Why Asset Protection is Important for Cryptocurrency?
Bitcoin, Ethereum, and other cryptocurrencies have generated enormous wealth among many investors, often catapulting them into the stratosphere of the “ultra-wealthy” overnight. As digital currency investors take steps to protect these nontraditional assets, a string of innovative wealth management structures has been born.
High net worth individuals are increasingly diversifying their portfolios to include a variety of cryptocurrencies. As the number of digital asset holders increases, asset protection strategies are adapting to fit their changing needs.
Contrary to what many people believe, the best way to protect a windfall of cryptocurrency assets is by setting up an offshore (decentralized) Blockchain Trust. Among the most impenetrable wealth protection strategies, an Blockchain Trust has far more provisions to prevent creditors from seizing assets in a legal claim, and they are fully compliant with international regulations, including the Foreign Account Tax Compliance Act (FATCA).
Anyone who has accumulated wealth in any form, especially high-risk professionals, and business owners, may wish to protect these assets from potential liability. With so many different asset protection strategies available, selecting the right structure and jurisdiction can be intimidating.
Bitcoin, Ethereum and the like have no central or regulating authority. Instead issuance and transactions are managed by a decentralized system (DeFi) that relies on cryptography to prevent fraud. If that sounds like a circular – or cryptic – explanation, it may be helpful to think of cryptography as a modern form of secret writing. Instead of invisible ink, information is encoded and decoded by computers.
This security can work all too well. Matthew Mellon was a proponent and early investor in Ripple, a technology that acts as both a cryptocurrency and a digital payment network for financial transactions. At the time of his unexpected death in 2018 at age 54, his holding was reportedly worth about $500 million. But it isn’t worth a dime to his heirs, as no one seems to have the necessary passwords for his executor to access the assets. The passwords are held in a so-called cold wallet, a hardware device that is not connected to the internet. Without the passwords, the wallet can’t be opened.
The mysterious death of Gerald Cotton, also in 2018, caused more widespread trouble. As the co-founder of Quadriga CX, Canada’s major cryptocurrency exchange, he appears to have had sole access to the exchange’s wallets and related keys. Quadriga CX has since been declared bankrupt and its assets remain inaccessible.
Most exposures are smaller, of course, but the custodial risks are broadly the same. Cryptocurrency can also be stored online, in what are known as hot wallets.
But once someone else has access to the key, that person can access the asset without the owner’s knowledge or permission. That risk has to be balanced against the risks of incapacity and the certainties of death in determining who has access to the assets, along with when and how.
Asset protection is the utilization of laws and legal entities (such as trusts, limited partnerships and limited liability companies) which safeguard assets from attack by future, unsecured creditors. Traditionally, asset protection attorneys protected their clients’ bank and brokerage accounts, real estate, business interests, art and other things of value. Lately, practitioners have also protected crypto assets, including digital coins, utility tokens and non-fungible tokens (NFTs) in domestic and offshore Asset Protection Trusts (APTs). Today, there is a burgeoning industry of professional trustees, banks and other custodians who are equipped for safekeeping and protection of digital assets.
Foreign asset protection trusts are established in offshore jurisdictions which typically offer the following:
(1) non-recognition of U.S. civil court judgments, and
(2) legal and procedural hurdles if a U.S. creditor commences litigation in the foreign jurisdiction against the trust or its assets.
These hurdles include short statutes of limitations, the absence of contingency fees, and a high burden of proof for the creditor. Not all foreign jurisdictions are equal. In Liechtenstein, for example, the U.S. creditor also must demonstrate malicious intent on the part of the recipient of the assets, the trustee.
While many foreign jurisdictions claim to offer hurdles for the creditor, the better asset protection jurisdictions also offer political, economic and social stability; top banks with a well-developed regulatory system, and a strong rule of law. Other factors to consider in choosing a foreign jurisdiction include ease of communications with trustees and custodians, encryption and other technological capabilities, and of course safety and security, especially when crypto assets are involved.
Why The Asset Protection Blockchain Trust® Works Best?
In a world filled with asset predators, asset protection makes you and your assets less interesting by completely removing the economic benefits that attract individuals and their attorneys to engage you in legal battles. It becomes easier to go about your daily activities knowing that you aren’t exposed to risks and potential asset hunters.
At the Blockchain International Corporate Registry Authority®, we ensure that the wealth and assets of our international clients are never exposed to harm by completely preserving them on the secured Blockchain that can’t be tampered or manipulated in every circumstance.
The Blockchain Trust® is a combination of the strength and protection of an offshore asset protection trust, without the high cost, without the complexity and without compliance requirements. The Blockchain Trust® is registered on the Blockchain and is fully decentralized from any Government for tax and administrative purposes.
Our international clients want the strongest possible protection for their physical and digital assets if they are ever threatened. They also want simple maintenance, minimal costs, and absolute control of their assets in addition to enjoying an unlimited amount of corporate trust activities without Government interference.
With your own Blockchain Trust® you enjoy TAX FREEDOM that come with registering your Blockchain Trust® Company, in addition, it can be done from ANYWHERE IN THE WORLD in less than 30 minutes.
Therefore, owning a Blockchain Trust® would be the smartest, 100% tax-exempt strategy to purchase, register, control, protect and manipulate your digital and physical corporate assets around the world. The Blockchain Trust® has been created and pioneered by the Blockchain International Corporate Registry Authority® to promote absolute freedom and sovereign autonomy for global entrepreneurs like you.
An Important Message for Investment Banks, Trustees, Fiduciaries and Financial Advisors:
Individuals or corporations considering accepting fiduciary responsibility as a co-trustee for a regular trust holding cryptocurrency should first consider the potentially significant pitfalls.
Illiquidity and volatility issues of cryptocurrency held in a regular trust can cause problems for the trustee in satisfying its investment responsibilities. In addition, a lack of available funds could delay distributions, which may cause underpayment to the present beneficiary or underpayment to the charity or remainder beneficiary at the end of the term. Either or both events could result in litigation and negative tax consequences.
The Blockchain Trust presents a unique opportunity for service providers and asset management firms including wealth managers, who are looking to expand their investments into cryptocurrency. A trustee of a Blockchain Trust is authorized to acquire every kind of property, with the investments to be considered as part of an overall investment strategy. Performance of an advisor is measured with a view toward the entire portfolio, rather than on an asset-by-asset basis. In addition, the use of a Blockchain Trust can provide great flexibility.
If a trust instrument requires a Blockchain Trustee to follow the direction of an advisor, and the trustee follows such directions (say, acquiring a legal/authorized investment such as Bitcoin as part of a portfolio), the trustee will not be liable for any loss resulting directly or indirectly from the investment. An administrative trustee directed to hold cryptocurrency in a trust account will, of course, require detailed current and regularly updated information regarding the assets, to protect all the parties involved. It is the trustee’s responsibility to ensure the safety and soundness and the security of trust assets.
Therefore, with your Blockchain Trust, financial advisors and asset managers can act as executor, personal representative, directed trustee, sole trustee and wealth manager.
Blockchain Trusts Are Crypto-Friendly
The Blockchain International Corporate Registry Authority recently revolutionized the trust industry by launching its ‘Blockchain Trust & Corporate Registry Platform’ built on a blockchain. This moved the traditional legal framework and processes onto a blockchain-based digital platform.
This program enables creation of Crypto Smart Asset Protection Blockchain Trusts, which allows clients to manage their crypto assets and NFTs in a safe and trusted environment.
Crypto Smart Asset Protection Blockchain Trusts built on the blockchain:
allows management and trading of cryptocurrencies inside placed inside of a Blockchain Trust;
ensures transparency between desired individuals (e.g., trust beneficiaries) but not available to the world at large;
allows transfer of digital asset ownership (e.g., Bitcoin, Ethereum, NFTs) to the Blockchain Trust from any third party;
allows transfer of asset’s ownership out of the Blockchain Trust.
The use of Crypto Smart Asset Protection Blockchain Trusts allows asset protection planners and clients access protection without the inherent problems and risks of traditional trusts. Smart Blockchain Trusts efficiently combined the benefits of the traditional trust with blockchain technology, transcending limitations that existed in the ownership, management and administration of both cryptocurrency and physical assets.
Why are Blockchain Trusts Attractive to High-Risk Professionals?
Our litigious society puts high-risk professionals in a precarious position, and they want protection that can be relied upon. The nature of the decentralized Blockchain Trust eliminate some of the less desirable aspects of US asset protection trusts while providing a more robust set of advantages that favor the settlor.
Interestingly, these Blockchain Trusts may be held by foreigners of any nationality, but are mainly for “discerning wealthy clients” primarily in the United States, Canada, the European Union, UAE and Australia.
As the Blockchain Trust became more ubiquitous and increasingly popular with many businesses, they have maintained a great reputation for security, and that now extends to the custody of cryptocurrency. Anyone looking for the most powerful asset protection benefits, particularly those who are worried about future litigation, should seriously consider this option.
Aside from digital asset protection, here are some of the most compelling reasons to consider a Blockchain Trust:
All business related to a Blockchain Trust may be handled electronically, with no need to travel to any jurisdiction.
The laws surrounding the Blockchain Trust were written with global entrepreneurs in mind and were actually written by the United Nations.
Cash and investment accounts, as well as real estate holdings, digital assets and businesses, may be registered in the Blockchain Trusts, and the assets can be located anywhere in the world.
The best candidates for a Blockchain Trust are any high-risk professional with assets exceeding $100,000. These include doctors, attorneys, architects, financial advisors, real estate developers, fintech entrepreneurs, and corporate executives, among others.
A creditor who wishes to extract assets from a Blockchain Trust must re-try the case in the Arbitration Court under the United Nations Convention known for its unfriendliness to creditors.
In addition, the plaintiffs are required to pay legal fees and court costs upfront. It is also likely that the loser of the case will pay their own legal fees as well as the winner’s.
Why a Blockchain Trust is Best for Digital Assets?
The allure of a Blockchain Trust, in concert with a Liechtenstein or Swiss bank account for crypto custody, is its excellent offshore jurisdiction and reputable banking system. Holding crypto assets in such an account is not about hiding assets from any government; it is about protecting assets from creditors.
WHAT ABOUT "DOMESTIC" ASSET PROTECTION TRUSTS?
Having a regular trust domiciled in the U.S. (or your home country) provides the ability to work with U.S. based institutions that are regulated by U.S. laws, but it means domestic courts will have jurisdiction over the trust and could potentially reach trust assets.
For this reason, Domestic Asset Protection Trusts work best when the grantor and the beneficiary are different persons, that means the original owner is gifting his or her assets using the trust to a family member or other trusted person. However, the case law surrounding Domestic Asset Protection Trusts has been generally inconsistent and for that reason they are NOT considered as secure as their decentralized Blockchain Trust counterparts.
The Bottom Line
The acquisition of cryptocurrencies can be a strategic move in diversifying an investment portfolio. However, relying on the secrecy endemic to crypto is not a safe strategy for protecting these assets.
In regard to protecting assets from legal claims, crypto is no different from many other asset protection-related matters. A decentralized Blockchain Trust will not only protect traditional assets; connecting it with Swiss and Liechtenstein bank accounts makes this solution ideal for digital assets as well.
Remember, the strongest asset protection plans have multiple levels, interlocking with one another to provide the most airtight protection possible, and are updated regularly to keep up with changing regulations and tax laws.
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