Conference presentation from Frankfurt CAC20

1. IT’S TIME TO TAKE A FRESH LOOK
AT THE CRYPTO MARKET
SEAMUS DONOGHUE
VP Sales and Business Development

2. “IT'S WORSE THAN TULIP BULBS. IT WON'T END
WELL. SOMEONE IS GOING TO GET KILLED. IT'S
JUST NOT A REAL THING, EVENTUALLY IT WILL
BE CLOSED.”

3. 3
The future of finance
LANDSCAPE
Fiat currency – value-destructive IOUs
Centralized trust but at a high cost
Limited financial access rupturing society
Intermediaries as gatekeepers
Regressive charges levied on all financial services
1.7bn unbanked population
Sound and private digital money
Open access distributed finance
Funding and investing accessible to all
Individuals can be their own bank
Fair and frictionless peer to peer commerce
A fully banked population
As it was As it’s becoming
Decentralized and democratized – a fairer and more inclusive financial system
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4. Tokenization will grow rapidly
LANDSCAPE
Source: WEF, HSBC
Just tokenization is expected to be worth $24trillion by 2027 – 10% of global GDP
2019 2020 2021 2022 2023 2024 2025 2026 2027
24
19
15
11
7
4
2
1
0.5
x
6
1
1
5
1
1
9
10-year
CAGR: +62%
Listed equity
Unlisted equity
Other equity
Investment funds
Bonds
Home equity
Other financial assets
Other tokenizable assets
Projected tokenized market volume until 2027
(in US$trn by asset class)10
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5. A big opportunity – But when?
LANDSCAPE
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Lack of secondary
market liquidity
Issuer quality
is low
Firms feel market
still not ready
Perception is still too much friction, relative to maintaining the status-quo

6. How to be ready for when this takes off?
LANDSCAPE
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Invest now and justify the decision based on the crypto
market, take the tokenization opportunity as unpriced upside
Come for the crypto, stay for the asset tokenization

7. Common objections
LANDSCAPE
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Most firms operate with an outdated view of where the market is. We must advance that narrative.
Reputational risk
Technology risks
Regulatory risks
“our AML will flag this as criminal asset”
most of the risk policies related to crypto are outdated,
written 3 to 5 years ago
matured technology, many deployment options, integrated with core
banking systems, in production with Tier 1“custody software not safe enough”
“we will fall through with the regulator”
regulatory barriers are falling across the world, same pattern as the
shift to cloud in banking
The reality

8. The most common objection of all
LANDSCAPE
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“Bitcoin is not a real asset class”
and yet:

9. 9
WE ARE HERE
The hype cycle is past
LANDSCAPE
Technology trigger
Peak of
inflated
expectations
Trough of
disillusionment
Slope of enlightenment
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2008
Satoshi Nakamoto
Issues bitcoin white paper
2014
Silkroad, the bitcoin denominated
marketplace for illegal goods,
shut down by the FBI
2016
DAO launches and 5 months later is
compromised and collapses
2017
Bitcoin bubble - Jamie Dimon calls Bitcoin
a “fraud”, “worse than Tulip Bulbs”
2018
Bitcoin crash – Bitcoin loses 80% of
its value, worse than doct.com crash
2019
Bitcoin futures
market open
2020
Fidelity announces Bitcoin Fund and
digital asset custody services; OCC
says chartered banks can act as
custodians
2021 onwards
Digital assets are a
mainstream market

10. 10
The institutionalization of digital assets
LANDSCAPE
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2018
2020
2021
2-3 years

11. 11
Broadening demand both retail and institutional
LANDSCAPE
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“Bitcoin is a ‘drop in the bucket’ compared with
the markets it could disrupt”
Ria Bhutoria, Director of Research, Fidelity Digital Assets
“Consistent and significant growth in the
demand for digital assets — shown through the
lens of Grayscale asset raising — continues to
corroborate our view that digital assets are an
emergent market that should not be ignored”
Grayscale Investments, LLC

12. Crypto performance making it hard to ignore
LANDSCAPE
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50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
200
2 Jan 2020 1 Feb 2020 2 Mar 2020 1 Apr 2020 1 May 2020 31 May 2020 30 Jun 2020 30 Jul 2020 29 Aug 2020 28 Sep 2020 28 Oct 2020
BTCUSD vs. S&P500 vs. Gold YTD performance (Jan 1, 2020 to Oct 28, 2020
– Rebased to 100)
BTCUSD S&P500 Gold GC=F Nasdaq ^XIC

13. Crypto performance making it hard to ignore
LANDSCAPE
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50
100
150
200
250
300
350
30 Oct 2017 28 Jan 2018 28 Apr 2018 27 Jul 2018 25 Oct 2018 23 Jan 2019 23 Apr 2019 22 Jul 2019 20 Oct 2019 18 Jan 2020 17 Apr 2020 16 Jul 2020 14 Oct 2020
BTCUSD vs. S&P500 vs. Gold 3-year performance (Oct 30, 2017 to Oct 28, 2020
– Rebased to 100)
BTCUSD S&P500 Gold GC=F Nasdaq IXIC

14. The supply-demand investment case for BTC
LANDSCAPE
Standing still is not an option
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27%
70%
77%
1Q2020 2Q2020 3Q2020
Grayscale’s Bitcoin Trust inflows as a proportion of mined bitcoin (Jan-1 2020 to Sep-30 2020)
Source: Grayscale.co

15. 15
Corporate treasuries view this as an asset
LANDSCAPE
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16. Fintechs are also helping to define the opportunity…
LANDSCAPE
Early movers are seeing rapid growth and bottom-line impact
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$37.0 $43.0 $52.4 $65.5 $125.5 $148.0 $178.0 $306.1 $875.0
2Q2018 3Q2018 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020
Square Cash App Bitcoin volumes continue to grow rapidly, with gross profits from
Bitcoin sales up +150% in 2Q2020 vs. 1Q2020
Source: Square company filings
$17m
Gross profits
from Bitcoin

17. …even the more established companies
LANDSCAPE
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346m users; 26m merchants
Staffed with 100 employees
“on route to becoming profitable”
“We are launching Onyx because we
believe we are shifting to a period of
commercialization of those
technologies, moving from research and
development to something that can
become a real business"

18. Not only crypto - Stablecoins are a progressive innovation to current payment frictions
LANDSCAPE
Latin America
North America
EMEA
Asia-Pacific
2018 2023F
2.7
1.9
SHARE OF GLOBAL
BANKING REVENUES
37% 38%
0.3
0.5
0.9
0.2
0.5
0.7
1.2
0.3
Global payments revenue, $ trillion
US$150m
/ day
Global growth of stablecoins market cap
Source: McKinsey; www.coingecko.com
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19. 19
The opportunity is now
LANDSCAPE
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Central Bank Digital Currencies
are being tested
Regulatory
barriers
are being lifted
Technology is maturing
Growing
institutional and
customer demand
Crypto is becoming
a core institutional
offering

20. 20
The market opportunity
LANDSCAPE
Sources: coinmarketcap.com; cointelegraph.com; defimarketcap.io; deutsche bank; SIFMA; coingecko.com; Nedbank
MARKET CAP
OCT 2020
BITCOIN
MARKET CAP
OCT 2018
DEFI
MARKET CAP
SEP 2020
MARKET CAP
OCT 2020
STABLECOINS
$2.5
BN
$20
BN
$15
BN
$110
BN
$165
BN
$250
BN
US$
11.5
TRN
GOLD
MARKET CAP
OCT 2020
US$
13-16
TRN
EURODOLLAR
MARKET CAP
SEP 2016-2020
US$
300-350
TRN
CAPITAL
MARKETS
SIZE 2019-2020
MARKET CAP
SEP 2018
MARKET CAP
OCT 2019
Size of circles aims to illustrate difference in market sizes, but is not proportional between circles
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21. 21
TRUSTED
they have been
safeguarding client and
institutional assets for
generations
EXPERT
incumbent firms have
significant accumulated
expertise in making markets
around structured and
complex assets
ROUTE TO CUSTOMER
incumbents have the clients
with unmet needs; they
don’t have to incur the time
and expense of acquiring
them
REGULATED
regulations will adapt not
disappear. As already
regulated entities,
incumbent institutions can
get to market fast with
digital asset services
Why banks are well-placed to capture the opportunity
THE MARKET OPPORTUNITY
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22. 22
THE MARKET OPPORTUNITY
Digital assets until now
Consumers and their banks
perceive there to be
significant risks around
digital assets
The largest custodians
don’t invest in the market
DIGITAL ASSETS
REMAINS SMALL AND
VOLATILE MARKET
No-one has been fired for ignoring this market opportunity
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1
2
3
4

23. 23
What makes up the core offering of banks crypto stack?
THE MARKET OPPORTUNITY
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Store and transfer bitcoins, ethers and thousands of
other digital assets in highly secure wallets backed by
hardware security modules or multi-party computation.
Custody
Protect the system integrity with a secure governance
framework regulating every process and ensuring the
absence of single points of trust.
Control
Tokenize and manage the full lifecycle of asset tokens
with a complete smart contract framework supporting
equities, bonds, derivatives and other asset classes.
Tokenize
Leverage the infrastructure to securely interact with
sub-custodians and a variety of third-party providers
offering liquidity, compliance, reporting and banking
services.
Connect
SECURE
PROGRAMMABLE
GOVERNANCE

24. 24
THE MARKET OPPORTUNITY
Digital assets enter a virtuous cycle
Those that don't invest in this opportunity will lose out
Consumers & institutional
investors increasingly
believe this is an important
financial market
The largest custodians
invest in the infrastructure
to safeguard the market
MARKET GROWS,
BECOMES MORE
LIQUID AND
PREDICTABLE
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3
4
1
2

25. “ONYX IS AT THE FOREFRONT OF A MAJOR SHIFT
IN THE FINANCIAL SERVICES INDUSTRY.” - 2020
“IT'S WORSE THAN TULIP BULBS. IT WON'T END WELL.
SOMEONE IS GOING TO GET KILLED. IT'S JUST NOT A REAL
THING, EVENTUALLY IT WILL BE CLOSED.” - 2017
Jamie DIMON – CEO J.P. Morgan

26. THE INSTITUTIONAL DIGITAL
ASSETS OPERATING SYSTEM
SEAMUS DONOGHUE - VP Sales and Business Development
donoghue@metaco.com
www.metaco.com