| Date post: | 19-Oct-2014 |
| Category: |
Economy & Finance |
| View: | 452 times |
| Download: | 3 times |
The Rise of GATCAPreparing for the new reality of global tax compliance and account reporting systems
Bitcoin and Crypto Currencies
Money 2.0 or Financial Crime Risk?
ACFCS WebinarAugust 8, 2014
Presented ByMike Urban, Fiserv
Brian KindleExecutive Director
Association of Certified Financial Crime SpecialistsMiami, FL
Certification, News, Guidance, Training, Networking
The Credential That Demonstrates Competency and Skill Across the Financial Crime Spectrum
CFCS Certification
Mike UrbanDirector, Financial Crime Risk Management
Fiserv
Bitcoin and Crypto Currencies – Money 2.0 or Financial Crime Risk?
ACFCS Training - August 8th, 2014
Mike Urban – Director, Financial Crime Risk Management
© 2013 Fiserv, Inc. or its affiliates. 7
Bitcoin Units and Network
• Peer-to-peer payment system introduced as open-source software in 2009 by developer Satoshi Nakamoto
• Payments are recorded in a public ledger (blockchain) using units of account (bitcoins)
• US Treasury calls bitcoin a decentralized virtual currency• Often referred to as a crypto or digital currency• Several others: Dogecoin, Litecoin – aka Altcoins
• Exist in a digital form tied to the alphanumeric string of numbers that represent each unique bitcoin
• Designed so production decreases geometrically over time, with total circulation eventually topping out at 21M
• Roughly 13M in circulation worth $7.8B
© 2013 Fiserv, Inc. or its affiliates. 8
© 2013 Fiserv, Inc. or its affiliates. 9
End User Experience
1. Install Wallet application
4. Bitcoins credited / debited
3. Place order through exchange
2. Transfer (real) money to Wallet
5. Spend ‘em or hoard ‘em
© 2013 Fiserv, Inc. or its affiliates. 10
Ecosystem
Wallet application
Exchange
Mobile App
ATM
Merchant checkout
Miners
Debit Card
© 2013 Fiserv, Inc. or its affiliates. 11
Miner 49’er
• Called mining, individuals or companies engaged in exchange for transaction fees and newly created bitcoins
• Bitcoins created to reward miners for payment processing to verify and record payments
© 2013 Fiserv, Inc. or its affiliates. 12
Mining Operations
© 2013 Fiserv, Inc. or its affiliates. 13
Blockchains – Digital Currency 2.0
• The global public ledger is known as the blockchain• Confirms transaction across multiple miners, solves risk of
‘simultaneous’ transactions • “Decentralized trust infrastructure" could provide a means of
exchange for more than digital currency• Stock certificates• Property titles• Smart property• Smart contracts • Programmable money
• Car that turns on only for the holder of a transferable digital token• Contract that executes itself without getting lawyers or debt
collectors involved – Ethereum
© 2013 Fiserv, Inc. or its affiliates. 14
Centralized Transactions
© 2013 Fiserv, Inc. or its affiliates. 15
Decentralized Network using Blockchains
© 2013 Fiserv, Inc. or its affiliates. 16
Smart Contracts
• Ethereum – leverages block chaining to create decentralized contract ‘proof of work’ application
© 2013 Fiserv, Inc. or its affiliates. 17
Opportunities
• Remittance - Transfer value across borders – more quickly, cheaply and easily than through the banking system or traditional money transmitters
• Merchant acceptance – <1% transaction fee paid by purchaser versus 3-5% merchant interchange, no chargebacks and several payment gateways enable acceptance of digital currency and remove volatility risk – Overstock.com, DISH, 35,000 others ….
• VC investment – Lot’s of interest and investment, over $100M publically disclosed, 60% in US
• New set of payment rails! First truly new trust based, open source payment application
• Innovations like multi-signature transactions and cryptographic proof-of-reserves, will consumer protection be best accomplished by regulation or by math
© 2013 Fiserv, Inc. or its affiliates. 18
Bitcoin Price Volatility
© 2013 Fiserv, Inc. or its affiliates. 19
Bitcoin Risks
© 2013 Fiserv, Inc. or its affiliates. 20
Regulatory Environment
• US government has made clear that exchangers of digital currency are subject to know-your-customer and anti-money laundering rules
• Uncertainty about the rules as policymakers grapple with a technology that does not neatly fit into preexisting boxes
• Once US Federal and State governments began scrutinizing exchanges’ compliance and regulatory processes, traditional financial institutions started dropping their bank accounts, citing risk
• The European Banking Authority has warned that bitcoin lacks consumer protections, can be stolen and chargebacks are impossible
• IRS says bitcoin payments >= $600 will be taxed like property transactions - bitcoin payments, investment gains realized, and income derived from mining
• Illegal in China, Vietnam and Russia
© 2013 Fiserv, Inc. or its affiliates. 21
Money 2.0 or Financial Crime Risk?
© 2013 Fiserv, Inc. or its affiliates. 22
Questions
© 2013 Fiserv, Inc. or its affiliates. 23
For More Information
Visit: www.financialcrimerisk.fiserv.com
Email:
