Presented by Alice Henshaw, Engineer at Fluidity, 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. CODIFYING
COMPLIANCE
Alice Henshaw, Fluidity

3. Codifying Compliance

4. What is a smart contract?
Immutable code on a distributed network
● Code that lives on a distributed network
● Once deployed it cannot be changed
● Legal agreements naturally translate

5. What is a token?
● A digital asset that’s ownable on-chain
● Encoded in a smart contract
● Transferable between owners
● Used for a multitude of reasons, including:
○ Payments
○ Staking
○ Ownership of real-world assets

6. A Simple Token Transfer
Alice wants to send Bob 10 AST token

7. A Simple Token Transfer
Does Alice own 10 AST?
Alice wants to send Bob 10 AST token

8. A Simple Token Transfer
Does Alice own 10 AST?
Transfer denied
N
Alice wants to send Bob 10 AST token

9. A Simple Token Transfer
Does Alice own 10 AST?
Alice’s balance: -10
Bob’s balance: +10
Transfer denied
Y N
Alice wants to send Bob 10 AST token

10. Security Tokens
Digital representation of real-world securities
● Tokenization represents securities as blockchain tokens
● Securities are subject to stringent regulation
● Current systems are outdated
● Codifying compliance enables adoption

11. A Security Token Transfer
Alice wants to send Bob 10 tokenized shares

12. A Security Token Transfer
Does Alice own 10 shares?
Alice wants to send Bob 10 tokenized shares

13. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
N
Alice wants to send Bob 10 tokenized shares

14. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Is Bob approved to own the shares?
Y
N
Alice wants to send Bob 10 tokenized shares

15. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Is Bob approved to own the shares?
Y
N
N
Alice wants to send Bob 10 tokenized shares

16. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Is Bob approved to own the shares?
Would this leave us with too many shareholders?
Y
Y
N
N
Alice wants to send Bob 10 tokenized shares

17. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Y
Is Bob approved to own the shares?
Would this leave us with too many shareholders?
Y
Y
N
N
Alice wants to send Bob 10 tokenized shares

18. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Y
N
Is Bob approved to own the shares?
Would this leave us with too many shareholders?
Are the shares “frozen”?
Y
Y
N
N
Alice wants to send Bob 10 tokenized shares

19. A Security Token Transfer
Does Alice own 10 shares?
TransferDenied
Y
N
Is Bob approved to own the shares?
Would this leave us with too many shareholders?
Are the shares “frozen”?
Y
Y
Y
N
N
Alice wants to send Bob 10 tokenized shares

20. A Security Token Transfer
Does Alice own 10 shares?
Alice’s balance: -10; Bob’s balance: +10
TransferDenied
Y
N
Is Bob approved to own the shares?
Would this leave us with too many shareholders?
Are the shares “frozen”?
Y
Y
Y
N
N
N
Alice wants to send Bob 10 tokenized shares

21. Know Your Customer
Codified Compliance
This process allows us to encode:
Holding Requirements
Anti-Money Laundering Bespoke Requirements
RegD
RegS

22. Beyond Compliance
Complex Transactions:
Multi-Tranche, Multi-Level Tokens
Secondary Marketplaces:
For Debt, Equity, Hybrids
Post-Issuance Administration:
Voting, Custody, Trustee
Automated payments:
Interest, Dividends
Adoptable unified framework for describing real-world assets digitally

23. Enabling a New Chapter in Capital Markets

24. @fluidityio /fluidity /fluidityio
Alice Henshaw
fluidity.io