When new and innovative ideas are introduced with the purpose of stimulating the economy, legislators are tasked with introducing legislation to provide legal certainty without inhibiting innovation to ensure that the sector is embraced by the community. This was evident when Bermuda introduced both the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 and the Digital Asset Business Act 2018.

With digital assets being a new asset class that’s garnered much attention, it’s not surprising that trustees are being asked to consider acquiring ownership of these new forms of assets.

Wealthy and financially sophisticated clients are exploring how they can either transfer digital assets into a trust structure as a form of asset protection, or for estate planning purposes, or are asking trustees to consider investing in digital assets. Trusts are also being considered as part of the fundamental structuring behind the digital asset projects and platforms.

Institutional and individual trustees are therefore being encouraged to familiarise themselves with a range of topics, including how digital assets function, how they’re acquired, how they must be managed and how they can be distributed to beneficiaries of a trust.

Additionally, trustees are mindful that they must ensure continued compliance with all of the legislative and regulatory requirements imposed upon trustees, included as a result of the oversight of the Bermuda Monetary Authority.

Some have queried whether it’s possible for a trustee to hold digital assets as a part of the trust’s assets. “Trust property” has generally been described as any type of property that’s “real or personal” and capable of being ascertained. However, trustees have had to grapple with how digital assets can form trust property based on the understanding that many digital assets are designed to work as a store or medium of exchange of value through the use of cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets.

Be that as it may, some experts in the field of technology and trust law are of the view that if the digital asset is identifiable and has the ability to be transferred, a trustee does have the power to hold it.

In spite of the understanding of what digital assets are, the key question is what constitutes “property”. The dictionary definition is “something of value, either tangible, such as land, or intangible, such as patents, copyrights, etc”. Therefore, it is logical to conclude that digital assets, although intangible, do possess the characteristics to form trust property capable of being held by a trustee, as those who own such assets have the right to possess them, use them and dispose of them as they deem fit, similar to the way in which intellectual property is dealt with.

Notwithstanding the position that digital assets are property capable of being held by trustees, it may be prudent to include bespoke provisions in a trust document to confirm this. Trustees may also wish to consider whether it would be useful to include special powers within the trust document to address the management and safekeeping of such assets, while the concept of digital assets advances.

Investors and/or regulators may wish to be reassured that the trustee has adequate powers to effectively manage the digital assets, while also ensuring that there are acceptable custody arrangements in place to evidence the effective exercise of their fiduciary duties as trustees and to protect investors from any undue misfortune.

Bermuda’s trust law already allows for the appointment of a managing trustee, and trustees may wish to include specific provisions whereby the management of the digital assets are exercised solely at the discretion of the managing trustee in order to mitigate the non-managing trustee’s liability.

In any event, trustees will need to be mindful of the regulatory and tax implications surrounding digital assets, taking into consideration the fundamental principle stated by the House of Lords in Speight v Gaunt that “…[As] a general rule a trustee sufficiently discharges his duty if he takes in managing trust affairs all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own”.

Therefore, it’s vitally important for trustees to thoroughly scrutinise any digital assets that they wish to invest in or hold on the terms of the trust, to ensure that they’re acting in the best interest of the beneficiaries and of the trust as a whole, and that they’re discharging their fiduciary duties effectively.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer

Share
X.com LinkedIn Email Save as PDF
More Publications
Appleby-Website-Privacy-and-Data-Protection
25 Jun 2025

Impact of Privacy Law on Bermuda Business

On 1st January 2025, Bermuda’s Personal Information Protection Act 2016 (PIPA) came into full forc...

Appleby-Website-Regulatory-Practice
25 Jun 2025

Simplified Due Diligence in Bermuda

Simplified Due Diligence (SDD) and Reduced Due Diligence (RDD) are critical features of a modern, ri...

Appleby-Website-Employment-and-Immigration
23 Jun 2025

Practical Tips for Conducting Workplace Investigations

Allegations of harassment, bullying or other misconduct in the workplace can create a legal mine fie...

Bermuda-1024x576-1
19 Jun 2025

Bermuda encourages investment with residential certificates

On March 31, 2023, the Bermuda Government replaced its previous tool intended to attract capital to ...

Appleby-Website-Insurance-and-Reinsurance
11 Jun 2025

Bermuda Paves the Way for Captive Insurers with New Stablecoin Policy

The Bermuda Monetary Authority (BMA) has announced a significant new policy framework that allows ca...

Appleby-Website-Insurance-and-Reinsurance
10 Jun 2025

Bermuda benefits from a strong and capital efficient regulatory regime

Bermuda’s long-term reinsurance sector is experiencing a new phase of complexity and scrutiny but ...

050-Insolvency-Restructuring-Grid-Image
9 Jun 2025

Bankruptcy & Restructuring – To Enforce, or not to Enforce

Bermuda’s flagship restructuring process is the appointment of provisional liquidators, whose powe...

ICLG Fintech 21 cover
5 Jun 2025

Digital transformation done right (Bermuda)

As any specialised tech lawyer or technology consultant will tell you, digital transformation projec...

Appleby-Website-Insurance-and-Reinsurance
2 Jun 2025

2025 Global Financial Crisis Stress Test: Bermuda

The Bermuda Monetary Authority (BMA) has recently published instructions for a significant data coll...

Bermuda-1024x576-1
22 May 2025

Corporate real estate acquisition in Bermuda

Corporate real estate acquisitions in Bermuda are a matter of careful balance. That is because, a...