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1. InterCon Dubai 2019
Cross-Border Capital Markets Services on the Blockchain
“an entrepreneur’s perspective”
by
Oz Eleonora

2. Confidential
Digital representation of securities in
real world enterprises which derive their
value from an external tradable asset
• Same as security interests but with an
electronic wrapper
• Subject to security regulations
• Requires mandatory KYC/AML Accreditation
What is a Security Token?

3. Confidential
“Blockchain technology will fundamentally
change market structures”
– Abigail Johnson Chairman & CEO, Fidelity Investments
Market
Source: Inwara Research, 2019
2027
Security Token Market Cap
US$10 Trillion (Forecast)
2019
Security Token Market Cap
$1 Billion (Estimate)
Blockchain based Asset Backed Securities:
• Company Securities (equity and debt)
• Real Estate,
• Others
“2019 Expected to be the initial explosion of the global
Security Token Offering (STO) market” Trade reports
Other estimates show slower growth
• US$ $10 Trillion (Forecast) by 2030
• a 59% CAGR for 2019-2030
Large Market regardless of estimates
• Only 30% of the world’s wealth is in cash
• Vast majority of companies around the
world are not publicly listed
Reality has
been slower

4. Confidential
STO MARKET: Nascent and Growing
The advent of Security Token Offerings (STO)
• Crackdown on ICOs by from regulatory authorities in major countries
0
12.5
25
37.5
50
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
47
20
2526
14
2019 - Advent of STOs
$0.75B by 5/1/19
QoQ growth of over 130% in Q1 2019

5. Confidential
STO MARKET: “Fast” Growth and Global
2017 2018 2019
Amount Raised US$ 6 Billion US$ 12.3 Billion US$0.753 Billion
Number of
ICOs and STOs
900 ICOs 981 ICOS 328 STOs
Completed ICO’s 52% 42% N/A
Failed ICO’s 48% 58% 4%
STO failure rate just 3.65%; reflects
enhanced regulatory compliance
and more qualified investors
1. Financial Regulations; and
2. New Found Benefits of STOs
• Broader investor base
• Lock up the capital but not the investor(*)
• Founders maintain more control
• Facilitates better oversight by regulators
• Allow for fractional ownership of property
GROWTH DRIVERS

6. Confidential
Problem
Tokenizing an asset does not make it more liquid by default
The primary obstacle of private security interests worldwide is liquidity
Primarily, due to:
1. Regulatory Uncertainty;
2. Lack of Transparency;
3. Legitimate infrastructure;
4. Participation of reputable traditional institutional investors.
Without cross-border capital markets
activity, there is no true liquidity.

7. Confidential
A capital markets transaction combines Change of Ownership/
Rights with Payment/Settlement.
• It straddles two worlds that are closely related yet disconnected (operating
side by side, not together)
• Regulation of these two worlds is (co)related but not the same, not always
aligned and sometimes even incompatible
• Capital Markets thus remain a specialist activity
• The blockchain has the unique characteristic of enabling an end-to-end capital
markets transaction fully contained within a single digital process
• this is completely unprecedented from a regulatory perspective
What is a “Capital Markets Transaction”?
Without compliance,
there can be no cross-border
capital market activity.

8. Confidential
A multidimensional, globally intertwined framework of rules governing
data collection & protection,
transaction monitoring & reporting,
and jurisdictional sovereignty
as related to cross border financial transactions.
• No single entity or country determines “compliance” in cross-border financial transactions
• There are no shortcuts, lest one is willing to risk legal persecution
• The blockchain is not exempt; much like the Internet is not exempt
What is “Compliance”?

9. Confidential
Visualization 1: capital markets transaction
KYC:
- identity
- location
- citizenship
- criminal record
Privacy:
- secure storage
- access
- explicit permission-
based sharing
Monitoring:
- issuer integrity
- origin & purpose
- recipient integrity
- facilitator integrity
Reporting:
- on all data points
- multiple authorities
- standards
- past, current, pending
Jurisdictional Sovereignty:
- registration
- contractual validity
- bilateral regimes
- Taxes
Recourse:
- arbitration
- adjudication
- enforcement
- Collection

10. Confidential
Visualization 2: cross-border capital markets transaction
GDPR
KYC
PSD2
IFRS
CME
FATCAFCA
FSA
SEC
OSC
CFTC
SFC
AFM
MAS
FRB
DNB
ECB
BaFin
BIS
Basel3
Country B Country C
Country A

11. Confidential
Solution?
Yes. With a pragmatic, hybrid approach that is technologically flexible.
Today’s market requires a combination of process, procedures and technology.
Primarily, due to:
1. Lack of regulatory digital readiness;
2. Need for international regulatory alignment;
3. Checkered past of blockchain-based capital markets services;
4. Weariness of investors and institutional focus on capital protection;
5. Participation of reputable traditional institutional investors.
Co-existence of traditional with advanced
blockchain-based compliance solutions is
inevitable and likely to last for a while.

12. Confidential
Real Life Example
GDPR
KYC
PSD2
IFRS
CME
FATCAFCA
FSA
SEC
OSC
CFTC
SFC
AFM
MAS
FRB
DNB
ECB
BaFin
BIS
Basel3
Country B Country C
Curaçao

13. Curaçao: Regional Blockchain-based Capital Markets Center
Requirements
• STOs are securities (no new regulations!)
• Issuer must be Curaçao entity
• Must engage lawyer, auditor (“big 6”) and
tax advisor (ruling)
• Simultaneous listing on DCSX
• Curaçao bank account
• No special tax treatment
USA
Curaçao
Hong Kong
Netherlands
• Compliance Management
• Treasury Management
• Distribution
• Capital Protection
THIS IS NOT A TAX OPTIMIZATION SERVICE!!
• Crypto/Hybrid Asset
Mgt Funds
• SME Issuers
(growth capital need)

14. Confidential
Conclusion
A truly successful global STO market requires liquidity at scale
As believers in the potential and power of the blockchain, we must acknowledge the
critical role of compliance and leverage the technology, as well as our global community
reach, to bridge the gap between what is today and what can be tomorrow.
There are no shortcuts, but it can be done. Zinica Group, together with our global
strategic partners is doing it.

15. THANK YOU!
Questions?
www.zinica.com