocates (Isle of Man - TAGLaw) Panelists: Basil Bielich, Browne Craine & Co (Isle of Man - TIAG) Sibina Eftenova, Popov & Partners (Bulgaria - TAGLaw) Erin Fonte, Dykema Cox Smith (Texas, USA -TAGLaw) Sinead O'Connor, DQ Advocates (Isle of Man - TAGLaw) Bitcoins, cryptocurrencies, or digital currencies… call them what you will, but they are in the headlines daily and may become the future of currency exchange. The legal and financial implications of these new methods of currency transfer affect clients and their customers. Our expert panel will analyze the current updates in regulatory compliance and law enforcement efforts surrounding electronic currency. Is this just a fad or are we seeing the future of “money” before our very eyes? What business opportunities arise for law and accounting firms in digital currency space? Does the technology behind digital currency have other applications in the business world?

1. Spring International Conference | May 2-4, 2016
LISBON

2. Digital Currency
Out of the shadows and
into the spotlight
TAGLaw Spring International
Conference in Lisbon

3. Panel members
• Tom Maher – DQ Advocates, Isle of Man
• Basil Bielich – Browne Craine & Co, Isle of Man
• Sibina Eftenova – Popov & Partners, Bulgaria
• Erin Fonte – Dykema Cox Smith, USA
• Sinead O’Connor – DQ Advocates, Isle of Man

4. Does Bitcoin exist?
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5. Introduction to digital currency
• Bitcoin is a consensus network that enables a
new payment system and a completely digital
money. It is the first decentralized peer-to-peer
payment network that is powered by its users
with no central authority or middlemen. From a
user perspective, Bitcoin is pretty much like cash
for the Internet. Bitcoin can also be seen as the
most prominent triple entry bookkeeping system
in existence.
Bitcoin Foundation

6. ??????????

7. Introduction to digital currency
• Bitcoin is two things
▫ A digital currency
▫ A network
• https://www.youtube.com/watch?
v=ycT2Spnc788

9. Is digital currency still in the
shadows?
• 16 million Bitcoin
wallets forecast by
2016
• 150 thousand
merchants accepting
• Coinbase see
international users
grow to over half of
total user base
• Silk Road
• Mount Gox
• Increasing use in
cyber ransom attacks
• Still the domain of the
criminal

10. Who’s embracing it and why?
• Not the banks
• What about the regulators?
• Is it easier to embrace the blockchain?
• What is the blockchain?
▫ https://www.youtube.com/watch?v=Tn0Jr-
pRQfA

11. Tax and accounting implications
• Basic accounting
• Auditing
• Tax implications

12. Business opportunities
“The progress of mankind is marked by the rise of
new technologies and the human ingenuity they
unlock”
• Main opportunity coming from blockchain
linked technology/distributed ledger
• How does law and regulation keep pace?

13. Business opportunities
• Distributed ledger:
▫ an asset database shared across a network;
▫ all participants have their own identical copy;
▫ changes reflected in all copies in minutes/ seconds;
▫ security and accuracy maintained cryptographically;
▫ entries can be updated by one, some or all participants,
according to rules agreed.
“Distributed ledger technologies have the potential to help
governments to collect taxes, deliver benefits, issue passports,
record land registries, assure the supply chain of goods and
generally ensure the integrity of government records and services”
UK Government Office for Science 2016

14. Business opportunities
Banking and
Finance
ü Intermediating function for transfers and exchanges of
money
ü Various services – Santander InnoVentures claims 20-25
uses
Real
Property
ü Track changes in ownership of an asset
ü Replace domestic title registers like property title
registries? - Honduras Creating Land Title Block Chain 2015
Intellectual
Property
ü Track ownership and licensing of intellectual property
Contract Law ü Self-executed “smart-contracts”
Corporate
Management
ü “Decentralized autonomous organizations” -
“corporations” run without human involvement?

15. Business opportunities
• Smart contract:
q Computer protocol that facilitates, verifies or enforces the
negotiation or performance of a contract:
q conditional (IF/THEN) statements;
q information processing;
q value transfer (receives, stores and sends)
q Proposing to embed contracts in all sorts of property that is
valuable and controlled by digital means – Nick Szabo;
q Benefits: certain, self-executing, quick and cost-saving;
q Legal issues: privacy and identification, jurisdiction, etc.
Might lawyers need to become familiar with creating and advising
on Blockchain contracts?

16. Business opportunities
Contract terms
(Event agreed)
Value
Event
Settlement
Shared, Replicated Ledger Shared, Replicated Ledger
• Counterparties establish
obligations and settlement
instructions/ conditions for
execution (“If…then…”)
• Value put under custody
of smart contract
• Agreed event triggers
contract execution
• Event can refer to:
ü transaction initiated
ü i n f o r m a t i o n
received
• Terms of contract
dictate movement of
v a l u e b a s e d o n
conditions met
• For assets represented
off the chain, accounts
o f f - c h a i n m a t c h
settlement instructions
• Changes to accounts will
be reflected on ledger
• Value transferred to
intended recipient as
dictated by contract terms
• For digital assets on
chain accounts contracts
are settled automatically
Value transfer

17. Concluding remarks