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Overview
Scope of the chapter. This chapter applies the general law of trustee duties to digital assets. It examines the sources of those duties and the extent to which a trust instrument may vary them; the prudent investor standard as it applies to volatile, non-income-producing and technically unusual holdings; the duty to diversify and the decisions on concentrated positions; retention clauses, directions to hold and the statutes that relax the duty to diversify; the duty to take control of and protect trust property, which for a digital asset is a duty concerning keys; delegation to agents and custodians and the position of co-trustees; the duty of loyalty where a trustee or its affiliate has an interest in a token or a network; the allocation of receipts such as staking rewards and airdrops between income and principal; and the duty to inform and report. It closes with drafting guidance, a model provision and a checklist.
The central proposition. No statute or reported decision in the United States forbids a trustee to hold a digital asset, and none treats a digital asset as prudent or imprudent by its nature. The prudent investor statutes permit a trustee to "invest in any kind of property or type of investment" consistent with the statute's standards. E.g., Wyo. Stat. § 4-10-902(e); Ohio Rev. Code § 5809.03(A). Delaware provides that no investment "shall be deemed imprudent solely because the investment is not specifically mentioned" in its list of authorized investments. 12 Del. C. § 3302(b). The question in every case is how the trustee decided to acquire, retain, secure and report the holding, measured against the purposes and terms of the particular trust. The answer turns on process, on the terms of the instrument and on the facts known when the decision was made.
Why digital assets test the standard. Four features of digital assets put pressure on rules developed for portfolios of stocks, bonds and land. First, many digital assets are volatile; a single holding may lose most of its value within months. Second, many produce no income in the trust-accounting sense, and some produce receipts of uncertain character, such as staking rewards, airdrops and tokens issued in a network fork. Third, a trust's ownership of a self-custodied digital asset depends on the trustee's continuing control of key material; the asset can be lost through a mistake in storage, and in most cases no court or third party can restore it. Fourth, trusts are often funded with concentrated positions that the settlor accumulated before the trust existed, with a low tax basis and with strong views about the asset's future. Each feature engages an established doctrine: the portfolio standard and the duty of impartiality, the principal and income rules, the duty to take control of and protect trust property, and the duty to diversify and its exceptions.
The state of the authority. The editors' searches found no reported decision in the United States that applies the prudent investor rule to a trustee's holding of a cryptocurrency or other native token. The analysis in this chapter therefore proceeds from the statutes, which are substantially uniform, and from the decisions on concentrated holdings of corporate stock, which raise the same questions of process, timing, consent and measure of loss. The leading decisions are In re Estate of Janes, 90 N.Y.2d 41 (1997), and In re Estate of Saxton, 274 A.D.2d 110 (3d Dep't 2000), on concentration; Wood v. U.S. Bank, N.A., 160 Ohio App. 3d 831 (Ohio Ct. App. 2005), and Americans for the Arts v. Ruth Lilly Charitable Remainder Annuity Trust #1, 855 N.E.2d 592 (Ind. Ct. App. 2006), on retention clauses; and In re Estate of Rothko, 43 N.Y.2d 305 (1977), on loyalty and co-fiduciary liability.
Statutory sources used. The chapter quotes the Uniform Trust Code and the Uniform Prudent Investor Act from state enactments, principally Wyoming's (Wyo. Stat. §§ 4-10-801 to -913) and Ohio's (Ohio Rev. Code chs. 5808 and 5809), and quotes the Uniform Fiduciary Income and Principal Act from Washington's enactment (Wash. Rev. Code ch. 11.104B). It examines the non-uniform regimes of Delaware, South Dakota, Nevada and New Hampshire, which are common choices of governing law for trusts that hold digital assets. Where an enactment departs from the uniform text in a way that matters, the text says so.
Relationship to other chapters. The custody models among which a trustee chooses are described in ch. 9; the private-law character of a custodian's holding in ch. 10; the institutions that may act as custodians in ch. 11; and staking, lending and yield arrangements in ch. 12. Fiduciary access to accounts and records under RUFADAA is the subject of ch. 13. Directed trusts and the drafting of trust instruments for digital assets are treated in ch. 15, and the trustee's liability, exculpation and the consequences of a loss of keys in ch. 16. Income taxation of receipts is treated in ch. 30. This chapter states the duties; those chapters supply the institutional and drafting detail.