However, the implosion of FTX will undoubtedly accelerate the introduction of digital asset regulation, which has already been mooted for some time. This is already being demonstrated in the UK, where His Majesty’s Treasury opened a consultation on 1 February 2023 titled ‘Future financial services regulatory regime for cryptoassets’.[1]

Managed properly, regulation could buoy the confidence of new entrants to the market, particularly those who see an opportunity to buy in when the market is at a low. To that end, and with younger generations wielding increasing influence over investment direction, trustees can expect continued interest in the adoption of digital assets into portfolios.

Digital assets present particular issues for trustees: volatility, cybersecurity and the matter of how the assets are actually held. The question then arises as to how trustees are to administer this asset class while satisfying both their fiduciary duties and those imposed upon them by the relevant trust instrument when failure to do so can result in personal liability.

Get clued up

First, education is key. Trustees must have a good understanding of the digital asset ecosystem and the associated risk factors. Different types of asset will carry different degrees of risk; for instance, household name ‘coins’ might be considered lower risk than a non-fungible token that has been hyped up via social media. If needed, one should take expert advice and document any research.