The Benefits of Blockchain for Nonprofits the Webinar Will Begin in a Few Moments

The Benefits of Blockchain for Nonprofits The webinar will begin in a few moments

NOTE: Participants will receive an email within 48 hours with a link to the slide deck and recording.

1 © ArmaninoLLP | armaninoLLP.com Learning Objectives

. Identify the key characteristics of blockchain that make it so effective . Recognize how blockchain’s unique traits can work for nonprofits . Evaluate how your nonprofit can begin on-ramping blockchain to take advantage of the new digital money

5 © ArmaninoLLP | armaninoLLP.com Today’s Presenters

Dean Quiambao Andries Verschelden Eric Thomas Partner Partner Director [email protected] [email protected] [email protected]

6 © ArmaninoLLP | armaninoLLP.com Agenda

. What Is Blockchain? . What is Cryptocurrency? . Why You Should Care About Blockchain? . How to get Started

7 © ArmaninoLLP | armaninoLLP.com 73%believe if their company fails to transform today, it will not exist in the future

9 © ArmaninoLLP | armaninoLLP.com 80%believe the pace at which my company needs to change is accelerating

10 © ArmaninoLLP | armaninoLLP.com It’s now a VUCA world

VOLATILE • UNCERTAIN • COMPLEX • AMBIGUOUS

11 © ArmaninoLLP | armaninoLLP.com THE IMPACT OF ARTIFICIAL INTELLIGENCE ON YOUR BUSINESSTHE IM PACT OF BLOCKCHAIN ON YOUR BUSINESS

84% 10Yrs 176Bn 1 Bn Of executives say their Since the publication of Expected annual business value By 2022, more than a organization have at least the Bitcoin Whitepaper generated by blockchain billion people will have some involvement with titled: “A Peer-to-Peer technology by 2025. By 2030 that some data about them blockchain technology Electronic Cash System” number increases to $3 trillion stored on a blockchain

PWC Gartner Gartner

LLP 12 © Armanino | armaninoLLP.com © Copyright Armanino 2019. Proprietary &Confidential. Key Terms

. Blockchain – A digital ledger that keeps tracks of all transactions recorded using the currency native to that blockchain. . Cryptocurrency Transaction – the movement of cryptocurrency from one address to another. This is viewable on a blockchain. . Blocks – a series of transactions that are combined into a single “block.” These are then added to the previous block (also full of transactions). . Cryptocurrency Public Address – synonymous with an email address, a unique identifier for an “account.”

13 © ArmaninoLLP | armaninoLLP.com Key Terms … Continued

. Cryptocurrency Wallet – typically software that can hold multiple addresses or “accounts” . Smart Contract/Tokens – an action or asset occurring on a blockchain that does not relate to a transaction of the native asset (i.e. IF/THEN, other assets) . Consensus – The way in which the participants in a network “agree” on the state of the ledger.

14 © ArmaninoLLP | armaninoLLP.com Bitcoin: The First Use of a Blockchain

“Blockchain” is a general term for the Bitcoins are the type of technology. token on the Bitcoin Blockchain There are many different public and private blockchains.

15 © ArmaninoLLP | armaninoLLP.com What is Bitcoin and Cryptocurrency?

. 100% Digital . Peer-to-Peer (P2P) . Secured by Cryptography . No Physical Form . No bank or intermediary . Governed by a set of rules . Used as a means of needed (known as a protocol) exchange, store of value or . “Decentralized” . No physical underlying accounting unit Management assets backing the value

May 2010, 1st BTC Trans. No bank or government *Then why does it have 10,000 BTC for 2 Pizzas “runs” or controls Bitcoin value?*

16 © ArmaninoLLP | armaninoLLP.com Distributed Ledger

Blockchains are immutable and tamper-resistant.

Blockchains are shared, decentralized ledgers.

17 © ArmaninoLLP | armaninoLLP.com Blockchain Adoption Curves

Digital Blockchain Blockchain Enabled Libra Announcement Transactions Participation Web 3.0 • Payments • Exchange Value • Blockchain Interoperability Payments • Money Transfer • Track Provenance • IT System Integrated processor allows • Digital Asset Creation • Record Keeping • New Business Models BTC payments at • Fundraising • Smart Contract Starbucks, Wholefoods

Goldman Sachs CEO Says it Armanino Solutions is “Absolutely” • Secure On-Ramp Financial Blockchain Considering Its • Armanino TrustExplorer© Services Technology Own • Armanino BlockAudit© Cryptocurrency

ADOPTION • Assurance over the Blockchain • Digital Asset Tax Structuring Institutional • Digital Asset Accounting & ERP Money Entry: • Forensics & Litigation Support CME BTC Futures Armanino Market Volume on Blockchain the rise Lab

6 12 18 24 30 (Months)

18 © ArmaninoLLP | armaninoLLP.com Blockchains = Networks

20 © ArmaninoLLP | armaninoLLP.com BLOCKCHAINS ARE DECENTRALIZED NETWORKS The are not ruled, managed or run by one party. This makes them durable, foundational building blocks.

21 © ArmaninoLLP | armaninoLLP.com BLOCKCHAINS ARE OPEN SOURCE NETWORKS

A Cambrian explosion of innovative new blockchain ideas are being put to the test at a global scale

22 © ArmaninoLLP | armaninoLLP.com BLOCKCHAINS ARE TRUSTED NETWORKS Through distribution, consensus mechanism and cryptography we can create immutability and traceability of records

23 © ArmaninoLLP | armaninoLLP.com BLOCKCHAINS ARE AUTONOMOUS NETWORKS

Blockchains have game theoretical incentives built in that ensure they keep running

24 © ArmaninoLLP | armaninoLLP.com Cryptocurrency Market Data

25 © ArmaninoLLP | armaninoLLP.com Why this Matters: Donation in Crypto

27 © ArmaninoLLP | armaninoLLP.com Ripple co-founder Chris Larsen donates $25 million in XRP to San Francisco State University. April 2019

28 © ArmaninoLLP | armaninoLLP.com Why?

. Donors want to contribute appreciated assets. . Treated like stock donations – donor does not pay tax and can write off the full amount of the donation. . Millennials, the next generation of donors, have a higher acceptance and trust in cryptocurrency than equity markets. . 68% of high-net-worth individuals are already invested or plan to invest in crypto by 2022, according to a deVere Group global survey. . Only 1% of nonprofits accepted cryptocurrency in 2018. Will grow exponentially. . According to a recent study from Edelman, 25% of affluent millennials (anyone between the age of 24 to 38 who has at least $50,000 in investable assets or $100,000 in individual or joint income) are using or holding cryptocurrency. . Do you want to tell a donor that you are not able to accept their large cryptocurrency contribution?

29 © ArmaninoLLP | armaninoLLP.com Entity Considerations

. Is accepting cryptocurrency in alignment with your organization’s risk tolerance? . Is accepting cryptocurrency in alignment with your organization’s public perception – innovator or traditionalist? + Is this an opportunity to change that perception? . Is accepting crypto a PR opportunity or risk? . Cryptocurrency is just another type of property. . Do we need to update our investment policy to include investments and gift acceptance in crypto?

30 © ArmaninoLLP | armaninoLLP.com Considerations for updating your Gift Acceptance Policy

. Convert to cash immediately or hold? . What is our current process for accepting property? + Is it appropriate for crypto? . Screening criteria – + There are over 2,000 cryptocurrencies. Some are easier to convert to cash than others. + Every transaction, good or bad, associated with a crypto currency is recorded in perpetuity. Could cause PR issues. . Should your organization accept directly or use an intermediary? . Should you limit the amounts of cryptocurrencies your organization will accept? . Will you need to update your standard donor advice?

31 © ArmaninoLLP | armaninoLLP.com Next Steps

32 © ArmaninoLLP | armaninoLLP.com Sample Implementation Strategy

Technical & Assessment Optimization & Design Operational & Best Practices Implementation

Assess Environment Technical Implementation Optimize Environment • Operational Needs • Implement Custody & Solutions • Develop Relevant Accounting • Security Tolerance Sets Policies • Assess Internal Skillset Operational Implementation • Tax Planning Design & Plan • Transactional & Reconciliation • Environment Iteration & Maturation Accounting • Select Currency Custody Set • Expand Usage & Use Cases • Identify & Implement Controls • Crypto Accounting Solution • Test & Finalize Processes • Payment/Invoicing Solutions

33 © ArmaninoLLP | armaninoLLP.com Okay – I’m Ready, Where Do I Start?

You need: + A USD-to-crypto ramp that connects with your existing banking infrastructure . A payment processor, like CoinPayments or BitPay . An exchange account, like Kraken, Shapeshift, SFOX or Coinbase . Cold and hot wallets to take custody like Abra, Shapeshift, Ledger, Keepkey + Possibly add a crypto accounting software solution, once volume justifies it + Policies around security controls and possibly accounting treatment

Bank Account Apply/F ulfill Y Flow Proposition Payment

Cash out?

Custodian A/R Integrate N Invoice

Hot Wallet/ Cold Wallet Payment Processor Send Invoice Y Material? Auto-Sweep

Payment Customer Processor N

Wallet Tracker ERP

Send TUSD/BTC Crypto Intacct Accounting Subledger

 Obtain Board & Finance & Investment committee approvals  Update policies  Educate internal teams  Designate internal or external Crypto knowledge owner/expert  Update donor advice  Implement a technical solution  Optimization and best practices  Communicate internally  Communicate externally  Review policies and procedures regularly

Andries Verschelden Partner [email protected]

Eric Thomas Director [email protected]

. Ready for donations

According to a poll in the Chronicle of Philanthropy:

. 35% of Americans say they have little or no confidence in charities

. 50% say that in deciding where to donate it is very important to know they have low overhead

. 68% say it’s important to have evidence that the charity’s programs are effective

. 13% say charities do a good job of spending money wisely