Digital Assets for the purpose of this webinar denote digitally-expressed assets derived from blockchain and Bitcoin, whose shared birth, like that of Romulus and Remus, has been succeeded by a wild kind of growth and elaboration. Will their Rome endure and transform the world? Let’s talk digital ledgers, coins, tokens, ICOs, and IEOs. To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/digital-assets-2020/

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5. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
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6. Meet the Faculty
MODERATOR:
Chris Cahill – Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
Nicole Kalajian - Stradley Ronon Stevens & Young, LLP
Oscar Jofre - KoreConX
Michelle Gitlitz - Crowell & Moring
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7. About This Webinar – Digital Assets
Digital Assets for the purpose of this webinar denote digitally-expressed assets derived from
blockchain and Bitcoin, whose shared birth, like that of Romulus and Remus, has been
succeeded by a wild kind of growth and elaboration. Will their Rome endure and transform the
world? Let‘s talk digital ledgers, cryptocurrencies, stablecoins, tokens, deivatives, and more.
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8. About This Series – Hot Topics 2020
You know that weed has gone mainstream when bright-faced MBAs and JDs euphemize
ganja with its scientific name of ―cannabis.‖ Mary Jane will likely become legal throughout the
US before consumers fully adopt blockchain-based cryptocurrencies as a means of obscuring
their purchases of bud. By then, digital assets, including but not limited to cryptocurrencies
and derivatives based on them, as well as a fantastic array of ―tokens‖ (which also reside on
blockchain), may become standard means to diversify investment portfolios. Meanwhile,
―central bank digital coins‖ may both expand access to financial products and provide another
field for superpower competition. This webinar series introduces blockchain, cannabis, and
digital assets as new realities and opportunities.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.8

9. Episodes in this Series
#1: Blockchain Basics
Premiere date: 10/8/20
#2: Making Cash With Cannabis
Premiere date: 11/5/20
#3: Digital Assets
Premiere date: 12/3/20
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10. Episode #3
Digital Assets
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11. What is Blockchain?
• A ledger
• Not stored in any one place
• Composed of a decentralized network of nodes
• New data on the blockchain must be verified by a majority of nodes
• Verification occurs by executing energy-intensive cryptographic calculations
• Once validated, a block of data is added to the chain
• Blocks may never be removed or edited
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12. What is Blockchain?
• Decentralized – data on the blockchain is not stored in any single place but distributed
across many nodes
• Immutable – once data is added to the blockchain, it cannot be removed, edited or
backdated
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13. Types of Blockchains
• Public Blockchains (permission-less)
• Private Blockchains (permissioned)
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14. From Centralized Ledger to Decentralized
• Blockchain establishes a decentralized ledger, by contrast to the familiar centralized
ledger, with a custodian or administrator being trusted to process monetary transactions and
manage the transfer of property
• See the two diagram on the following pages, from David Sneyd, ―Blockchain solutions to
ESG problems‖ (BMO Global Asset Management, Oct. 2018)
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16. How Does Blockchain Establish a Decentralized Ledger?
• Participant makes an entry, i.e., creates a new block
• Proposed transaction is broadcast to each participant on the network
• Validity of the new block is subject to pre-set criteria and a complex algorithm called
―proof of work‖
• A majority of miners conclude that transaction is valid
• New block is created and time-stamped
• All are provided with an updated version of the ledger:
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18. Some Components of a Blockchain
• Each block contains:
 A ―hash,‖ which is a digital fingerprint or unique identifier
 Time-stamped batches of recent valid transactions
 And the hash of the previous block
• The previous block hash links the blocks together and prevents the past form being
altered or rewritten
• Each subsequent block strengthens the verification of previous blocks (and the entire
blockchain)
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19. Some Components of a Blockchain, 2
• Proof of work requires high computational capacity, provided by ―miners‖
• Miners supply the network with computing power, to allow the updating of the database
• A majority of mining power must be able to confirm the new blocks by decrypting the data
• Once a “block” (a record of a purchases and sales created by miners by solving a
mathematical puzzle that validates the transactions) is added to the network ledger of
older transaction (the “chain”), such record on the blockchain can’t be changed or
reversed (i.e., the transaction is immutable)
• Thus a blockchain, to be non-falsifiable, must not have any operator holding at any time
more than half of the computational power of the chain
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20. According to Satoshi
• A coin can be defined as a chain of digital signatures
• The input to each transaction is the output of one or more other transactions
• The balance in your Bitcoin wallet is the sum of your unspent transactions
• The coins in your wallet can be traced all the way back to the miner that mined them
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21. So What is Gained by Going from a Centralized to a
Decentralized Ledger?
• If a bank or credit card company keeping a centralized ledger is hacked, then other
participants lose access to their data
• With a decentralized ledger, all participants keep a copy of the data
• With a decentralized ledger, there is no extra cost of (or litigation from) efforts to
synchronize records kept by counterparties to a transaction
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22. Smart Contracts
• Smart contracts are ―self-executing contracts with the terms of the agreement between [a]
buyer and seller being directly written into lines of code. Once a smart contract has been
created, computer transaction protocols will execute the terms of a contract automatically
based on a set of conditions.‖ Rensel v. Centra Tech, Inc., 2018 WL 4410110 at *10 (S.D.
Fla. June 14, 2018). The promise re smart contracts:
 Self-executing
 Additional parties not needed to monitor the transactions
 Greater cost efficiency and faster transaction speed
• To determine whether contractual conditions are met, smart contracts use ―oracles,‖
which are agreed-upon real-time data providers which confirm triggering events
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23. 3870 Cryptocurrencies in 2019
• Bitcoin is top in market capitalization at $355,655,173.57 (as of 2020 webinar, was
$93,262, 696,346 in 2019) and a price of $19,237.58 ($5,278.26 in 2019), with a circulating
supply of 18,558,550 (17,669,200 in 2019)
• 2d is Ethereum, with a market cap of $67,970,805,436 ($16,747,513,469 in 2019) and a
price of $601.71 ($158.23 in 2019), and a circulating supply of 113,643,591 (105,840,948)
• Approximately 722 of the 3879 2/3 listed cryptocurrencies have market capitalizations
exceeding $5 million
• See ―All Crytocurrencies‖ set forth at https://coinmarketcap.com/all/views/all/, visited
11/30/20 and 9/27/19
• United States currency in circulation is approximately $2.01 trillion (1.5 trillion in Jan. ‗19);
M2 is approximately $18,881 trillion ($14.5 trillion as of Jan. ‘19)
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24. Crypto-Naysayer: Warren Buffett
• ―Bitcoin has no unique value at all‖
• ―It is a delusion, basically‖
• ―It attracts charlatans‖
• ―If you do something phony by going out and selling yo-yos or something, there‘s no money
in it — but when you get into Wall Street, there‘s huge money‖
• (re Bitcoin:) ―probably rat poison squared,‖ a ―mirage,‖ ―not a currency,‖ and ―tulips‖
• Other naysayers: Bill Gates, Nouriel Roubini, Robert Shiller, Ray Dalio, and Howard Marks
Kate Rooney, ―Warren Buffett says bitcoin is a ‗delusion‘ and ‗attracts charlatans,‖ CNBC.com (Feb. 25,
2019) (https://www.cnbc.com/2019/02/25/warren-buffett-says-bitcoin-is-a-delusion.html, visited 4/27/19)
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25. Crypto Booster: Tim Draper (US Venture Capital
Investor)
• Fiat money will become laughable and obsolete in five years
• He believes his money in the bank to be less secure than his money in Bitcoin. ―My bank
is constantly under a hack attack,‖ Draper has stated, adding that to date, nobody has
managed to hack Bitcoin‘s blockchain
• Believes that the existing financial system is much more culpable for things like terrorism
and crimes than blockchain technology perhaps will ever be
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26. Crypto Booster: Tim Draper (US Venture Capital
Investor)
• In November 2018, Draper reaffirmed his April 2018 Bitcoin prediction that the biggest
cryptocurrency will trade as high as $250,000 per coin by 2022 [please see slide 23 above for
current prices of BTC and ETH]
• See Helen Parz, ―Tim Draper Predicts CryptoWill Rule, Only Criminals will Use Cash in
Five Years,‖ Coin Telegraph (Feb. 18, 2019) (https://cointelegraph.com/news/tim-draper-
predicts-crypto-will-rule-only-criminals-will-use-cash-in-five-years, visited 4/27/19)
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27. Blockchain and Digital Assets: Nomenclature
• Digital asset is an electronic record (on a blockchain) in which an individual has a right
or interest; the term is also used generically to refer to both digital assets and digitized assets,
e.g., Bitcoin
• Digitized asset is a physical asset for which ownership is represented in an electronic
record (on a blockchain), e.g., land title
• Token is used to refer to both digital and digitized assets
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28. Blockchain and Digital Assets: Nomenclature
• All cryptocurrencies are Payment Tokens
• A Wallet stores digital ―coins‖ by keeping safely the keys (a string of characters) and
passwords for cryptocurrency. Losing these means losing access to the cryptocurrency (see
QuadrigaCX example below)
• An Asset Token represents assets such as a debt or equity claim on the issuer
(analogous to equities, bonds, or derivatives)
• A Smart Contract is a set of coded instructions that execute automatically, without
human involvement, when certain conditions are met
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29. Crypto as an Investment: Crypto Futures
• A futures contract is a standardized exchange-traded derivative contract to buy or sell real
or financial assets at a set price on a specified future date, in a predefined quality and
quantity
• In December 2017, the Chicago Board of Options Exchange (CBOE) and the Chicago
Mercantile Exchange (CME) introduced bitcoin futures contracts
• In March 2019, the CBOE decided to stop listing additional futures contracts as it re-
assesses its approach to that market (i.e., prices were down), but has started listing them
again in 2020 (as prices shot up)
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30. What is a Stablecoin?
• A stablecoin is a new class of cryptocurrency that offers price stability because
stablecoins are backed by a reserve asset
• Stablecoins feature both the instant processing and security or privacy of payments of
cryptocurrencies, and the volatility-free stable valuations of fiat currencies (see
Investopedia)
• Examples: LIBRA (planned by Facebook, backed by a basket of fiat currencies); Walmart
has filed a patent application for a stablecoin backed by traditional currency [there are
many others]
• Central Bank Digital Currency [NOT decentralized]: DC/EP (launched by the People‘s Bank
of China, backed by renminbi); the US and many other countries are considering
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31. Initial Coin Offering and Fund-raising
• ICOs offer Asset Tokens for sale, often to raise money to fund early stage ventures
• At first, issuers simply published a white paper describing the proposition and then sold
―coins‖ ($6 billion raised in 2017)
• The SEC clarified that many such virtual currencies are ―securities‖ subject to SEC
regulation
• The SEC recently won summary judgment against Kik Interactive Inc. on its civil
complaint that Kik that its sale of Kin was not a functional currency – as purported -- but
rather an unregistered sale of securities
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32. QuadrigaCX: My Kingdom for a Password
• QuadrigaCX is Canada‘s largest cryptocurrency exchange
• About $190 million worth of cryptocurrency supposedly held by QuadrigaCX is missing
• 115,000 people affected
• Holdings (if they exist) are stuck in an electronic vault because the company‘s founder
and sole employee died without sharing the password
See Tim Copeland, ―The Complete Story of the QuadrigaCX $190 Million Scandal,‖ Decrypt Media
(March 13, 2019) (https://decryptmedia.com/5853/complete-story-quadrigacx-190-million, visited 4/27/19)
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33. Cryptocurrency Ponzi Schemes
• The Ponzi Scheme Blog for March 2019 (http://theponzibook.blogspot.com/, visited
4/27/19), which compiles one month‘s tally of charges, arrests, and sentencings, listed 16
cryptocurrency Ponzi schemes; the November 2020 edition listed 4 such schemes
• In 2018, the national conference of the National Association of Federal Equity Receivers
convened a panel on ―Demystifying Cryptocurrency and Blockchain for the Federal Equity
Receiver‖ [FERs are often appointed a the request of the SEC and FTC to pursue fraudsters
and their ill-gotten assets]
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34. Regulators in the U.S.
• SEC – Securities and Exchange Commission: regulates the exchange of securities [when
digital assets are securities]
• CFTC – Commodities Futures Trading Commission: regulates derivative exchange
operators and the sale of commodities [such as some digital assets]
• IRS – Internal Revenue Service: subjects the sale of property, including crypto, to capital
gains taxation
• FinCEN – Financial Crimes Enforcement Network (US Treasury Dept.): monitors
cryptocurrency transfers for anti-money laundering purposes
• State regulators oversee spot exchanges of crypto through state money transfer laws
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35. Regulators Outside the U.S.
• EU – European Union
• European Parliament (anti-money laundering legislation)
• EMIR – European Market infrastructure Regulation
• ESMA – European Securities Markets Authority
• BIS – Bank of International Settlements
• Regulators in UK, Switzerland, France, Germany, Austria, Slovenia, Malta, Japan,
• Singapore, China, Australia, South Korea, and other nation-states
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36. Some Further Reading
• Statement of Rebecca M. Nelson before the Committee on Banking, Housing, and Urban
Affairs, U.S. Senate Hearing on ―Examining Regulatory Frameworks for Digital Currencies
and Blockchain‖ (July 30, 2019), Cong. Res. Service (https://crsreports.gov)
• Digital and Digitized Assets: Federal and State Jurisdictional Issues, American Bar Ass‘n,
Derivatives and Futures Law Committee, Innovative Digital Products and Processes
Subcommittee, Jurisdiction Working Group (March 2019)
• ―Bitcoin 101,‖ at the Coindesk site, see www.condesk.com/learn/bitcoin-101
• ―Central Bank Digital Currencies: Foundational principles and Core Features,‖ Bank for
International Settlements 2020
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37. About the Faculty
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38. About The Faculty
Chris Cahill - CCahill@sfgh.com
Mr. Cahill is partner at Sugar Felsenthal Grais & Helsinger LLP, in Chicago, Illinois. He guides
secured lenders, creditors, debtors, creditors‘ committees, potential purchasers and others
through bankruptcy cases, out-of-court workouts, assignments for the benefit of creditors, and
receiverships. Mr. Cahill has substantial mega-case experience representing very large
debtors, and counsels and litigates on behalf of manufacturers and secured lenders in large
and middle-market cases.
Mr. Cahill also publishes frequently and speaks regularly on commercial insolvency
issues. For example, he is an executive editor of Commercial Bankruptcy Litigation, 2d
Edition (Jonathan P. Friedland, Elizabeth Vandesteeg & Christopher M. Cahill eds., 2020).
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39. About The Faculty
Nicole Kalajian - nkalajian@stradley.com
Nicole represents securities and commodities professionals in a variety of regulatory, compliance and
corporate matters. She has extensive experience with respect to hedge funds, commodity pools, private
equity funds, cryptocurrency funds, venture capital funds, real estate funds, fund of funds and socially
responsible investment vehicles. Nicole provides legal and compliance guidance to registered and
exempt investment advisers, commodity pool operators (CPOs), commodity trading advisors (CTAs),
introducing brokers (IBs), forex (FX) firms, proprietary trading firms, futures commission merchants
(FCMs) and broker-dealers (BDs). Nicole provides legal and compliance guidance concerning the launch
of securities token offerings (STOs), i.e., compliant initial coin offerings (ICOs). She also serves as
counsel to boards, mutual funds and exchange-traded funds (ETFs). Nicole drafts and develops offering
documents, compliance manuals, policies and procedures, corporate materials, business contracts,
investment agreements and advertising materials. She also provides legal and structuring guidance
concerning master-feeder structures, domestic and foreign funds, international offerings, separately
managed accounts and robo-adviser platforms. Nicole is a Founder of the Investment Network and the
Digital Assets Working Group, and is a Director of the Washington D.C. Compliance Round Table. Nicole
was selected as a Super Lawyers Rising Star in 2016, 2017, 2018, 2019 and 2020.
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40. About The Faculty
Oscar Jofre - oscar@koreconx.com
Oscar is Co-Founder President/CEO at KoreConX. He is currently one of the Top 10 Global Thought
Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech.
He has published an eBook that has been downloaded in over 20 countries, and been distributed by
partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance,
shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany,
France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering
alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world‘s
leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech,
LegalTech, InsurTech and OrgTech is having in their business. He is a member of the Crowdfunding
Intermediary Regulatory Advocates (CFIRA) in the USA, and a contributing author to The Fintech Book, the
world‘s first crowdsourced book on Fintech globally. He writes for Sharewise, Locavesting, Equities.com,
Business.com, Crowdfund Insider, CrowdfundBeat, and Agoracom. Oscar has been recognized as one of
the 10 most influential Hispanic Leaders in Canada. In May 2010, Oscar A. Jofre Jr. was recognized by the
Rt. Hon. Stephen Harper for his accomplishments. Oscar was awarded the Vision 2012 Business Man of
the Year by the Toronto Hispanic Chamber of Commerce on September 2012.
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41. About The Faculty
Michelle Gitlitz - MGitlitz@crowell.com
Michelle Gitlitz is the Global Head of Crowell & Moring‘s Blockchain and Digital Assets practice, and a
partner in the White Collar and Regulatory Enforcement and Corporate groups. She is located in the
firm‘s New York office.
An experienced regulatory lawyer and litigator, Michelle‘s practice focuses on the legal and regulatory
issues facing both emerging and established companies that invest in and incorporate blockchain
technology and digital assets into their businesses. Her experience includes advising clients on the legal,
regulatory, and risk management issues surrounding coin/token offerings (including launching new
offerings and remediating prior offerings); working with clients in connection with digital currency
exchanges and platforms; establishing new blockchains and nodes; and advising clients on navigating
federal and state money transmission laws.
To read more, go to: https://www.financialpoise.com/webinar-faculty/michelle-gitlitz/
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42. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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43. About Financial Poise
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