Yes - Commercium is a state-chartered bank under Wyoming's special purpose depository institution ("SPDI") law. As a depository institution, Commercium meets the definition of a bank under state and federal law.

The SPDI Charter allows Commercium to hold and take custody of public network-based cryptocurrencies. However, given the uncertain regulatory environment for crypto currencies, Commercium will not enter this market until regulatory certainty has been achieved. In essence, we do not see us entering this space until at least one of the four Large US Banks from JP Morgan, BNY Mellon, Citibank or State Bank have established this capability. Additionally, before launch we would seek approval from both the Wyoming Division of Banking and the Federal Reserve Board of Kansas City.

SPDIs are sometimes described as "bank-like" or "bank-lite". Not the case. SPDIs are banks under state and federal law. The SPDI charter is a bank charter - specifically, a depository institution, which is a distinction that unlocks certain regulatory benefits and obligations.

A Wyoming-chartered SPDI is a fully reserved bank that receives deposits and conducts other activity related to the business of banking, including custody, asset servicing, fiduciary asset management, and related activities. SPDIs can handle digital assets, such as virtual currencies, digital securities, and digital consumer assets. SPDIs may deal in traditional assets as well, by serving as a vehicle for business cash management, operational accounts, and any other purpose permitted under applicable law.

A TC is not a bank, rather is a separate corporate entity owned by a bank or other financial institution, law firm, or independent partnership. Its function is to manage trusts, trust funds, and estates for individuals, businesses, and other entities. A trust is an arrangement that allows a third party or trustee to hold assets or property for a beneficiary or beneficiaries. TCs get their title from the fact that they act in a fiduciary capacity for their clients—as trustees.

Differences

SPDIs and TCs are different in multiple ways. Important differences include:

1. SPDIs are regulated as banks and must comply with banking regulations and special, strict regulations applicable to SPDIs (for example, have their customer deposits of fiat currency at all times backed 100% or more by unencumbered liquid assets, which include U.S. currency and level 1 high-quality liquid assets).
2. SPDIs advance qualified custody of securities and digital assets. SPDIs may provide custodial services for digital assets and perform authorized transactions for customers. Further, the Wyoming SPDI laws mean that only SPDIs can provide an effective bailment while permitting direct ownership of securities, all provable through the blockchain.
3. SPDIs may conduct activity under Wyoming regulations tailored to digital assets, which address issues such as technology controls, transaction handling, and custody operations for digital assets.
4. SPDIs operate under Wyoming law that defines digital assets in conjunction with the Wyoming Uniform Commercial Code and describes, among things, perfection and priority of security interests in digital assets.
5. SPDIs may resemble custody banks because they will likely be predominantly engaged in custody, safekeeping, and asset servicing activities. A custody bank is focused on safekeeping assets, fiduciary management, transaction processing and settlement, and providing an "on/off" ramp to securities markets, commodities markets, and customer bank accounts.
6. A SPDI can engage in a wider range of activities than a TC.
7. A TC is often owned by another entity, such as a bank.

No, deposits with Commercium are not FDIC-insured. However, Commercium must comply with all SPDI reserve requirements,such as holding 100% of deposits in reserve. These requirements ensure the safety of customer deposits.

Fractional Reserve Banking is a system where only a fraction of their depositors' balances are available for withdrawal, with the rest used to lend out to other customers. For example: if a customer deposits $100 in their bank with a reserve requirement of 10%, $10 is left in reserve while the remaining $90 is lent out to another customer.

If depositors simultaneously lose confidence, especially if the bank's investments underperform or lose money, and try to withdraw their funds, the bank runs the possibility of not having enough liquid cash on hand to cover all withdrawals, leading to a bank run.

1. Our Banking services are traditional banking products:
• USD checking, savings, escrow accounts
• Payment services (ACH, wire, Bill Pay)
2. Full Reserve Bank versus Fractional Reserve Banking:
• 100% of Commercium customer deposits are held in reserves.
• $30 million capital
• Our Charter prohibits us from engaging in any form of lending.
• Our Charter prohibits the issuance of credit cards.
3. We currently have no plans to enter the crypto currency space (see earlier question)
4. Stablecoins - given the four Large US Banks are already operating in this space, Commercium plan to also enter this market. We will only utilize those tokens that have 100% USD backing of cash and US securities such as USDC from Circle, and the to be shortly launched Wyoming Stable Token
5. Our tokenization aspirations are already in place by major banks in the US such JPMC (its partnerships with ONYX) and BNY Mellon.

Historically, the choice whether states would require their banks to be insured or federally regulated rested solely with the states, not with the Federal Government, and until approximately 1990 most state laws were silent on the topic. Banks simply chose to be FDIC insured and federally regulated, and the Fed and FDIC routinely granted them access. But five U.S. states held back, keeping flexibility for themselves and a check on potential overreach by federal bank regulators. The five states - Connecticut, Maine, Nebraska, Vermont and Wyoming - enacted bank charters that neither require insurance nor federal regulation. Such uninsured state banks are prohibited from lending (either explicitly by law or functionally), and therefore hold 100% cash to back customer deposits plus up to 8% of deposits as an additional capital requirement.

Commercium, unlike many banks, does not engage in lending or fractional reserve banking, instead, 100% of customer deposits are held in reserve with additional protective measures. Here is how deposits are safeguarded in the event of bankruptcy:

• 100% Reserve in Liquid Assets: All customer deposits are held in unencumbered, high-quality liquid assets. Specifically, Commercium's investment policy mandates retaining at least 20% in cash. The remainder is invested in US Treasury bills with a maximum tenure of 3 months. This, combined with constant liquidity management ensures that all customers will be able to access their deposits immediately. In the unlikely event of a very severe run on the bank occurs, 100% of all deposited funds will be available within 3 months. However due to the nature of 100% reserves, the chances of a bank run are much less likely than at a fractional reserve bank.
• Capital Reserves: Beyond holding 100% of customer deposits, Commercium will maintain a minimum capital reserve of $30 million.
• Legal Framework & Guidelines: Although the Wyoming Banking Division hasn't yet overseen a liquidation, their procedures are outlined in section 12-12-123 of the SPDI Charter under the voluntary dissolution section.
• Title 13 - Banks, Banking and Finance
• Capital Requirements: Prior to opening, Commercium is required to retain capital of at least $30 million. As the bank grows its assets, the minimum capital requirement will be either $30 million or 2% of assets, whichever is greater.
• Asset Pledge: $15 million of bank assets will be legally pledged to the State Banking Division, ensuring they can promptly address potential harm to the SPDI charter during any forced or voluntary liquidation. This pledged amount is accessible immediately, even before any remaining capital post-liquidation.

Wyoming Banking Division has led the nation in creating the regulatory framework that established the Special Purpose Depository Institutions (SPDI) regime, being a non-lending banking license for digital asset connectivity to traditional banking systems. We are a full reserve bank as we will hold 100% of customer deposits in reserves (unencumbered liquid assets). Commercium is one of four SPDIs that have received Charter approval, where we aim to take advantage of digital banking and qualified custody of digital assets and digital securities, under Wyoming's customer friendly bailment legislation.

We will be fully compliant in all aspects of Bank Secrecy Act/AML and sanctions regulations. Digitally organized at the outset, we aim to be lean and agile, retain a low-cost base and offer new to the market digital products using the blockchain technology platform.

By becoming a chartered bank, Commercium will legally be able to offer a variety of new services; each of which will help the company achieve its end goal of bridging traditional wealth management with the world of blockchain and digital custody. These offering will include:

• Custody of digital assets and digital securities. As a Bank we will adhere to the standards of traditional Trust and Custodial institutions.
• Tokenization of financial and real-world assets for Commercium Corporate clients and HNWI's. We will partner with a tokenization service company
• Custody of 100% US$ backed stablecoins
• FIAT checking, savings, escrow accounts and payment services (ACH, wire, Bill Pay).

Commercium Bank will be able to take custody of both fiat and crypto assets, with more oversight and legal protection for clients than a trust company can offer. Client confidence will get a further boost through the additional capital that SPDI banks are required to hold (100% of unencumbered liquid assets). Although chartered in Wyoming, Commercium Bank will be able to operate in most U.S. states under a unified regulatory framework through reciprocity agreements, which is good for Commercium, but also for the industry as a whole, as it will facilitate onboarding for a range of businesses and institutions that are only comfortable entrusting financial transactions to a bank.

As part of Commercium's core banking implementation, Commercium will test and have approval to launch products and services for commercial and retail customers. Commercium's plan for day 1 is commercial, but by testing retail products this means Commercium can launch at a much quicker pace later on.

The Wyoming Division of Banking has expressed no objections to allowing SPDI's to accept non-US citizen customers or deposits. The Wyoming Division of Banking has, however, indicated this practice may affect the risk profile of the SPDI and could in turn require modified AML/BSA diligence requirements for onboarding non-US customers, as well as additional requirements for compliance on examination, but it can be permitted.

As part of our core banking implementation (checking accounts, savings accounts, bank services) with NYMBUS, we have secured alongside a back-office capability and a call center capability. These two areas from NYMBUS who already serve many banks, will be linked with the proposed Commercium back-office capabilities.

The Wyoming Division of Banking permits SPDI's to conduct business and operate throughout the US. In addition, most states have reciprocity arrangements to qualified banks that operate in those states as a money transmitter. However, a certain number of states have been identified that require separate MTL licensure for SPDI's. The list below, which may be subject to change and is under ongoing evaluation and discussion by the Wyoming Division of Banking, identifies those states which require separate MTL's:

• Alabama
• Alaska
• Arkansas
• California
• Connecticut
• Georgia
• Iowa
• Louisiana
• Maine
• Michigan
• Mississippi
• New Mexico
• Oregon
• Pennsylvania
• South Carolina
• Texas
• West Virginia

Those states not listed above have expressed or indicated reciprocity for purposes of not requiring separate MTL's for operation.

We will work with the Wyoming Division of Banking with all those US States that require an individual MTL license approach.

Lastly, please keep in mind this list does not include New York, as the BitLicense process has been handled and approached separately and has separate requirements.

Commercium is a state-chartered U.S. bank, regulated by the Wyoming Division of Banking, and is subject to the same standards that govern all banks, including bank-level capital requirements and bank-level compliance requirements (including the higher standard that applies to banks called the "Customer Due Diligence Rule"). Additionally, as a regulated bank, Commercium will be subject to frequent supervisory examinations that may not apply to non-banks.

As a compliance-led organization, our compliance department has actively worked to build out our internal controls, procedures, and policies designed to identify, monitor, and mitigate risks associated with the bank's operations and ensure Commercium can meet all regulatory objectives. The compliance department is currently overseen by our Chief Compliance/BSA Officer (CCO), Corey Reason. Our CCO oversees all compliance and risk matters and leads the department. Our Local Compliance Officer (LCO) reports to the CCO and works closely with other departments to address compliance questions before elevating appropriate concerns to the CCO.

As a compliance-led organization, our compliance department has actively worked to build out our internal controls, procedures, and policies designed to identify, monitor, and mitigate risks associated with the bank’s operations and ensure Commercium can meet all regulatory objectives. The compliance department is currently overseen by our Chief Compliance/BSA Officer (CCO), Corey Reason. Our CCO oversees all compliance and risk matters and leads the department. Our Local Compliance Officer (LCO) reports to the CCO and works closely with other departments to address compliance questions before elevating appropriate concerns to the CCO.

As we get closer to opening, the department has plans to scale. This expansion will include a team of enterprise risk managers, fraud risk managers, business analysts, transaction monitoring analyst, and KYC analysts for transaction monitoring, evaluating potential risks, and implementing appropriate controls and monitoring procedures to mitigate those risks.

Liquidity - Commercium (Finance) will need to deliver a Call Report quarterly once open. In addition, Commercium will need to supply a detailed cash sources and uses report quarterly. Transaction Monitoring - Fiat transactions via Commercium's core banking platform is monitored by Abrigo (used in 2400 financial institutions) and USDC/digital transactions by Chainalysis (market leader in digital transaction monitoring)

Commercium has been given a Certificate of Authority (COA) Requirements letter by the Wyoming Division of Banking that lists 38 items which will need to be completed before Commercium will receive a Certificate of Authority. Of the 38 items required to receive the COA, Commercium believe that 30 of these items are completed and ready for certification. There are 3 items in progress (finalize policies - 90%+ completed) and 5 remaining items awaiting raise of capital and produce a policy list.

USD checking, savings, FBO accounts, escrow accounts, and payment services (ACH, wire, Bill Pay).

On the 2nd August 2022, Commercium received confirmation from the Federal Reserve Bank of Kansas City (FRBKC) that we satisfy the threshold legal definition of an entity eligible to maintain a master account.

On the 7thf September 2022, Commercium received its routing number but was denied permission to attach settlements, until such time we received FRBKC approval (see appendix B for copy of this confirmation).

On the 7thf September 2022, Commercium received its routing number but was denied permission to attach settlements, until such time we received FRBKC approval (see appendix B for copy of this confirmation).

Commercium has a core banking relationship with Nymbus (approved by the Wyoming Division of Banking) and their partners such as Socure (identification & verification for retail), MidDesk (identification and verification for Commercial), Abrigo (Compliance), and Flexi (general ledger). As part of the Nymbus package we have secured back-office support, call center support, and liaison with Commercium back-office staff via workflow system.

Commercium's digital infrastructure includes an account with Circle for stablecoin; level 1 wallet management infrastructure using Fireblocks, and transaction monitoring using Chainalysis.

The letter states Commercium must have a minimum of $30 million in capital to open the bank. Further, the letter states the Commercium Board must adopt a resolution stating the bank cannot go below $30 million in capital without the prior written consent of the Wyoming Division of Banking.

$30 Minimum Capital level required
Use of Cash

• $15M: Asset Pledge (restricted cash) to be invested in unencumbered liquid assets
• $15M: Unused, unrestricted cash to be invested in unencumbered liquid assets
• $15M: Operating Expenses for first year of live operations, and other potential reserves

The $45 million gives Commercium sufficient capital to open and enough runway, we believe, to get to profitability. We can meet the requirement to pledge $15 million in assets from the cash we receive from the capital infusion.

The capital outlay is not solely for licenses, but is to meet the statutory requirements, and 3-year operating expenses. Commercium currently has 8 staff in-situ, 6 executives, 3 part-time executives, and 4 other Directors on the Board. Capital will be used for increased staff to commence the implementation activities and setting up the SPDI operations.

Corporate relationships and terms are nearing conclusion, and the plan for integration is in place with Nymbus and has been approved by Wyoming Division of Banking. Our chosen custody provider has also been provisionally agreed by the Wyoming Division of Banking.

There are many dependencies that affect the timeline, and ultimately approval of any change in control is up to the Wyoming Division of Banking to approve. The key to speedy approval is full identification and verification of all personnel involved and timely responses to their requests.

Under the Wyoming Division of Banking's regulations there is a requirement to disclose certain information regarding parties that will have a proposed controlling interest in the entity. A controlling interest is defined as a person or cohort of persons who:

• Owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the institution.
• Controls in any manner the election of a majority of the directors of the institution.
• Have the power to exercise a controlling influence over the management or policies of the institution.

Any person with a controlling interest in an SPDI must submit audited financial statements, at least annually, a description of affiliated or parent entities, and serve as a source of strength for the institution. Serving as a source of strength may include providing capital plans, maintenance agreements or agreements for resource-sharing.

If a legal entity has a controlling interest, the Wyoming Division of Banking Commissioner may require the entity to execute a tax allocation agreement with the SPDI, specifying that an agency relationship exists with respect to tax assets generated by the SPDI. Such assets are "held in trust for the benefit of the institution and will be promptly remitted to the institution". The Commissioner is empowered to conduct an examination of a person with a controlling interest or otherwise require information of that person. The Commissioner may also require a person with a controlling interest to divest or sever their relationship with the SPDI. This regulation also prohibits a "commercial firm" from obtaining a controlling interest in an SPDI. "[A] company is a 'commercial firm' if the annual gross revenues derived by the company and all of its affiliates from activities that are financial in nature . . . and, if applicable, from the ownership or control of one or more insured depository institutions, represent less than 15 percent of the consolidated annual gross revenues of the company."

The Wyoming Division of Banking requires SPDI applicants to file a Biographical & Financial Report with the charter application and for a change in control. The report requires an individual who is a "principal shareholder", of ten percent or more of the voting securities, to recognize such a position and provide the information required by the report. Such information includes whether the filer has been involved in a charter or license application that was unsuccessful in which the filer was a Principal Shareholder. It further asks whether the filer has been involved in a "notice of change in control for a depository institution" that was unsuccessful in which the filer was an acquirer or transferee.

There are other aspects of the change in control for purposes of Wyoming Division of Banking approval, however, the above should provide a general overview of the type of information which will be required.

We will leverage vendor-provided blockchain technology. As with any software vendor, the security measures will be proven through their documentation and will first demonstrate software compliance through initial testing before being accepted and integrated. (For reference, it's the same process we would use to bring on any software from Nymbus to Microsoft Word.) User acceptance testing, penetration testing, and deployment testing procedures, etc. will be developed for system approval through both internal and third-party evaluations before we are certified by the Wyoming Division of Banking.

Part of our software vendor selection will include the ability to support the integration of multiple blockchain types. This is designed to ensure we can adapt to any regulatory-approved developments. While no one can yet guarantee support of any future US-backed digital currency, we are following the development of the Central Bank Digital Currency (CBDC) to ensure we have the maximum opportunity to complement these developments.

The Securities Exchange Act Rule 15c3-3, commonly referred to as the Customer Protection Rule, is a critical regulation that aims to safeguard the funds and securities of customers held by broker-dealers. This rule imposes specific requirements on firms to ensure the protection of customer assets and the proper segregation of those assets from the broker-dealer's own funds.

The Securities and Exchange Commission (SEC) established Rule 15c3-3 in 1972 in response to a congressional directive to create rules concerning the acceptance, custody, and use of customer securities. Under this rule, broker-dealers are required to take steps to protect the securities that customers leave in their custody.

Rule 15c3-3 ensures that brokerage firms maintain secure accounts so that clients can withdraw their assets at any time. These measures include the segregation of customer assets and proper record-keeping to help prevent the misuse of customer funds or securities.

Qualified custody is important for several reasons:

Customer protection: The primary goal of Rule 15c3-3 is to safeguard customer funds and securities. By ensuring proper segregation of customer assets and strict adherence to regulatory requirements, customers can have peace of mind that their investments are protected against potential broker-dealer insolvencies, fraud, or mismanagement.

Ensuring financial stability: Qualified custody helps maintain the financial stability of the securities market by reducing the risk of broker-dealer failures that could have widespread consequences. By protecting customer assets, this rule promotes confidence in the financial system and encourages continued investment and participation in the securities market.

Regulatory compliance: Broker-dealers that follow Rule 15c3-3 are better equipped to meet their regulatory obligations, which in turn helps to build trust among customers, regulators, and other stakeholders. Compliance with this rule demonstrates the broker-dealer's commitment to protecting customer assets and maintaining high standards of conduct.

Role of Qualified Custodians in Secondary Market Trading of Securities

Qualified custodians play a crucial role in the secondary market trading of securities by ensuring that customer assets are managed and held securely. A qualified custodian is a financial institution, such as a bank or trust company, that is authorized to hold and safeguard customer funds and securities according to the regulatory requirements outlined in Rule 15c3-3.

In secondary market trading, investors buy and sell securities that have already been issued, such as stocks, bonds, and other financial instruments. Qualified custodians ensure that these transactions are conducted securely, transparently, and in accordance with applicable regulations. By doing so, they help to maintain investor confidence in the market and facilitate the smooth operation of secondary market trading.

Additionally, qualified custodians play a vital role in the ongoing innovation and integration of new financial products into the securities market. For example, the SEC has issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers, encouraging innovation around the application of Rule 15c3-3 to digital asset securities.

Additionally, qualified custodians play a vital role in the ongoing innovation and integration of new financial products into the securities market. For example, the SEC has issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers, encouraging innovation around the application of Rule 15c3-3 to digital asset securities.