Presented by Henri Arslanian, FinTech & Crypto Leader, Asia at PwC, at Fluidity 2019. Fluidity brings the worlds of finance and technology together to shape the future of blockchain and capital markets. On May 9, 2019, we welcomed companies and teams to help shape the narrative of rebuilding finance at the historic Williamsburgh Savings Bank in Brooklyn, New York. Resources: Website: https://fluiditysummit.com Facebook: https://facebook.com/fluidityio/ Twitter: https://twitter.com/fluidityio LinkedIn: https://linkedin.com/company/fluidityio/ YouTube: https://youtube.com/channel/UC0NBCYlgLIxjSljf7CV91nQ/

2. INSTITUTIONAL
CHALLENGES AND
OPPORTUNITIES
Henri Arslanian, PwC

3. !3
Warning!

4. PwC
Global Crypto Institutional Trends
!4
May 2019
6 Macro Institutional Crypto Trends
Institutional
Crypto
Trends
Regulatory
Clarity
Crypto
Exchanges
Security
Tokens
Entry of
Institutional
Players
Crypto
Funds
Stable
Coins

5. Global Crypto Institutional Trends May 2019
!5
1. Regulatory Clarity

6. PwC
Global Crypto Institutional Trends
United States: New legislative
discussions to exclude crypto
from securities law.
Switzerland: The Swiss State Secretariat for
International Finance reported that it would
set up a working group on blockchain and
ICOs.
United Kingdom: Financial Conduct Authority,
are currently holding a consultation for
5AMLD, which places new restrictions on
crypto assets.
Japan: Regulators have made
amendments to the financial
instruments and exchange law as well
as the fund settlement act.
Bahrain: Central bank launched new crypto regulations to
establish new supervision and enforcement standards.
Hong Kong: Securities regulator
proposed a “sandbox” for crypto
exchanges and new rules for crypto
funds.
Malta: VFA Act entered into force.
First 14 crypto asset agents
licensed in Malta.
Thailand: Regulators recently issued its
very first licenses to four cryptocurrency
exchanges.
France: Regulators provided
further digital asset clarity within
PACTE Bill.
Gibraltar: Financial Services Commission
have issued 8 DLT regulatory licenses.
Bermuda: Monetary Authority
published a draft regulatory document
relating to crypto custodial services
!6
May 2019
Increased Regulatory Clarity Globally

7. PwC
Global Crypto Institutional Trends
Today approximately 60% of regulators have
released some type of Crypto guidance or regulations.
These jurisdictions represent 89% of global GDP.
!7
May 2019
This data is based on proprietary PwC research and publicly available information.

8. PwC
Global Crypto Institutional Trends
!8
May 2019
Principles Based
Approach
Integration into Existing
Framework
Creation of Bespoke
Framework
Three Major Observed Approaches to
Crypto Regulatory Policy Making

9. PwC
Global Crypto Institutional Trends
!9
May 2019
Conflicts between
Regulators and
Central Banks
Which Vertical of Crypto
to Prioritise
Pace of Change of
Industry
Buy-in of Local
Traditional Ecosystem
Players (e.g. banks)
Internal Crypto Expertise
Capabilities
Ongoing Monitoring
Challenges for Policy Makers

10. 2. Continuous Entry of Institutional Players

11. PwC
Global Crypto Institutional Trends
!11
May 2019
Lack of
Expertise
Risk vs Reward
Test
Regulatory
Uncertainty
Reputation
Risk
Operational
Issues
Challenges Faced by
Traditional Financial Institutions

12. PwC
Global Crypto Institutional Trends
!12
May 2019
Invest in Crypto
Companies
Partner with Crypto
Companies
Set-up new Crypto
Focused Entities
Three Major Approaches for
Traditional Financial Institutions

13. Global Crypto Institutional Trends May 2019
!13
3. Rise of Stable Coins

14. PwC
Global Crypto Institutional Trends
Name
Market
Capitalisation
Trading Volume (24hr)
Trading Pairs
Available
Blockchain
$2,774,881,287 $12,689,658,345 2240
Omni Protocol &
Ethereum
$301,944,300 $82,533,175 141 Ethereum
$225,677,367 $68,976,631 162 Ethereum
$183,044,802 $110,365,621 82 Ethereum
$82,175,666 $19,085,796 86 Ethereum
$45,522,156 $18,628,593 55 Ethereum
!14
Source: CryptoSlate (Data as of 6th of May 2019)
May 2019
Continuous Rise of Stablecoins

15. PwC
Global Crypto Institutional Trends
!15
May 2019

16. PwC
Global Crypto Institutional Trends
!16
May 2019

17. PwC
Global Crypto Institutional Trends
!17
May 2019

18. Global Crypto Institutional Trends
!18
May 2019
4. Continuous Institutionalisation of
Crypto Exchanges

19. PwC
Global Crypto Institutional Trends
!19
KYC / AML
Legal &
Regulatory
Compliance
Institutional
Mindset
Internal
Governance &
Controls
Third Party
Audit
May 2019
Examples of Crypto Exchange Best Practices

20. PwC
Global Crypto Institutional Trends
!20
Falling Volumes Bank Accounts
Regulatory and
Tax Uncertainty
Industry
Perception
Cyber Security
May 2019
Key Challenges Faced by Crypto Exchanges

21. PwC
Global Crypto Institutional Trends
!21
May 2019

22. PwC
Global Crypto Institutional Trends May 2019
!22
5. Growth of Crypto Funds

23. PwC
Global Crypto Institutional Trends
!23
May 2019
Institutional
Custody Offerings
Bank Account
Opening
Regulatory and Tax
Uncertainty
Governance and
Operational
Due Diligence
Volatile Institutional
Investor Interest
Business
Viability
Key Challenges Faced by Crypto Funds

24. PwC
Global Crypto Institutional Trends
!24
May 2019
Growth of Crypto Hedge Funds
Distribution of Crypto
Hedge Fund AuM
Percentageoffunds
0%
18%
35%
53%
70%
$50m+
$40m
to$50m
$30m
to$40m
$20m
to$30m
$10m
to$20m
<$10m
Over 60% of Crypto Hedge Funds have less
than US$10 million in AuM.
Despite difficult market conditions, the median
Crypto Hedge Fund has grown its AuM 3X in
2018.

25. PwC
Global Crypto Institutional Trends
!25
Median 2018 Crypto Hedge Fund Return
2018Return
-80%
-60%
-40%
-20%
0%
20%
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sept-18
Oct-18
Nov-18
Dec-18
Median fundamental Median discretionary Median quant Bitcoin
May 2019
Growth of Crypto Hedge Funds Industry
2018 Return
Median all funds -46%
Median fundamental fund -53%
Median discretionary fund -63%
Median quant fund +8%

26. Global Crypto Institutional Trends May 2019
!26
6. Security Tokens and Tokenisation

27. PwC
Global Crypto Institutional Trends
!27
Lack of Liquidity
Still in
Development
Phase
Lack of
Established
Platforms
Lack of
Established
Protocols
May 2019
Challenges with Security Tokens

28. PwC
Global Crypto Institutional Trends May 2019
!28

29. PwC
Global Crypto Institutional Trends
!29
May 2019

30. pwc.com
© 2019 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers
International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as
agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member
firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other
member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
Henri Arslanian
PwC Global Crypto Leader
henri.arslanian@hk.pwc.com