Asset protection trusts for cryptocurrencies and digital assets

Asset protection is the use of laws and legal entities (such as trusts, limited partnerships, and limited liability companies) that protect assets from attacks from future unsecured creditors. Traditionally, asset protection attorneys have protected their clients’ bank and brokerage accounts, real estate, business interests, artwork, and other valuables. Lately, practitioners have also protected crypto assets, including digital coins, utility tokens, and non-fungible tokens (NFTs) in domestic and offshore asset protection funds (APTs). Today, there is a booming industry of professional trustees, banks and other custodians equipped for the custody and protection of digital assets.

Foreign asset protection trusts are established in offshore jurisdictions which typically offer the following: (1) non-recognition of judgments from U.S. civil courts, and (2) legal and procedural hurdles if a U.S. creditor initiates litigation in foreign jurisdiction against the trust or its assets. These obstacles include short limitation periods, the absence of contingency fees and a high burden of proof for the creditor. Not all foreign jurisdictions are created equal. In Liechtenstein, for example, the US creditor must also demonstrate malicious intent on the part of the beneficiary of the assets, the trustee. While many foreign jurisdictions claim to offer hurdles for the creditor, the best asset protection jurisdictions also offer political, economic and social stability; leading banks with a well-developed regulatory system and strong rule of law. Other factors to consider when choosing a foreign jurisdiction include ease of communication with trustees and custodians, encryption and other technological capabilities, and of course safety and security, particularly when issues arise. crypto assets are involved.

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