Notorious for volatility and a lack of regulation, the cryptocurrency market brings unique risks and challenges. From lost keys and cyberattacks to second-by-second fluctuations in value and complexities surrounding tax compliance, the burden of risk mitigation is a heavy one for any investor.
A responsible trustee can help mitigate the risks for clients The essential consideration for any cryptocurrency owner is to find a trustee not only with proven experience in the digital asset sphere, but with a network of specialists including custodian and investment advisers.
While the risks for each investor will vary on a case-by-case basis, there are some which are common to all. In this article we will address mitigation of some of the most significant risks for all investors.
Compliance
As the cryptocurrency market rapidly evolves, governing bodies around the world are each setting their own regulatory and tax compliance requirements. The legal and financial risks for investors, or their beneficiaries, who fail to comply with regulations are significant.
When digital assets are held by a trustee, they also hold the responsibility for compliance and take on the risk of the consequences for failing to do so. With many of our clients holding multi-jurisdictional structures, we keep abreast of the emerging regulatory requirements and engage specialist legal advisors when necessary.
Custodians
If an investor loses the private key for the cryptocurrency, there is no way to ever recover their lost assets. One of the best ways to mitigate this risk is to instruct a responsible and experienced custodian. More information on custodians is available HERE.
Succession planning
As a corporate trustee, we provide the assurance of longevity for our clients, which is particularly important when considering succession planning risks. While an investor will have a clear understanding of cryptocurrency, there is no guarantee that their beneficiaries will know how to navigate the market, understand the security risks of private keys or know how to convert digital wealth into traditional (“fiat”) assets, such as cash, property or luxury assets.
By engaging a trustee, investors can ensure the long-term safeguarding of their digital wealth. Our clients can also set out their wishes for or potentially define any restrictions on the use of digital wealth by their beneficiaries, for example stipulating that it can only be used for education, or that it is to be ‘drip-fed’ to beneficiaries.
As regulated trustees in the Cayman Islands, Guernsey and Switzerland with years of experience working in partnership with digital asset owners and specialists, you can rely on our expertise in managing and mitigating risk.
Find out more
WATCH: Our Crypto Catch-up video series explores the role of a trustee and how their services can play a role in protecting digital assets, and potential barriers that can have an impact on investors.
Contact us for more information on how we can facilitate the off-ramping of your cryptocurrency.
