Lighthouse
Lighthouse on Digital Assets

Detailed Contents

This table lists every chapter, section and subsection of Lighthouse on Digital Assets with its paragraph (¶) number. Each entry links to its place in the text.

Part I: Foundations

Chapter 1Digital Assets and the Law: Scope, Taxonomy and Terminology

  1. ¶ 101Overview
    1. 101.01Scope of the chapter
    2. 101.02The central difficulty
    3. 101.03Why the definitions diverge
    4. 101.04Property first
    5. 101.05Control as the organizing concept
    6. 101.06The audience and the approach
    7. 101.07Organization of the chapter
    8. 101.08Date of statement
  2. ¶ 110The Term "Digital Asset" Across Legal Regimes
    1. 110.01Method
    2. 110.02Uniform Commercial Code Article 12
    3. 110.03Money under the amended Code
    4. 110.04Fiduciary access: RUFADAA
    5. 110.05Federal tax: Internal Revenue Code § 6045
    6. 110.06Federal stablecoin legislation
    7. 110.07The European Union: MiCA
    8. 110.08The FATF standard
    9. 110.09England and Wales: the 2025 Act
    10. 110.10State digital-asset statutes
  3. ¶ 120A Working Taxonomy
    1. 120.01Purpose of the taxonomy
    2. 120.02The classifying questions
    3. 120.03The six classes
    4. 120.04Claim-based and claimless assets
    5. 120.05Movement between classes
    6. 120.06Wrapped and bridged tokens
  4. ¶ 130Native Tokens and Cryptocurrencies
    1. 130.01Definition
    2. 130.02What the holder has
    3. 130.03"Cryptocurrency" and "virtual currency."
    4. 130.04Proof-of-work and proof-of-stake
    5. 130.05Forks and airdrops
    6. 130.06Commodity status
    7. 130.07Securities status
  5. ¶ 140Stablecoins, Tokenized Deposits and Central Bank Digital Currencies
    1. 140.01The common feature
    2. 140.02Fiat-backed stablecoins
    3. 140.03The GENIUS Act definition
    4. 140.04Consequences of the definition
    5. 140.05MiCA's two classes
    6. 140.06Crypto-collateralized and algorithmic tokens
    7. 140.07Freezing and blacklisting
    8. 140.08Tokenized deposits
    9. 140.09Central bank digital currencies
    10. 140.10Comparison
  6. ¶ 150Tokenized Securities, Real-World Assets and Non-Fungible Tokens
    1. 150.01Tokenization defined
    2. 150.02Two models
    3. 150.03Tokenized securities
    4. 150.04Tokenized funds
    5. 150.05Real-world assets
    6. 150.06Tokenized commodities
    7. 150.07Tokenized receivables and controllable payment intangibles
    8. 150.08Non-fungible tokens defined
    9. 150.09What the holder owns
    10. 150.10Exclusion from MiCA
    11. 150.11Securities status
    12. 150.12Non-fungible tokens linked to physical assets
  7. ¶ 160Governance Tokens and Protocol Interests
    1. 160.01Definition
    2. 160.02The decentralized autonomous organization
    3. 160.03Partnership exposure
    4. 160.04Regulatory treatment of DAOs
    5. 160.05Legal wrappers
    6. 160.06Securities status
    7. 160.07Protocol tokens with economic rights
  8. ¶ 170Characterization Depends on Purpose
    1. 170.01The principle
    2. 170.02Money for one statute, property for another
    3. 170.03A commodity for the Commodity Exchange Act
    4. 170.04Property in insolvency: the terms decide
    5. 170.05A security in some transactions only
    6. 170.06Not property for one statute
    7. 170.07Property in English law
    8. 170.08Ruscoe v Cryptopia
  9. ¶ 180Terminology Used in This Treatise
    1. 180.01Why a fixed vocabulary
    2. 180.02Ledger, address and transaction
    3. 180.03Keys and seed phrases
    4. 180.04Wallet
    5. 180.05Multi-signature and threshold arrangements
    6. 180.06Custody
    7. 180.07Control
    8. 180.08Smart contract
    9. 180.09Exchange, platform and broker
    10. 180.10Virtual asset service provider
  10. ¶ 190Roadmap and First-Review Checklist
    1. 190.01Organization of the treatise
    2. 190.02Part I: Foundations
    3. 190.03Part II: Commercial law
    4. 190.04Part III: Custody and control
    5. 190.05Part IV: Fiduciaries
    6. 190.06Part V: Entities, foundations and DAOs
    7. 190.07Part VI: Estates and succession
    8. 190.08Part VII: Creditors, enforcement and recovery
    9. 190.09Part VIII: Insolvency
    10. 190.10Parts IX to XI: Tax, AML and regulation
    11. 190.11Appendices and finding lists
    12. 190.12First-review checklist
    13. 190.13Citation and cross-reference conventions

Chapter 2The Technology for Lawyers: Ledgers, Keys, Wallets and Smart Contracts

  1. ¶ 201Overview
    1. 201.01Scope of the chapter
    2. 201.02Why the technology matters to the law
    3. 201.03The level of description
    4. 201.04Technology changes; functions persist
    5. 201.05Sources
    6. 201.06Plan of the chapter
  2. ¶ 210Distributed Ledgers, Blocks and Consensus
    1. 210.01The ledger
    2. 210.02The problem consensus solves
    3. 210.03Blocks and hashes
    4. 210.04Proof of work
    5. 210.05Proof of stake
    6. 210.06Permissioned ledgers
    7. 210.07Nodes, miners, validators and the absence of an operator
    8. 210.08Majority attacks
    9. 210.09Transaction fees and failed transactions
  3. ¶ 220Finality, Forks and Network Governance
    1. 220.01Two meanings of finality
    2. 220.02Probabilistic finality
    3. 220.03Economic finality on proof-of-stake networks
    4. 220.04Soft forks and hard forks
    5. 220.05The DAO and the Ethereum hard fork of 2016
    6. 220.06Contentious forks and the assets they create
    7. 220.07Who governs a network
    8. 220.08Developer duties: Tulip Trading
  4. ¶ 230Keys, Signatures and Addresses
    1. 230.01Public-key cryptography
    2. 230.02What a signature proves
    3. 230.03Signature schemes
    4. 230.04Addresses
    5. 230.05Accounts and unspent outputs
    6. 230.06The irreversibility of transfers
    7. 230.07Weak randomness and key compromise
    8. 230.08Quantum computing
  5. ¶ 240Seed Phrases, Wallets and Key Storage
    1. 240.01What a wallet is
    2. 240.02Seed phrases under BIP-39
    3. 240.03The legal character of a seed phrase
    4. 240.04Hierarchical deterministic wallets under BIP-32
    5. 240.05Passphrases
    6. 240.06Hot and cold storage
    7. 240.07Moving assets after exposure
    8. 240.08Hosted and unhosted wallets
    9. 240.09Mt. Gox: keys on a server
    10. 240.10QuadrigaCX: a single key-holder
  6. ¶ 250Shared Control: Multi-Signature, Threshold Signatures and Secret Sharing
    1. 250.01Why holders share control
    2. 250.02Multi-signature arrangements
    3. 250.03Threshold signatures
    4. 250.04Secret sharing
    5. 250.05Evidence and transparency
    6. 250.06Shared control and Article 12
    7. 250.07Collaborative custody and recovery keys
    8. 250.08Governance terms that the technology does not supply
  7. ¶ 260Smart Contracts, Token Standards and Administrative Powers
    1. 260.01What a smart contract is
    2. 260.02Deterministic execution
    3. 260.03Token standards
    4. 260.04Identifying a token
    5. 260.05Allowances and approvals
    6. 260.06Immutable and upgradeable contracts
    7. 260.07Immutable contracts as property: Van Loon
    8. 260.08Administrative powers in token contracts
    9. 260.09Upgradeable organizations and algorithmic management
    10. 260.10Audits and formal verification
  8. ¶ 270Oracles, Bridges and Layer-2 Networks
    1. 270.01The limits of a single ledger
    2. 270.02Oracles
    3. 270.03Oracle manipulation
    4. 270.04Bridges
    5. 270.05The legal character of a wrapped token
    6. 270.06Bridge exploits: Ronin
    7. 270.07Layer-2 networks
  9. ¶ 280Privacy Tools, Tracing and Evidence of Control
    1. 280.01Pseudonymity
    2. 280.02Privacy techniques
    3. 280.03Developers of privacy tools
    4. 280.04Blockchain tracing
    5. 280.05Tracing evidence in court: Sterlingov
    6. 280.06Authentication of ledger records
    7. 280.07Proving control
    8. 280.08Identity and keys: COPA v Wright
    9. 280.09Evidence of control under shared arrangements
  10. ¶ 290Practice Checklist
    1. 290.01Use of the checklist
    2. 290.02The asset
    3. 290.03The keys
    4. 290.04The intermediaries
    5. 290.05Evidence
    6. 290.06Relation to later chapters

Chapter 3Digital Assets as Property in the United States

  1. ¶ 301Overview
    1. 301.01Scope of the chapter
    2. 301.02Why the question matters
    3. 301.03State law governs
    4. 301.04The sources
    5. 301.05Summary of conclusions
    6. 301.06A note on terminology
    7. 301.07Plan of the chapter
  2. ¶ 310The Concept of Property and the Three-Part Test
    1. 310.01Property as a set of legal relations
    2. 310.02The breadth of the California conception
    3. 310.03The first element: precise definition
    4. 310.04The second element: exclusive possession or control
    5. 310.05The third element: a legitimate claim to exclusivity
    6. 310.06Transferability
    7. 310.07The English approach compared
    8. 310.08Interests that fail the test
  3. ¶ 320Conversion, Trespass to Chattels and Replevin
    1. 320.01The tort of conversion
    2. 320.02The merger requirement
    3. 320.03Jurisdictions that have relaxed the requirement
    4. 320.04Tokens and the tort
    5. 320.05Consent and the customer agreement
    6. 320.06Trespass to chattels
    7. 320.07Replevin and specific recovery
    8. 320.08Damages
  4. ¶ 330Tokens as Property in Bankruptcy and Civil Litigation
    1. 330.01Property of the estate
    2. 330.02Three models of the customer relationship
    3. 330.03The Celsius Earn decision
    4. 330.04Custody accounts and wallet accounts
    5. 330.05Recovery of the property or its value
    6. 330.06Execution and attachment outside bankruptcy
    7. 330.07The Wyoming custody election
  5. ¶ 340Money, Currency and Commodity Status
    1. 340.01Why money status matters
    2. 340.02The definition before 2022
    3. 340.03The 2022 amendment
    4. 340.04The Wyoming rule
    5. 340.05Money and funds in criminal and regulatory statutes
    6. 340.06The local money-transmission statute
    7. 340.07Commodity status
    8. 340.08Tax status
  6. ¶ 350Statutory Declarations of Property Status
    1. 350.01The legislative approach
    2. 350.02The Wyoming definitions
    3. 350.03Reading the classification
    4. 350.04The consumer-protection clause
    5. 350.05Article 12 as a statutory framework
    6. 350.06Fiduciary-access statutes
  7. ¶ 360Marital Property, Community Property and Divorce
    1. 360.01Characterization in the family courts
    2. 360.02Separate property and tracing
    3. 360.03Valuation date
    4. 360.04Disclosure and concealment
    5. 360.05Restraint and the key
    6. 360.06Premarital and marital agreements
  8. ¶ 370Unclaimed Property and Escheat
    1. 370.01The problem of dormant accounts
    2. 370.02The older uniform acts
    3. 370.03The 2016 revision
    4. 370.04Liquidation by the holder
    5. 370.05Delivery in kind
    6. 370.06Self-custodied tokens are outside the system
  9. ¶ 380Criminal Law: Theft, Fraud and Forfeiture
    1. 380.01Theft
    2. 380.02Wire fraud and the property requirement
    3. 380.03Exploits of automated protocols
    4. 380.04Money laundering and unlicensed transmission
    5. 380.05Forfeiture
    6. 380.06What is not property: immutable code
  10. ¶ 390Synthesis, Drafting and Checklist
    1. 390.01The state of the law
    2. 390.02Drafting customer and custody agreements
    3. 390.03Drafting trust instruments and wills
    4. 390.04Litigation
    5. 390.05Checklist

Chapter 4Comparative Characterization: England and Wales and the Common-Law World

  1. ¶ 401Overview
    1. 401.01Scope of the chapter
    2. 401.02Why the comparative position matters
    3. 401.03The common question
    4. 401.04The convergence on property
    5. 401.05The divergence on category
    6. 401.06Characterization of custodial holdings
    7. 401.07Method and citation
  2. ¶ 410The Traditional Framework: Things in Possession and Things in Action
    1. 410.01The two classes of personal property
    2. 410.02The Ainsworth criteria
    3. 410.03Rights recognized outside the two classes
    4. 410.04The possessory remedies
    5. 410.05Information is not property
    6. 410.06The questions crypto-assets present
  3. ¶ 420The Legal Statement and the First English Decisions
    1. 420.01The UK Jurisdiction Taskforce
    2. 420.02The status of the Statement
    3. 420.03The first interim orders
    4. 420.04The decisions that followed
  4. ¶ 430Stablecoins, NFTs, Exchanges and Developers in the English Courts
    1. 430.01The second generation of cases
    2. 430.02USDT and the redemption right
    3. 430.03Exchanges as recipients
    4. 430.04What Tulip did not decide
    5. 430.05Rivalrousness as the distinguishing feature
  5. ¶ 440The Law Commission and the Property (Digital Assets etc) Act 2025
    1. 440.01The Law Commission project
    2. 440.02The other recommendations
    3. 440.03The characteristics of third-category things
    4. 440.04The Act
    5. 440.05What the Act does
    6. 440.06What the Act leaves open
    7. 440.07Extent
    8. 440.08Comparison with Article 12
  6. ¶ 450New Zealand: Ruscoe v Cryptopia
    1. 450.01Significance
    2. 450.02The three interdependent features
    3. 450.03Express trust from terms and conduct
    4. 450.04Insolvency consequences
  7. ¶ 460Singapore
    1. 460.01Overview
    2. 460.02Proprietary injunctions over stolen crypto-assets
    3. 460.03NFTs
    4. 460.04Thing in action or third category
    5. 460.05The redemption right
  8. ¶ 470Hong Kong, Australia, Canada and the Offshore Courts
    1. 470.01Hong Kong
    2. 470.02Variation of a trust by later terms
    3. 470.03Australia
    4. 470.04Canada
    5. 470.05The British Virgin Islands and the Cayman Islands
  9. ¶ 480Trusts, Custody and Insolvency Across the Common-Law World
    1. 480.01The common method
    2. 480.02Segregation as evidence of intention
    3. 480.03Certainty of subject matter for pooled tokens
    4. 480.04One trust or many
    5. 480.05Constructive trusts over misappropriated tokens
    6. 480.06Trustees and fiduciaries holding digital assets
    7. 480.07Insolvency
  10. ¶ 490Using Commonwealth Authority in United States Practice
    1. 490.01Three uses
    2. 490.02Foreign law as governing law
    3. 490.03Cross-border insolvency
    4. 490.04Persuasive authority in domestic cases
    5. 490.05Differences that limit transposition
    6. 490.06Drafting for multiple systems
    7. 490.07Checklist

Chapter 5Conflict of Laws: Situs, Governing Law and the UNIDROIT Principles

  1. ¶ 501Overview
    1. 501.01Scope of the chapter
    2. 501.02Why the question matters
    3. 501.03Three ways of framing the problem
    4. 501.04Relation to other chapters
    5. 501.05Terminology
  2. ¶ 510Why Situs Is Hard for Ledger-Based Assets
    1. 510.01The traditional function of situs
    2. 510.02The absence of a location
    3. 510.03Assets that do have an anchor
    4. 510.04Three practical consequences
    5. 510.05The distinction between proprietary and personal questions
  3. ¶ 520The Lex Situs Rule and Its Candidates
    1. 520.01The rule for intangibles generally
    2. 520.02Owner's domicile or residence
    3. 520.03Residence of the person in control
    4. 520.04Location of the private key
    5. 520.05Location of nodes, validators or the developers
    6. 520.06Seat of the issuer
    7. 520.07Place of the intermediary
    8. 520.08Designated law
    9. 520.09Change of connecting factor
  4. ¶ 530Article 12: Section 12-107 and Section 9-306B
    1. 530.01The design choice
    2. 530.02The general rule
    3. 530.03Section 12-106 matters
    4. 530.04The waterfall in subsection (c)
    5. 530.05Reading the steps
    6. 530.06The District of Columbia default
    7. 530.07No relation required
    8. 530.08Rights fixed at the time of purchase
    9. 530.09Security interests: Section 9-306B
    10. 530.10The split between perfection and priority
    11. 530.11When the forum has not enacted Article 12
  5. ¶ 540American Choice of Law Outside Article 12
    1. 540.01The residual field
    2. 540.02The general principles of section 6
    3. 540.03Contracts: sections 187 and 188
    4. 540.04Property: sections 222 and 244 to 246
    5. 540.05Torts
    6. 540.06Extraterritorial reach of federal statutes
    7. 540.07Case discussion: Williams v. Binance
    8. 540.08The Restatement (Third)
  6. ¶ 550English Approaches and the Law Commission
    1. 550.01The setting of the English cases
    2. 550.02Ion Science and Fetch.AI
    3. 550.03Residence displaces domicile
    4. 550.04LMN v Bitflyer
    5. 550.05Case discussion: Tulip Trading v Bitcoin Association
    6. 550.06Tort gateway and the place of damage
    7. 550.07The Law Commission's work
  7. ¶ 560The UNIDROIT Principles and the Hague Conference
    1. 560.01The instrument
    2. 560.02Scope of Principle 5
    3. 560.03The waterfall
    4. 560.04The issuer step
    5. 560.05The interpretive rules in paragraph (2)
    6. 560.06Custody and security rights
    7. 560.07Insolvency
    8. 560.08The Hague Conference and UNIDROIT joint project
  8. ¶ 570Exchange Terms, Forum Clauses and Arbitration
    1. 570.01The contractual layer
    2. 570.02Enforceability in the United States
    3. 570.03Case discussion: Coinbase v. Suski
    4. 570.04Coinbase v. Bielski
    5. 570.05Consumer protection in England
    6. 570.06Case discussion: Soleymani v Nifty Gateway
    7. 570.07Case discussion: Payward v Chechetkin
  9. ¶ 580Persons Unknown, Foreign Insolvency and Trusts
    1. 580.01Claims against persons unknown
    2. 580.02The duty of fair presentation
    3. 580.03Recognition of foreign insolvency proceedings
    4. 580.04Recognition in practice
    5. 580.05The law governing a trust that holds digital assets
    6. 580.06The Convention's application to digital assets
    7. 580.07The American rule for trusts
  10. ¶ 590Drafting and Practice Checklist
    1. 590.01The governing principle for drafters
    2. 590.02Token issuers
    3. 590.03System operators
    4. 590.04Custodians and exchanges
    5. 590.05Lenders
    6. 590.06Trustees and estate planners
    7. 590.07Litigators
    8. 590.08Summary

Part II: Commercial Law: Control, Transfer and Security Interests

Chapter 6UCC Article 12 and Controllable Electronic Records

  1. ¶ 601Overview
    1. 601.01Scope of the chapter
    2. 601.02The two functions of Article 12
    3. 601.03What Article 12 does not do
    4. 601.04Sources
    5. 601.05Relation to other chapters
    6. 601.06Organization
  2. ¶ 610The Problem Before 2022 and the Drafting Project
    1. 610.01Digital assets as general intangibles
    2. 610.02First consequence: perfection only by filing
    3. 610.03Second consequence: no protection for good-faith purchasers
    4. 610.04Third consequence: uncertain governing law
    5. 610.05Market responses
    6. 610.06State experiments
    7. 610.07The 2022 amendments
    8. 610.08Technology neutrality
  3. ¶ 620The Controllable Electronic Record: Definition and Exclusions
    1. 620.01The definition
    2. 620.02A record
    3. 620.03Stored in an electronic medium
    4. 620.04Capable of control
    5. 620.05The exclusions generally
    6. 620.06Investment property
    7. 620.07Electronic money
    8. 620.08Deposit accounts
    9. 620.09Chattel paper, documents of title and transferable records
    10. 620.10Controllable accounts and controllable payment intangibles
    11. 620.11The record and what it evidences
    12. 620.12Classification in Article 9
  4. ¶ 630Control under § 12-105
    1. 630.01The general rule
    2. 630.02The source of the powers
    3. 630.03Power to avail itself of substantially all the benefit
    4. 630.04Exclusive power to prevent others
    5. 630.05Exclusive power to transfer control
    6. 630.06Identification
    7. 630.07Limits and protocols that do not defeat exclusivity
    8. 630.08Shared power
    9. 630.09When power is not shared
    10. 630.10Independent copies of the same key
    11. 630.11Presumption of exclusivity
    12. 630.12Control through another person
    13. 630.13No duties from acknowledgment
  5. ¶ 640Rights of Purchasers: § 12-104 and the Take-Free Rule
    1. 640.01Structure of § 12-104
    2. 640.02Other law governs acquisition
    3. 640.03The shelter principle
    4. 640.04The qualifying purchaser
    5. 640.05Purchaser
    6. 640.06The thief's transferee
    7. 640.07Control
    8. 640.08Value
    9. 640.09Good faith
    10. 640.10Without notice
    11. 640.11The take-free rule
    12. 640.12Rights evidenced by the record
    13. 640.13No-action protection
    14. 640.14Relation to Article 9 priority
  6. ¶ 650Controllable Accounts, Controllable Payment Intangibles and Discharge
    1. 650.01The concept
    2. 650.02Two requirements
    3. 650.03Uses
    4. 650.04Transfer and the take-free rule
    5. 650.05Discharge of the account debtor
    6. 650.06The notification
    7. 650.07When notification is ineffective
    8. 650.08Proof of transfer
    9. 650.09Comparison with § 9-406
    10. 650.10Governing law and perfection
  7. ¶ 660Governing Law: §§ 12-107 and 9-306B
    1. 660.01The general rule
    2. 660.02The waterfall
    3. 660.03Designation by the record and by the system
    4. 660.04The default: the District of Columbia
    5. 660.05No relation required
    6. 660.06Time of purchase
    7. 660.07Discharge
    8. 660.08Article 9 governing law
    9. 660.09The enactment problem
  8. ¶ 670Conforming Amendments: Money, Electronic Money, Articles 8 and 9
    1. 670.01The amended definition of money
    2. 670.02Effect of the added sentence
    3. 670.03Money in Article 9
    4. 670.04Control of electronic money
    5. 670.05Perfection and transfer of electronic money
    6. 670.06Controllable electronic records in Article 9
    7. 670.07Article 8
  9. ¶ 680Transition, Enactment and Non-Uniform Regimes
    1. 680.01Article A
    2. 680.02Saving clauses
    3. 680.03Security interests perfected before the effective date
    4. 680.04Priority and the adjustment date
    5. 680.05The state of enactment
    6. 680.06Non-uniform enactments
    7. 680.07Wyoming
    8. 680.08Consequences of the Wyoming regime
  10. ¶ 690Applications, Drafting and Checklist
    1. 690.01Exchange accounts
    2. 690.02Can a customer have control through the exchange?
    3. 690.03Lending against exchange-held assets
    4. 690.04Non-fungible tokens
    5. 690.05Stablecoins
    6. 690.06Wrapped and bridged tokens
    7. 690.07Drafting security agreements
    8. 690.08Drafting purchase agreements
    9. 690.09Drafting issuance terms
    10. 690.10Litigating control and status
    11. 690.11Checklist

Chapter 7Security Interests in Digital Assets: Attachment, Perfection and Priority

  1. ¶ 701Overview
    1. 701.01Scope of the chapter
    2. 701.02Why digital assets required new rules
    3. 701.03Text used in this chapter
    4. 701.04The central idea: control
    5. 701.05The second idea: what the debtor owns
    6. 701.06Relation to other chapters
    7. 701.07Terminology
  2. ¶ 710Classifying Digital-Asset Collateral
    1. 710.01Why classification comes first
    2. 710.02Controllable electronic records as general intangibles
    3. 710.03Controllable accounts and controllable payment intangibles
    4. 710.04Electronic money
    5. 710.05Deposit accounts and tokenized deposits
    6. 710.06Investment property
    7. 710.07Claims against platforms
    8. 710.08Non-fungible tokens and linked assets
  3. ¶ 720Attachment
    1. 720.01The three requirements
    2. 720.02Value
    3. 720.03Rights in the collateral: self-hosted assets
    4. 720.04Rights in the collateral: assets at a platform
    5. 720.05Control as a substitute for a signed agreement
    6. 720.06Description of the collateral
    7. 720.07After-acquired collateral
    8. 720.08Proceeds
    9. 720.09Forks, airdrops and staking rewards
  4. ¶ 730Perfection: Filing and Control
    1. 730.01Two methods
    2. 730.02Perfection by filing
    3. 730.03Perfection by control
    4. 730.04The elements of control
    5. 730.05Exclusivity: protocols and shared power
    6. 730.06When shared power is not exclusive
    7. 730.07Control through another person
    8. 730.08Electronic money
    9. 730.09Termination and release
  5. ¶ 740Priority
    1. 740.01The competitors
    2. 740.02Control beats non-control
    3. 740.03Two secured parties with control
    4. 740.04Lien creditors and buyers
    5. 740.05Qualifying purchasers
    6. 740.06Secured parties as qualifying purchasers
    7. 740.07The shelter principle
    8. 740.08Transition priority
  6. ¶ 750Collateral Held Through Custodians and Exchanges
    1. 750.01Three legal routes
    2. 750.02The Article 8 route
    3. 750.03The intermediary's own lien
    4. 750.04The Article 12 route and omnibus wallets
    5. 750.05The control agreement
    6. 750.06The title-transfer route
  7. ¶ 760Lending Structures: Margin, Title Transfer and Rehypothecation
    1. 760.01The market forms
    2. 760.02Loan-to-value mechanics
    3. 760.03Recharacterization of title-transfer arrangements
    4. 760.04Case discussion: In re Celsius Network LLC, No. 22-10964 (MG), ECF No. 4089 (Bankr. S.D.N.Y. Nov. 9, 2023) (corrected memorandum opinion approving the CEL token settlement and resolving issue of collateral ownership)
    5. 760.05Rehypothecation under the Code
    6. 760.06Case discussion: In re BlockFi Inc., No. 24-2637 (3d Cir. Sept. 9, 2025) (not precedential)
  8. ¶ 770Enforcement After Default
    1. 770.01The framework
    2. 770.02Self-help through control
    3. 770.03Commercially reasonable disposition
    4. 770.04Notification
    5. 770.05Case discussion: Van Tubergen v. BlockFi, Inc., No. 24-6404 (ZNQ) (D.N.J. Apr. 14, 2025) (not for publication)
    6. 770.06Purchase by the secured party
    7. 770.07Application of proceeds and acceptance
    8. 770.08The Gemini and Genesis foreclosure
    9. 770.09Smart-contract liquidations
  9. ¶ 780Choice of Law and the Debtor's Bankruptcy
    1. 780.01Two governing laws
    2. 780.02The controllable electronic record's jurisdiction
    3. 780.03Investment property
    4. 780.04The automatic stay
    5. 780.05The safe harbors
    6. 780.06Strong-arm avoidance and adequate protection
    7. 780.07Margin top-ups as preferences
  10. ¶ 790Drafting and Checklist
    1. 790.01The documents
    2. 790.02Collateral description
    3. 790.03Tri-party control agreement
    4. 790.04Self-hosted wallet control
    5. 790.05Agreed standards for margin and liquidation
    6. 790.06Borrower-side provisions
    7. 790.07Checklist
    8. 790.08Cross-references

Chapter 8Tokenized Securities, Article 8 and Real-World Assets

  1. ¶ 801Overview
    1. 801.01Scope of the chapter
    2. 801.02The limits of the chapter
    3. 801.03The central proposition
    4. 801.04Two questions in every tokenization
    5. 801.05Terminology
  2. ¶ 810The Architecture of Article 8
    1. 810.01Two holding systems
    2. 810.02The definition of security
    3. 810.03Certificated and uncertificated securities
    4. 810.04Financial assets
    5. 810.05The rules of § 8-103
    6. 810.06The opt-in for LLC interests
    7. 810.07Choice of law
  3. ¶ 820The Issuer-Maintained Ledger as the Register
    1. 820.01Corporate-law authority
    2. 820.02Uncertificated shares
    3. 820.03Delivery and registration of transfer
    4. 820.04Control of an uncertificated security
    5. 820.05Transfer agents and the master securityholder file
    6. 820.06Wyoming certificate tokens
    7. 820.07Certificate tokens and Article 8
    8. 820.08When the ledger and the register diverge
  4. ¶ 830Article 8 or Article 12: Classifying the Token
    1. 830.01The statutory boundary
    2. 830.02First step: is there an Article 8 security?
    3. 830.03Second step: is there a securities account?
    4. 830.04Third step: is the token a controllable electronic record?
    5. 830.05Fourth step: the residue
    6. 830.06A security for one purpose but not another
  5. ¶ 840Securities Accounts at Digital-Asset Intermediaries
    1. 840.01The securities account
    2. 840.02Who is a securities intermediary
    3. 840.03The express-agreement election
    4. 840.04An election in practice
    5. 840.05What the election does
    6. 840.06What the election does not do
    7. 840.07The DTC tokenization pilot
    8. 840.08The mechanics
    9. 840.09The Article 8 analysis in the pilot
    10. 840.10Limits of the pilot
  6. ¶ 850Customer Protection: §§ 8-503, 8-504 and 8-511
    1. 850.01The property interest of entitlement holders
    2. 850.02Pro rata sharing
    3. 850.03How the interest is enforced
    4. 850.04The duty to maintain
    5. 850.05Priority against the intermediary's secured creditors
    6. 850.06Case discussion: In re Celsius Network LLC
  7. ¶ 860Tokenized Funds, Deposits and Third-Party Tokens
    1. 860.01Registered funds
    2. 860.02Private funds
    3. 860.03Redemption, distributions and the record date
    4. 860.04Tokenized deposits
    5. 860.05Third-party tokenization
    6. 860.06The SEC staff's taxonomy
    7. 860.07Private-law consequences of each model
  8. ¶ 870Real-World Assets and SPV Structures
    1. 870.01The basic limitation
    2. 870.02The special-purpose vehicle
    3. 870.03Real estate
    4. 870.04Receivables and private credit
    5. 870.05Commodities
    6. 870.06The gap between token and asset
    7. 870.07Sponsor insolvency
  9. ¶ 880Comparative Regimes
    1. 880.01Two approaches abroad
    2. 880.02Switzerland: ledger-based securities
    3. 880.03The Swiss model compared with Article 8
    4. 880.04The European Union: the DLT Pilot Regime
    5. 880.05The United Kingdom: the Digital Securities Sandbox
    6. 880.06Luxembourg
    7. 880.07English law of intermediated securities
    8. 880.08Conflict-of-laws instruments
  10. ¶ 890Drafting and Due Diligence
    1. 890.01The issuer's documents
    2. 890.02The intermediary's account agreement
    3. 890.03The RWA vehicle's documents
    4. 890.04Due diligence on a tokenized security or RWA token
    5. 890.05Coordination with other chapters

Part III: Custody and Control

Chapter 9Custody Models: Self-Custody, Shared Control and Third-Party Custody

  1. ¶ 901Overview
    1. 901.01Scope of the chapter
    2. 901.02Why the model matters
    3. 901.03The two questions in every model
    4. 901.04Vocabulary
    5. 901.05Relation to other chapters
    6. 901.06Organization
  2. ¶ 910Custody as a Legal Question
    1. 910.01Custody without possession
    2. 910.02Factual control and legal control
    3. 910.03The four risks
    4. 910.04Legal process
    5. 910.05Single points of failure
    6. 910.06The documents of a custody arrangement
    7. 910.07Reading Table 9-1
  3. ¶ 920Self-Custody with a Single Key
    1. 920.01The model
    2. 920.02The legal position
    3. 920.03Loss risk
    4. 920.04Case discussion: Howells v Newport City Council
    5. 920.05Compromise risk
    6. 920.06Backups and passphrases
    7. 920.07Succession risk
    8. 920.08Legal process against the owner
    9. 920.09When single-key self-custody is appropriate
  4. ¶ 930Shared Control: Multi-Signature and Threshold Arrangements
    1. 930.01Three techniques
    2. 930.02What shared control changes
    3. 930.03Key holders and their relationship
    4. 930.04Article 12 and shared power
    5. 930.05Contract and code risk in on-chain arrangements
    6. 930.06Incident study: the 2017 multi-signature wallet failures
    7. 930.07Threshold arrangements: evidence and dependency
    8. 930.08Policies and limits
    9. 930.09Succession and removal
  5. ¶ 940Collaborative Custody and Key-Holding Agents
    1. 940.01The model
    2. 940.02What the provider is
    3. 940.03The provider's duties
    4. 940.04Refusal to co-sign
    5. 940.05Control under Article 12
    6. 940.06Recovery agents
    7. 940.07Provider failure
    8. 940.08Model key-holder provision
    9. 940.09Comments on the model provision
  6. ¶ 950Qualified Third-Party Custody
    1. 950.01The model
    2. 950.02Segregation
    3. 950.03The regulatory pattern
    4. 950.04Storage tiers
    5. 950.05Key management and personnel controls
    6. 950.06Sub-custody and technology providers
    7. 950.07Forks, airdrops and other incidents of ownership
    8. 950.08Diligence: a regulatory template
    9. 950.09What third-party custody does not remove
  7. ¶ 960Exchange Custody and the Record of Failures
    1. 960.01The model
    2. 960.02Characterization depends on the terms
    3. 960.03Mt. Gox
    4. 960.04Case discussion: Celsius, custody and earn
    5. 960.05Case discussion: QuadrigaCX
    6. 960.06Case discussion: Prime Core Technologies
    7. 960.07The FTX control failures
  8. ¶ 970Allocation of Loss, Insurance, Assurance Reports and Proof of Reserves
    1. 970.01The default allocation
    2. 970.02Contractual allocation
    3. 970.03Unauthorized instructions
    4. 970.04Allocation among key holders
    5. 970.05Insurance
    6. 970.06Assurance reports
    7. 970.07Proof of reserves
    8. 970.08Records and evidence
  9. ¶ 980Choosing a Model by Client Type; Recovery Arrangements
    1. 980.01The factors
    2. 980.02Individuals
    3. 980.03Trusts
    4. 980.04Funds and advisers
    5. 980.05Operating companies
    6. 980.06Entities used as holding vehicles
    7. 980.07Recovery arrangements
  10. ¶ 990Drafting and Practice Checklist
    1. 990.01Drafting a custody agreement
    2. 990.02Drafting a shared-control agreement
    3. 990.03Common errors
    4. 990.04Checklist
    5. 990.05Cross-references

Chapter 10The Custodial Relationship: Bailment, Trust or Debt

  1. ¶ 1001Overview
    1. 1001.01Scope of the chapter
    2. 1001.02Why the question matters
    3. 1001.03The governing principle
    4. 1001.04The deciding instrument
    5. 1001.05The facts that test the terms
    6. 1001.06Relation to other chapters
    7. 1001.07Plan of the chapter
  2. ¶ 1010The Characterizations and the Order of Analysis
    1. 1010.01Six possible relationships
    2. 1010.02Labels do not decide
    3. 1010.03The order of analysis
    4. 1010.04Contract formation
    5. 1010.05The governing law of the characterization
    6. 1010.06The consequences compared
    7. 1010.07Mixed and changing relationships
  3. ¶ 1020Bailment
    1. 1020.01The attraction of the bailment model
    2. 1020.02The possession requirement
    3. 1020.03Control as the functional analogue
    4. 1020.04Fungible bailment
    5. 1020.05The Wyoming statutory bailment
    6. 1020.06Disclosures under the Wyoming statute
    7. 1020.07Effect of the Wyoming statute outside Wyoming
    8. 1020.08Duty of care
  4. ¶ 1030Trust: Express, Implied and Constructive
    1. 1030.01Why the trust is the strongest characterization
    2. 1030.02The three certainties
    3. 1030.03Subject matter: fungible pools
    4. 1030.04Intention: the objective test
    5. 1030.05Case discussion: Ruscoe v Cryptopia Ltd (in liq), [2020] NZHC 728, [2020] 2 NZLR 809 (High Court of New Zealand, Gendall J)
    6. 1030.06Case discussion: Re Gatecoin Ltd, [2023] HKCFI 914 (Court of First Instance, Hong Kong, Linda Chan J)
    7. 1030.07The Singapore position
    8. 1030.08United States law
    9. 1030.09Constructive and resulting trusts
  5. ¶ 1040Debtor and Creditor
    1. 1040.01The bank-deposit model
    2. 1040.02The loan for consumption
    3. 1040.03Indicators of a debtor-creditor relationship
    4. 1040.04Case discussion: In re Celsius Network LLC, No. 22-10964 (MG), Memorandum Opinion and Order Regarding Ownership of Earn Account Assets (Bankr. S.D.N.Y. Jan. 4, 2023), reported at 647 B.R. 631
    5. 1040.05Use rights without a transfer of title
    6. 1040.06Consequences of creditor status
  6. ¶ 1050Agency, Security Entitlements and Article 12
    1. 1050.01Agency
    2. 1050.02The Voyager FBO decision
    3. 1050.03The Article 8 route
    4. 1050.04The entitlement holder's property interest
    5. 1050.05The intermediary's duties
    6. 1050.06Priority of the intermediary's secured creditors
    7. 1050.07The benefits and limits of Article 8 for customers
    8. 1050.08Article 12
  7. ¶ 1060The Terms of Service in the Insolvency Cases
    1. 1060.01The pattern of the cases
    2. 1060.02Celsius: four programs
    3. 1060.03Celsius: the Custody ruling
    4. 1060.04Celsius: the shortfall and the Custody Settlement
    5. 1060.05What the Celsius rulings show
    6. 1060.06BlockFi: Wallet and interest accounts
    7. 1060.07Voyager: cryptocurrency held in Voyager's name
    8. 1060.08Voyager: the court's caution
    9. 1060.09FTX: terms that promised ownership
    10. 1060.10FTX: the Global Settlement
    11. 1060.11What FTX shows
  8. ¶ 1070Segregation, Commingling and Tracing
    1. 1070.01Forms of segregation
    2. 1070.02Why segregation matters
    3. 1070.03Tracing and its burden
    4. 1070.04The lowest intermediate balance
    5. 1070.05Many innocent claimants
    6. 1070.06Shortfall allocation
    7. 1070.07Forks, airdrops and staking rewards
    8. 1070.08Proof of reserves
  9. ¶ 1080Regulatory Overlays
    1. 1080.01How regulation shapes the private-law relationship
    2. 1080.02The New York guidance
    3. 1080.03Significance of the New York guidance
    4. 1080.04Accounting: SAB 121 and its rescission
    5. 1080.05Accounting presentation and property law
    6. 1080.06State trust companies and banks
  10. ¶ 1090Drafting the Custody Agreement
    1. 1090.01Objectives
    2. 1090.02Layered characterization
    3. 1090.03Wyoming custodians
    4. 1090.04Provisions the customer should resist
    5. 1090.05Consumer platforms
    6. 1090.06Checklist

Chapter 11Qualified Custodians, Trust Companies and Chartered Institutions

  1. ¶ 1101Overview
    1. 1101.01Scope of the chapter
    2. 1101.02Why the institution matters
    3. 1101.03The principal categories
    4. 1101.04The regulatory turn of 2025
    5. 1101.05Plan of the chapter
    6. 1101.06Currency of the law
  2. ¶ 1110The Layers of Custody Law
    1. 1110.01Four layers
    2. 1110.02Interaction of the layers
    3. 1110.03Custody, safekeeping and control
    4. 1110.04The customer's interest in the regulatory choice
    5. 1110.05The GENIUS Act custody provision
    6. 1110.06Customer property and commingling under the GENIUS Act
    7. 1110.07Effect of the GENIUS Act provision
  3. ¶ 1120The Advisers Act Custody Rule
    1. 1120.01The rule
    2. 1120.02When an adviser has custody
    3. 1120.03The qualified custodian
    4. 1120.04The statutory definition of bank
    5. 1120.05Funds or securities
    6. 1120.06The 2023 safeguarding proposal and its withdrawal
    7. 1120.07Privately offered securities
    8. 1120.08Pooled vehicles
  4. ¶ 1130State Trust Companies Under the Custody Provisions
    1. 1130.01The problem the 2025 letter addressed
    2. 1130.02The no-action letter
    3. 1130.03What the letter removes
    4. 1130.04The first condition: due inquiry into authorization and controls
    5. 1130.05The second condition: the custody agreement
    6. 1130.06The third and fourth conditions: disclosure and best interest
    7. 1130.07The letter compared with the rule
    8. 1130.08Registered funds and the Investment Company Act
    9. 1130.09Exchange-traded products outside the 1940 Act
  5. ¶ 1140Broker-Dealer Custody
    1. 1140.01The customer-protection rule
    2. 1140.02The 2020 Commission statement
    3. 1140.03Effect of the 2020 statement
    4. 1140.04The December 2025 staff statement
    5. 1140.05Relation between the two statements
    6. 1140.06Broker-dealers as qualified custodians
  6. ¶ 1150Banks and the Federal Banking Agencies
    1. 1150.01Custody as a bank power
    2. 1150.02Interpretive Letter 1170
    3. 1150.03Interpretive Letters 1172 and 1174
    4. 1150.04Interpretive Letter 1179 and the non-objection requirement
    5. 1150.05The 2025 rescissions
    6. 1150.06Interpretive Letter 1184: execution and sub-custody
    7. 1150.07SAB 121 and SAB 122
    8. 1150.08National trust banks
    9. 1150.09Significance of a national trust charter
  7. ¶ 1160State Charters
    1. 1160.01State trust companies
    2. 1160.02Wyoming's custody statute
    3. 1160.03Further protections in the Wyoming statute
    4. 1160.04Assessment of the Wyoming statute
    5. 1160.05Special purpose depository institutions
    6. 1160.06New York limited purpose trust companies
    7. 1160.07Content of the New York guidance
    8. 1160.08Supervision and its limits
    9. 1160.09Case discussion: In re Prime Core Technologies Inc., No. 23-11161 (JKS), D.I. 1085 (Bankr. D. Del. July 18, 2025)
  8. ¶ 1170Access to Central Bank Services
    1. 1170.01Why a master account matters
    2. 1170.02The 2022 account-access guidelines
    3. 1170.03The Toomey Amendment
    4. 1170.04Case discussion: Custodia Bank, Inc. v. Federal Reserve Board of Governors, No. 24-8024 (10th Cir. Oct. 31, 2025), aff'g 728 F. Supp. 3d 1227 (D. Wyo. 2024), reh'g en banc denied (10th Cir. Mar. 13, 2026), petition for cert. filed, No. 26-62 (U.S. July 10, 2026)
  9. ¶ 1180Selecting a Custodian
    1. 1180.01The holder's obligations govern the choice
    2. 1180.02Trustees
    3. 1180.03Fiduciary custody and non-fiduciary custody
    4. 1180.04Funds and advisers
    5. 1180.05Operating companies and individuals
    6. 1180.06Using more than one custodian
  10. ¶ 1190Due Diligence, Model Provision and Checklist
    1. 1190.01The purpose of diligence
    2. 1190.02Charter and regulatory status
    3. 1190.03Financial condition and capital
    4. 1190.04Controls and audits
    5. 1190.05Wallet architecture and records
    6. 1190.06Key management
    7. 1190.07Insurance
    8. 1190.08The custody agreement
    9. 1190.09Monitoring
    10. 1190.10Checklist

Chapter 12Staking, Lending, Rehypothecation and Yield Products

  1. ¶ 1201Overview
    1. 1201.01Scope of the chapter
    2. 1201.02The common question
    3. 1201.03Why the question is decided by contract
    4. 1201.04The regulatory overlay
    5. 1201.05The record of failure
    6. 1201.06Organization
    7. 1201.07Cross-references
  2. ¶ 1210Staking: Forms and Mechanics
    1. 1210.01What staking is
    2. 1210.02Rewards
    3. 1210.03Slashing
    4. 1210.04Bonding and unbonding
    5. 1210.05Solo staking
    6. 1210.06Delegated staking without transfer of custody
    7. 1210.07Pooled staking
    8. 1210.08Custodial staking
    9. 1210.09Liquid staking
    10. 1210.10Restaking
  3. ¶ 1220Property in Staked Assets and Rewards
    1. 1220.01Staking from one's own address
    2. 1220.02Delegation
    3. 1220.03Rewards as the owner's property
    4. 1220.04Custodial staking: the custody agreement decides
    5. 1220.05Statutory treatment in Wyoming
    6. 1220.06Slashing losses in custodial staking
    7. 1220.07Liquid staking receipts
  4. ¶ 1230Staking and the Securities Laws
    1. 1230.01The question
    2. 1230.02The Kraken settlement
    3. 1230.03The Coinbase litigation
    4. 1230.04The 2025 statement on protocol staking
    5. 1230.05Ancillary services
    6. 1230.06The 2025 statement on liquid staking
    7. 1230.07The status and limits of the statements
    8. 1230.08The European Union
  5. ¶ 1240Lending: Title Transfer, Secured Loans and Consent
    1. 1240.01Two structures
    2. 1240.02The loan of fungibles
    3. 1240.03The securities-lending model
    4. 1240.04The secured loan of money against tokens
    5. 1240.05Consent and its form
  6. ¶ 1250Retail Yield Programs
    1. 1250.01The model
    2. 1250.02The Celsius custody program
    3. 1250.03BlockFi: the regulatory settlement
    4. 1250.04BlockFi: the bankruptcy
    5. 1250.05Gemini Earn: the structure
    6. 1250.06Gemini Earn: the security arrangement
    7. 1250.07Gemini Earn: the enforcement actions
    8. 1250.08Voyager
  7. ¶ 1260Rehypothecation by Custodians and Brokers
    1. 1260.01Meaning
    2. 1260.02The broker-dealer model
    3. 1260.03Article 8
    4. 1260.04New York guidance
    5. 1260.05Wyoming and the European Union
    6. 1260.06The FTX and Celsius records
  8. ¶ 1270Protocol Lending, Liquidation and Loss
    1. 1270.01The structure
    2. 1270.02Over-collateralization and liquidation
    3. 1270.03Price oracles
    4. 1270.04Bad debt and its allocation
    5. 1270.05The depositor's legal position
    6. 1270.06Smart-contract and governance risk
  9. ¶ 1280Tax and Fiduciary Limits
    1. 1280.01Scope
    2. 1280.02Revenue Ruling 2023-14
    3. 1280.03Lending and income
    4. 1280.04Revenue Procedure 2025-31: purpose
    5. 1280.05Revenue Procedure 2025-31: conditions
    6. 1280.06Liquidity
    7. 1280.07Lessons for private trusts
    8. 1280.08The trustee's power to stake or lend
    9. 1280.09Delegation and loyalty
  10. ¶ 1290Disclosure, Consent and Drafting
    1. 1290.01The drafting objective
    2. 1290.02Title and use
    3. 1290.03Staking terms
    4. 1290.04Disclosure
    5. 1290.05Trust instruments
    6. 1290.06Loan agreements
    7. 1290.07Checklist

Part IV: Fiduciaries and Digital Assets

Chapter 13Fiduciary Access: RUFADAA, Terms of Service and Online Tools

  1. ¶ 1301Overview
    1. 1301.01Scope of the chapter
    2. 1301.02Citation of the Act
    3. 1301.03The two questions the Act answers
    4. 1301.04What the Act does not do
    5. 1301.05The federal frame
    6. 1301.06Why the Act matters for digital assets of value
    7. 1301.07Organization
    8. 1301.08Related chapters
  2. ¶ 1310The Problem, the Uniform Acts and Adoption
    1. 1310.01The problem
    2. 1310.02Early state statutes
    3. 1310.03The 2014 uniform act
    4. 1310.04Industry opposition and the competing model
    5. 1310.05The 2015 revision
    6. 1310.06Adoption
    7. 1310.07Non-uniform enactments
  3. ¶ 1320Definitions and Scope
    1. 1320.01"Digital asset."
    2. 1320.02The underlying-asset exclusion
    3. 1320.03"Electronic communication," "content" and "catalogue."
    4. 1320.04The consequence of the content definition
    5. 1320.05"Custodian" and "user."
    6. 1320.06"Online tool."
    7. 1320.07"Fiduciary" and "designated recipient."
    8. 1320.08Applicability
  4. ¶ 1330User Direction: Online Tools, Estate Plans and Terms of Service
    1. 1330.01The hierarchy
    2. 1330.02First tier: the online tool
    3. 1330.03Second tier: the will, trust, power or other record
    4. 1330.04The override of terms of service
    5. 1330.05Third tier: the terms of service
    6. 1330.06How the tiers interact with the default rules
  5. ¶ 1340The Procedure for Disclosure
    1. 1340.01The custodian chooses the method
    2. 1340.02Why the method matters for assets of value
    3. 1340.03Charges, deleted assets and segregation
    4. 1340.04The documents a fiduciary must provide
    5. 1340.05What the custodian may request in addition
    6. 1340.06The court-order requirement in practice
  6. ¶ 1350Disclosure by Fiduciary Type
    1. 1350.01The structure of §§ 7 to 14
    2. 1350.02Personal representatives: content (§ 7)
    3. 1350.03Personal representatives: other digital assets (§ 8)
    4. 1350.04Agents: content (§ 9)
    5. 1350.05Agents: other digital assets (§ 10)
    6. 1350.06Trustees as original users (§ 11)
    7. 1350.07Trustees who are not original users (§§ 12, 13)
    8. 1350.08Conservators and guardians (§ 14)
  7. ¶ 1360Fiduciary Duty and Authority; Computer-Fraud Laws
    1. 1360.01Duties
    2. 1360.02Limits on authority
    3. 1360.03Assets not held by a custodian
    4. 1360.04Devices
    5. 1360.05Authorized user under state computer-crime laws
    6. 1360.06The federal Computer Fraud and Abuse Act
    7. 1360.07Van Buren applied to fiduciaries
    8. 1360.08Termination of accounts
  8. ¶ 1370Custodian Compliance, the Stored Communications Act and the Cases
    1. 1370.01The sixty-day rule
    2. 1370.02Notice and denial
    3. 1370.03Court orders the custodian may require
    4. 1370.04Immunity
    5. 1370.05The Stored Communications Act
    6. 1370.06Ajemian v. Yahoo!, Inc
    7. 1370.07Matter of Serrano
    8. 1370.08Matter of Swezey
    9. 1370.09Matter of Coleman
    10. 1370.10Other authority
  9. ¶ 1380Digital Assets of Value: Hosted Accounts, Self-Custody and Online Tools
    1. 1380.01The two settings
    2. 1380.02Hosted accounts: what the Act secures
    3. 1380.03Is the balance a digital asset?
    4. 1380.04Transfer of the assets is a separate request
    5. 1380.05Securing the account during administration
    6. 1380.06Self-custody: authority without a key
    7. 1380.07Multi-party arrangements
    8. 1380.08Online tools for financial accounts
  10. ¶ 1390Drafting and Checklist
    1. 1390.01The drafting task
    2. 1390.02Consent to disclosure of content
    3. 1390.03Authority over digital assets generally
    4. 1390.04Coordination with online tools
    5. 1390.05Keeping key material out of the instrument
    6. 1390.06Requests by the fiduciary
    7. 1390.07Checklist

Chapter 14Trustee Duties over Digital Assets: Prudence, Diversification and the Duty to Secure

  1. ¶ 1401Overview
    1. 1401.01Scope of the chapter
    2. 1401.02The central proposition
    3. 1401.03Why digital assets test the standard
    4. 1401.04The state of the authority
    5. 1401.05Statutory sources used
    6. 1401.06Relationship to other chapters
  2. ¶ 1410Sources of the Trustee's Duties and Their Default Character
    1. 1410.01Three layers
    2. 1410.02Default rules
    3. 1410.03Mandatory limits
    4. 1410.04The Delaware model
    5. 1410.05South Dakota and Nevada
    6. 1410.06The time of judgment
  3. ¶ 1420The Prudent Investor Standard Applied to Digital Assets
    1. 1420.01The standard
    2. 1420.02The portfolio rule
    3. 1420.03The statutory factors
    4. 1420.04The duty to verify facts
    5. 1420.05Special skills
    6. 1420.06The review at inception
    7. 1420.07Impartiality
    8. 1420.08Costs
  4. ¶ 1430Diversification and Concentrated Holdings
    1. 1430.01The duty
    2. 1430.02Why concentration matters for digital assets
    3. 1430.03The common-law antecedents
    4. 1430.04Case discussion: In re Estate of Janes, 90 N.Y.2d 41 (1997)
    5. 1430.05Case discussion: In re Estate of Saxton, 274 A.D.2d 110 (3d Dep't 2000)
    6. 1430.06In re Estate of Rowe
    7. 1430.07Applying the cases to a digital-asset concentration
    8. 1430.08Special circumstances
    9. 1430.09Beneficiary consent
  5. ¶ 1440Retention Clauses, Directions and Statutory Exceptions
    1. 1440.01The question
    2. 1440.02Case discussion: Wood v. U.S. Bank, N.A., 160 Ohio App. 3d 831 (Ohio Ct. App. 2005)
    3. 1440.03Case discussion: Americans for the Arts v. Ruth Lilly Charitable Remainder Annuity Trust #1, 855 N.E.2d 592 (Ind. Ct. App. 2006)
    4. 1440.04Delaware: a direction to retain
    5. 1440.05South Dakota
    6. 1440.06Nevada
    7. 1440.07The uniform states and New Hampshire
    8. 1440.08The regimes compared
  6. ¶ 1450The Duty to Take Control of and Protect Trust Property
    1. 1450.01The statute
    2. 1450.02Taking control at inception
    3. 1450.03Collecting from others
    4. 1450.04Protecting the asset: the choice of custody
    5. 1450.05Separation and identification
    6. 1450.06Commingling across trusts
    7. 1450.07Records
    8. 1450.08Insurance and abandonment
  7. ¶ 1460Delegation, Custodians and Co-Trustees
    1. 1460.01Delegation permitted
    2. 1460.02The three duties of a delegating trustee
    3. 1460.03The agent's duty and jurisdiction
    4. 1460.04Approval of delegation in South Dakota
    5. 1460.05What cannot be delegated
    6. 1460.06Key holders in shared-control arrangements
    7. 1460.07Co-trustees
    8. 1460.08Co-fiduciary liability in Rothko
  8. ¶ 1470Loyalty and Conflicts of Interest
    1. 1470.01The duty
    2. 1470.02Transactions affected by a conflict
    3. 1470.03Applications to digital assets
    4. 1470.04Retention of the trustee's own interest
    5. 1470.05Case discussion: In re Estate of Rothko, 43 N.Y.2d 305 (1977)
    6. 1470.06Remedies
    7. 1470.07Managing conflicts
  9. ¶ 1480Income and Principal; Information and Reporting
    1. 1480.01Why allocation matters
    2. 1480.02General principles
    3. 1480.03The residual rule
    4. 1480.04Specific rules that may apply
    5. 1480.05The power to adjust
    6. 1480.06The duty to inform
    7. 1480.07The annual report
    8. 1480.08Silent trusts
  10. ¶ 1490Drafting, Model Provision and Checklist
    1. 1490.01The drafter's task
    2. 1490.02Points of drafting
    3. 1490.03Checklist

Chapter 15Holding Digital Assets in Trust: Directed Trusts and Drafting

  1. ¶ 1501Overview
    1. 1501.01Scope of the chapter
    2. 1501.02Why design matters more for digital assets
    3. 1501.03The directed trust as the principal tool
    4. 1501.04What the instrument must address
    5. 1501.05Relation to other chapters
    6. 1501.06Terminology
    7. 1501.07A note on statutory text
  2. ¶ 1510Structuring a Trust to Hold Digital Assets
    1. 1510.01The design questions in order
    2. 1510.02Purpose and the settlor's intention
    3. 1510.03Single trustee, co-trustees or a directed trust
    4. 1510.04Institutional trustee policies
    5. 1510.05Custody as a design choice
    6. 1510.06Direct ownership or an entity
    7. 1510.07Revocable and irrevocable trusts
  3. ¶ 1520The Directed Trust Statutes: The Uniform Act and the State Regimes
    1. 1520.01Development
    2. 1520.02The Uniform Act: definitions and scope
    3. 1520.03The Uniform Act: powers relevant to digital assets
    4. 1520.04The Uniform Act: duties and liability
    5. 1520.05Delaware
    6. 1520.06Delaware's definition of an investment decision
    7. 1520.07South Dakota
    8. 1520.08Nevada
    9. 1520.09Wyoming
    10. 1520.10New Hampshire
    11. 1520.11States that retain the Uniform Trust Code rule
    12. 1520.12Choosing a statute for a digital-asset trust
  4. ¶ 1530Investment and Custody Directors, the Directed Trustee and the Cases
    1. 1530.01The two directors a digital-asset trust needs
    2. 1530.02Who should serve as director
    3. 1530.03The director's fiduciary standard
    4. 1530.04Nonfiduciary directors
    5. 1530.05The directed trustee's residual duties
    6. 1530.06When the director holds the keys
    7. 1530.07Case discussion: du Pont v. Wilmington Trust Co., C.A. No. 12836-VCS (Del. Ch. Oct. 6, 2017) (revised Oct. 11, 2017) (Slights, V.C.)
    8. 1530.08The Mennen litigation
    9. 1530.09Earlier Delaware authority
    10. 1530.10Jurisdiction over directors
    11. 1530.11Engagement terms for a professional director
  5. ¶ 1540Protectors and Other Powerholders
    1. 1540.01The protector's role
    2. 1540.02Adapting administrative provisions to new technology
    3. 1540.03Changing situs and governing law
    4. 1540.04Removing and replacing directors and custodians
    5. 1540.05Resolving technical questions
    6. 1540.06Fiduciary status of protectors
    7. 1540.07Limits
  6. ¶ 1550Retention Clauses and Powers over Digital Assets
    1. 1550.01The default rule and the instrument's power to vary it
    2. 1550.02Elements of a retention clause for tokens
    3. 1550.03Notes on the model retention provision
    4. 1550.04Why express powers are needed
    5. 1550.05Staking and lending
    6. 1550.06Governance tokens and voting
    7. 1550.07Forks, airdrops and abandonment
    8. 1550.08Notes on the model powers provision
  7. ¶ 1560Key-Management Provisions in the Instrument
    1. 1560.01Why the instrument must address key material
    2. 1560.02Who may hold key material
    3. 1560.03The key-storage memorandum
    4. 1560.04Successor key-holders
    5. 1560.05Proof of control
    6. 1560.06Compromise and emergency action
    7. 1560.07Funding the trust
    8. 1560.08Notes on the model key provisions
  8. ¶ 1570Holding Through an LLC; Valuation and Accounting
    1. 1570.01Reasons for an entity beneath the trust
    2. 1570.02Aligning the operating agreement with the trust instrument
    3. 1570.03Which fiduciary standard governs a dual role
    4. 1570.04Case discussion: Rollins v. Rollins, 294 Ga. 711 (2014)
    5. 1570.05Valuation
    6. 1570.06Accounting and reporting
  9. ¶ 1580Situs, Revocable Trusts and Offshore Trusts
    1. 1580.01Situs and the availability of a directed-trust statute
    2. 1580.02The trustee's capability
    3. 1580.03Moving an existing trust
    4. 1580.04The revocable trust as a probate substitute
    5. 1580.05Funding a revocable trust with digital assets
    6. 1580.06Offshore trusts holding digital assets
    7. 1580.07Domestic directors of an offshore trust
  10. ¶ 1590Drafting and Checklist
    1. 1590.01Allocating functions
    2. 1590.02The custody direction provision
    3. 1590.03The exculpation provision
    4. 1590.04Notes on the custody and exculpation provisions
    5. 1590.05Common drafting errors
    6. 1590.06Checklist

Chapter 16Fiduciary Liability, Exculpation and Loss of Keys

  1. ¶ 1601Overview
    1. 1601.01Scope of the chapter
    2. 1601.02Relationship to earlier chapters
    3. 1601.03Why digital assets change the analysis
    4. 1601.04The statutory texts used
    5. 1601.05Organization
  2. ¶ 1610Who Is Liable, and under What Law
    1. 1610.01The trustee
    2. 1610.02The personal representative
    3. 1610.03The agent under a power of attorney
    4. 1610.04Conservators and guardians
    5. 1610.05Custodians and other agents of the fiduciary
    6. 1610.06Co-fiduciaries and contribution
    7. 1610.07Directed trustees and advisers
    8. 1610.08Personal and representative liability
  3. ¶ 1620Breach Theories for Digital Assets
    1. 1620.01Failure to take control
    2. 1620.02Failure to secure keys
    3. 1620.03Failure to keep records and to identify trust property
    4. 1620.04Commingling
    5. 1620.05Imprudent retention
    6. 1620.06Imprudent sale and the hindsight problem
    7. 1620.07Improper delegation
    8. 1620.08Losses through staking and lending
    9. 1620.09Breach of the duty of loyalty
    10. 1620.10Failure to inform and report
  4. ¶ 1630Measuring the Loss: Volatile Assets and the Valuation Date
    1. 1630.01The statutory baseline
    2. 1630.02The candidate dates
    3. 1630.03The conflict rule applied to digital assets
    4. 1630.04Negligent retention of a volatile token
    5. 1630.05The conversion rules: highest intermediate value
    6. 1630.06Which rule governs a fiduciary
    7. 1630.07Restoration in kind
    8. 1630.08Proving value
  5. ¶ 1640Exculpation Clauses
    1. 1640.01Function of an exculpation clause
    2. 1640.02The UTC limit
    3. 1640.03The drafter-trustee rule
    4. 1640.04Delaware: wilful misconduct
    5. 1640.05Construing a clause written for securities
    6. 1640.06Clauses tailored to digital assets
    7. 1640.07Directed trusts
    8. 1640.08What exculpation cannot do
    9. 1640.09English law and the jurisdictions that follow the Privy Council
    10. 1640.10The statutory limits in the offshore jurisdictions
    11. 1640.11Professional trustees
  6. ¶ 1650Indemnity, Insurance and Reliance on Advisers and Custodians
    1. 1650.01Reimbursement of expenses
    2. 1650.02Indemnity provisions
    3. 1650.03Insurance
    4. 1650.04Reliance on advisers
    5. 1650.05Reliance on custodians and their reports
    6. 1650.06Protection of persons dealing with trustees
  7. ¶ 1660Accountings, Consent and Court Instructions
    1. 1660.01The accounting as protection
    2. 1660.02What an adequate report discloses
    3. 1660.03Beneficiary consent, release and ratification
    4. 1660.04Petitions for instructions
    5. 1660.05Timing and the market
    6. 1660.06The effect of an order
  8. ¶ 1670Lost Keys, Inaccessible Assets and the Deceased Key-Holder
    1. 1670.01Loss and inaccessibility distinguished
    2. 1670.02The deceased key-holder
    3. 1670.03Cost and benefit of recovery efforts
    4. 1670.04Accounting for inaccessible assets
    5. 1670.05Claims against predecessors and settlors
  9. ¶ 1680Theft, Recovery Duties, Limitation Periods and the Drafting Lawyer
    1. 1680.01Theft and the fiduciary's exposure
    2. 1680.02Lessons for key storage
    3. 1680.03The fiduciary's duties after a theft
    4. 1680.04Claims against intermediaries
    5. 1680.05Limitation periods: the structure
    6. 1680.06Hidden losses
    7. 1680.07Disclosure documents as the trigger
    8. 1680.08The drafting lawyer
    9. 1680.09The lawyer as custodian
  10. ¶ 1690Drafting and Practice Checklist
    1. 1690.01Allocating risk in the instrument
    2. 1690.02A custody standard
    3. 1690.03A tailored exculpation clause
    4. 1690.04Valuation for reporting
    5. 1690.05Indemnity and insurance
    6. 1690.06Practice points for fiduciaries

Part V: Entities, Foundations and DAOs

Chapter 17Holding Digital Assets Through Limited Liability Companies

  1. ¶ 1701Overview
    1. 1701.01Scope of the chapter
    2. 1701.02The central point
    3. 1701.03The statutes examined
    4. 1701.04What the LLC does not do
    5. 1701.05Terminology
    6. 1701.06Organization
  2. ¶ 1710Why Hold Digital Assets Through an LLC
    1. 1710.01Five reasons
    2. 1710.02Segregation of liability
    3. 1710.03Centralized authority
    4. 1710.04Transfer of interests in place of transfer of keys
    5. 1710.05Succession
    6. 1710.06Charging-order protection
    7. 1710.07Costs and limits
  3. ¶ 1720Choice of State and Form
    1. 1720.01The questions that decide the choice
    2. 1720.02Delaware
    3. 1720.03Wyoming
    4. 1720.04Nevada
    5. 1720.05Series LLCs
    6. 1720.06Series and wallets
    7. 1720.07Other states
  4. ¶ 1730Contribution, Title and Records
    1. 1730.01Tokens as contributions
    2. 1730.02The two methods
    3. 1730.03Exchange and custodial accounts
    4. 1730.04Documenting the contribution
    5. 1730.05The wallet register
    6. 1730.06Reconciliation
    7. 1730.07Tax on contribution
    8. 1730.08Valuing contributions
  5. ¶ 1740Authority over Keys: Management, Signing and Control
    1. 1740.01Two kinds of authority
    2. 1740.02The statutory defaults
    3. 1740.03Delegation to signers and custodians
    4. 1740.04The approval matrix
    5. 1740.05Matching the matrix to the key arrangement
    6. 1740.06The company's control under Article 12
    7. 1740.07Removing a manager or signer
    8. 1740.08Death and incapacity of a signer
  6. ¶ 1750Information Rights and the Secrecy of Keys
    1. 1750.01The tension
    2. 1750.02Delaware
    3. 1750.03Wyoming
    4. 1750.04What members should receive
    5. 1750.05What members should not receive
    6. 1750.06Transferees and personal representatives
  7. ¶ 1760Duties of the Manager over Volatile Assets
    1. 1760.01The default duties
    2. 1760.02The duty of care
    3. 1760.03Purpose and investment policy
    4. 1760.04The duty to secure
    5. 1760.05The duty of loyalty and the benefits of company keys
    6. 1760.06Conflicts specific to digital assets
    7. 1760.07Modifying the duties
    8. 1760.08How far to modify
  8. ¶ 1770Creditors of Members: Charging Orders, Single-Member LLCs, Veil Piercing and Keys
    1. 1770.01The charging order
    2. 1770.02Exclusivity
    3. 1770.03The single-member problem
    4. 1770.04Adding a member
    5. 1770.05Veil piercing
    6. 1770.06Separateness in a digital-asset company
    7. 1770.07Keys and turnover orders
    8. 1770.08Distributions and the creditor
  9. ¶ 1780Tax, Beneficial-Ownership Reporting, Accounting and the LLC Under a Trust
    1. 1780.01Classification
    2. 1780.02Points specific to token-holding partnerships
    3. 1780.03Beneficial-ownership reporting
    4. 1780.04Financial-statement accounting
    5. 1780.05Distributions in kind
    6. 1780.06The LLC under a trust
    7. 1780.07Valuation for transfer tax
  10. ¶ 1790Drafting: Model Provisions and Checklist
    1. 1790.01The provisions a digital-asset LLC needs
    2. 1790.02Model Provision 1: assets and wallets
    3. 1790.03Model Provision 2: key arrangement and approvals
    4. 1790.04Model Provision 3: confidential key material
    5. 1790.05Model Provision 4: standard of conduct
    6. 1790.06Model Provision 5: successor signers
    7. 1790.07Defined terms
    8. 1790.08Checklist

Chapter 18Foundations and Purpose Trusts

  1. ¶ 1801Overview
    1. 1801.01Scope of the chapter
    2. 1801.02What “ownerless” means
    3. 1801.03Relationship to other chapters
    4. 1801.04Three questions
    5. 1801.05Terminology
    6. 1801.06Organization of the chapter
  2. ¶ 1810Why Ownerless Structures Are Used
    1. 1810.01The problem the form addresses
    2. 1810.02The protocol foundation
    3. 1810.03A factual example: the Swiss foundation model
    4. 1810.04Token issuance through a foundation
    5. 1810.05Holding intellectual property
    6. 1810.06The treasury as an endowment
    7. 1810.07Liability and the alternative of no entity
    8. 1810.08Costs and limits
  3. ¶ 1820Cayman Islands: The Foundation Company and the STAR Trust
    1. 1820.01The foundation company
    2. 1820.02Members who do not profit
    3. 1820.03A constitution that can be designed
    4. 1820.04The defaults
    5. 1820.05Supervisors, interested persons and the memberless company
    6. 1820.06The duty to carry out the objects
    7. 1820.07Amendment, disputes and by-laws
    8. 1820.08The secretary and the anti-money laundering gate
    9. 1820.09Distributions and solvency
    10. 1820.10The Grand Court's functions
    11. 1820.11The STAR trust
    12. 1820.12Regulatory overlay
  4. ¶ 1830Switzerland and Liechtenstein
    1. 1830.01The Swiss foundation
    2. 1830.02State supervision
    3. 1830.03Organizational defects and insolvency
    4. 1830.04The fixed purpose
    5. 1830.05Family foundations and the private holder
    6. 1830.06Challenge by creditors and dissolution
    7. 1830.07The Swiss regulatory framework
    8. 1830.08The Liechtenstein foundation
    9. 1830.09The Token and TT Service Provider Act
    10. 1830.10What the TVTG means for a foundation
  5. ¶ 1840Panama, Nevis, the British Virgin Islands, Jersey and Other Regimes
    1. 1840.01The Panamanian private interest foundation
    2. 1840.02The Nevis multiform foundation
    3. 1840.03The Cook Islands and Belize foundations
    4. 1840.04The British Virgin Islands VISTA trust
    5. 1840.05Purpose trusts in Jersey, Bermuda and the British Virgin Islands
    6. 1840.06The Jersey foundation
    7. 1840.07The Wyoming statutory foundation
    8. 1840.08Choosing among the offshore regimes
  6. ¶ 1850Governance and Token-Holder Input
    1. 1850.01The council and its duties
    2. 1850.02The checking offices
    3. 1850.03What the checking offices are for
    4. 1850.04Token holders have no rights by default
    5. 1850.05Making token-holder votes binding
    6. 1850.06The limits of binding votes
    7. 1850.07Independence in fact
    8. 1850.08Conflicts of interest
  7. ¶ 1860Holding the Treasury: Keys, Custody and Distributions
    1. 1860.01Legal ownership and control of keys
    2. 1860.02Arrangements for holding keys
    3. 1860.03Key holders as agents of the vehicle
    4. 1860.04Separation from the founders
    5. 1860.05Assets in an on-chain treasury contract
    6. 1860.06Treasury policy and concentration
    7. 1860.07Grants and distributions
    8. 1860.08Records and assurance
  8. ¶ 1870Tax, Reporting and United States Contacts
    1. 1870.01United States classification
    2. 1870.02Protocol foundations under the classification rules
    3. 1870.03United States founders and contributors
    4. 1870.04International reporting
    5. 1870.05Securities and anti-money laundering contacts
  9. ¶ 1880Creditors, Insolvency and the Courts
    1. 1880.01Three classes of creditor
    2. 1880.02Creditors of the founder
    3. 1880.03Creditors of the vehicle
    4. 1880.04Insolvency of the vehicle
    5. 1880.05Disregarding the vehicle
    6. 1880.06The developers' exposure
    7. 1880.07Recognition of the vehicle abroad
  10. ¶ 1890Choosing a Vehicle; Checklist
    1. 1890.01Foundation, purpose trust or DAO limited liability company
    2. 1890.02Other considerations
    3. 1890.03Using more than one vehicle
    4. 1890.04Checklist
    5. 1890.05Concluding observations

Chapter 19The Unincorporated DAO: Legal Status and Member Liability

  1. ¶ 1901Overview
    1. 1901.01Scope of the chapter
    2. 1901.02The problem stated
    3. 1901.03The decided cases
    4. 1901.04The doctrinal pattern
    5. 1901.05Organization of the chapter
    6. 1901.06Terminology
  2. ¶ 1910What a DAO Is in Fact
    1. 1910.01Description in the cases
    2. 1910.02Governance tokens
    3. 1910.03On-chain and off-chain voting
    4. 1910.04Treasuries and keys
    5. 1910.05Signers, delegates and contributors
    6. 1910.06The development company and the transition
    7. 1910.07Stated purposes of decentralization
    8. 1910.08Governance minimization and immutable code
  3. ¶ 1920Characterization: Partnership, Nonprofit Association or Joint Venture
    1. 1920.01The default rule
    2. 1920.02The elements applied to a DAO
    3. 1920.03Profit sharing as evidence
    4. 1920.04Co-ownership that does not create a partnership
    5. 1920.05The statutory-entity exclusion
    6. 1920.06Default rules that a DAO displaces
    7. 1920.07The unincorporated nonprofit association
    8. 1920.08Limits of the nonprofit characterization
    9. 1920.09The joint venture
    10. 1920.10The general unincorporated association
  4. ¶ 1930Sarcuni v. bZx DAO
    1. 1930.01Significance
    2. 1930.02Case discussion
    3. 1930.03The class-conflict point
  5. ¶ 1940CFTC v. Ooki DAO: Capacity and Service
    1. 1940.01Significance
    2. 1940.02Case discussion
    3. 1940.03The amici's arguments
    4. 1940.04The founders' parallel exposure
  6. ¶ 1950Samuels v. Lido DAO and Houghton v. Leshner
    1. 1950.01Significance
    2. 1950.02Case discussion
    3. 1950.03Further proceedings in Samuels
    4. 1950.04Case discussion
    5. 1950.05The pleading posture
  7. ¶ 1960Who Is a Partner, and the Exposure of Each Participant
    1. 1960.01Two tests
    2. 1960.02Founders
    3. 1960.03Investors
    4. 1960.04Voting holders
    5. 1960.05Passive holders
    6. 1960.06Delegates
    7. 1960.07Multi-signature signers
    8. 1960.08Developers and service providers
    9. 1960.09Timing: when liability attaches
    10. 1960.10Exhaustion and the order of recovery
    11. 1960.11Contribution and indemnity among partners
  8. ¶ 1970Defences, Procedure, Securities and Governance Attacks
    1. 1970.01Capacity to be sued
    2. 1970.02Governing law
    3. 1970.03Service of process
    4. 1970.04Appearance on behalf of a DAO
    5. 1970.05Personal jurisdiction over partners
    6. 1970.06Terms of use and arbitration
    7. 1970.07In pari delicto and the token-holding plaintiff
    8. 1970.08Partners not proper parties
    9. 1970.09Securities law
    10. 1970.10Governance attacks
    11. 1970.11Veil and alter-ego arguments
  9. ¶ 1980Tax and Reporting of an Unwrapped DAO
    1. 1980.01Federal entity classification
    2. 1980.02Default classification
    3. 1980.03Domestic or foreign
    4. 1980.04Consequences of partnership classification
    5. 1980.05Partners' own reporting
    6. 1980.06Payments from the treasury
    7. 1980.07State tax
    8. 1980.08Guidance
  10. ¶ 1990Mitigation Short of a Wrapper, the Move to a Wrapper, and Checklist
    1. 1990.01The limits of mitigation without an entity
    2. 1990.02Measures affecting characterization
    3. 1990.03Measures affecting individual exposure
    4. 1990.04Contracting through an entity
    5. 1990.05Insurance and indemnity
    6. 1990.06Litigation readiness
    7. 1990.07Why wrappers exist
    8. 1990.08Transition planning
    9. 1990.09Checklist

Chapter 20DAO LLCs: Wyoming, the Marshall Islands and Other Wrappers

  1. ¶ 2001Overview
    1. 2001.01Scope of the chapter
    2. 2001.02The problem the statutes address
    3. 2001.03What the statutes do and do not do
    4. 2001.04The central Wyoming questions
    5. 2001.05Relationship to other chapters
    6. 2001.06Sources and currency
    7. 2001.07Terminology
    8. 2001.08Organization of the chapter
  2. ¶ 2010Why DAO Statutes Exist; Wyoming in 2021 and 2022
    1. 2010.01The gap the statutes fill
    2. 2010.02The 2021 enactment
    3. 2010.03The difficulty with the binary
    4. 2010.04The 2022 amendments
    5. 2010.05The current management provisions
    6. 2010.06The resulting model
    7. 2010.07The Marshall Islands parallel
  3. ¶ 2020Wyoming: Definitions and Application of the LLC Act
    1. 2020.01A supplement to the LLC Act
    2. 2020.02Consequences for creditors and members
    3. 2020.03"Decentralized autonomous organization" and the source definitions
    4. 2020.04Majority of the members
    5. 2020.05Membership interest
    6. 2020.06Open blockchain and publicly available identifier
    7. 2020.07Smart contract
    8. 2020.08Reading the definition
    9. 2020.09The Title 34 interface
  4. ¶ 2030Wyoming: Formation, Articles and the Statement of Management
    1. 2030.01Formation
    2. 2030.02The required contents of the articles
    3. 2030.03The statutory notice
    4. 2030.04The missing identifier
    5. 2030.05Matters governed by the articles and the code
    6. 2030.06The statement of management
    7. 2030.07Degrees of algorithmic management
    8. 2030.08The state of the register
    9. 2030.09Statements of authority
  5. ¶ 2040Wyoming: Smart Contracts, Upgrades and the Duty to Amend
    1. 2040.01Upgradeability is mandatory
    2. 2040.02Why the legislature required it
    3. 2040.03Immutable contracts
    4. 2040.04The four amendment events
    5. 2040.05Every change to the code requires an amendment
    6. 2040.06The identifier does not avoid the amendment
    7. 2040.07False or erroneous statements
    8. 2040.08Preemption between code, articles and operating agreement
    9. 2040.09Consequences of the preemption rule
  6. ¶ 2050Wyoming: Members, Duties, Information and Withdrawal
    1. 2050.01Who is a member
    2. 2050.02Consequences of the membership default
    3. 2050.03Voting power
    4. 2050.04No fiduciary duties by default
    5. 2050.05Duties of persons who act for the company
    6. 2050.06Information
    7. 2050.07Withdrawal
    8. 2050.08Ceasing to be a member by transfer
    9. 2050.09Liability shield
  7. ¶ 2060Wyoming: Dissolution, Natural-Person Control, Foreign DAOs and the DUNA
    1. 2060.01The six dissolution events
    2. 2060.02After the event
    3. 2060.03Dissolution by vote
    4. 2060.04The one-year inactivity rule
    5. 2060.05Natural-person control
    6. 2060.06Designing for natural-person control
    7. 2060.07Lawful purpose
    8. 2060.08Foreign DAOs
    9. 2060.09The decentralized unincorporated nonprofit association
    10. 2060.10DAO LLC or DUNA
  8. ¶ 2070The Marshall Islands DAO Act
    1. 2070.01Enactment and sources
    2. 2070.02A resident domestic LLC
    3. 2070.03Formation
    4. 2070.04For-profit and non-profit DAO LLCs
    5. 2070.05The securities provisions
    6. 2070.06Tax
    7. 2070.07Management
    8. 2070.08Amendment
    9. 2070.09Preemption reversed
    10. 2070.10Records, signatures and information
    11. 2070.11Beneficial ownership
    12. 2070.12Withdrawal and dissolution
    13. 2070.13Permitted business
  9. ¶ 2080Utah, Vermont and Tennessee; Choosing a Wrapper; Tax and Banking
    1. 2080.01Utah: enactment and renumbering
    2. 2080.02Utah: formation requirements
    3. 2080.03Utah: members and liability
    4. 2080.04Utah: representation, forks and failure
    5. 2080.05Vermont
    6. 2080.06Tennessee
    7. 2080.07Choosing a wrapper
    8. 2080.08United States tax classification
    9. 2080.09Banking and custody
  10. ¶ 2090Drafting: Model Statement of Management and Checklist
    1. 2090.01The documents
    2. 2090.02Drafting the statement of management
    3. 2090.03Drafting the upgrade procedure
    4. 2090.04Model statement of management
    5. 2090.05Marshall Islands drafting points
    6. 2090.06Checklist

Part VI: Estates and Succession

Chapter 21Estate Planning for Digital Assets

  1. ¶ 2101Overview
    1. 2101.01Scope of the chapter
    2. 2101.02Why digital assets need separate planning
    3. 2101.03The two failure modes
    4. 2101.04The legal framework
    5. 2101.05Property status and the plan
    6. 2101.06Organization
  2. ¶ 2110The Inventory: What to Record and What Never to Record
    1. 2110.01The purpose of the inventory
    2. 2110.02What the inventory should record
    3. 2110.03What the inventory should never record
    4. 2110.04Public addresses
    5. 2110.05The location description
    6. 2110.06Keeping the inventory current
    7. 2110.07Holdings the owner has forgotten
  3. ¶ 2120Instructions and Secrets: Letters, Memoranda and Probate Publicity
    1. 2120.01Three kinds of document
    2. 2120.02Probate publicity
    3. 2120.03Incorporation by reference
    4. 2120.04The separate writing for tangible property
    5. 2120.05Facts of independent significance
    6. 2120.06The letter of instruction
    7. 2120.07Case discussion
    8. 2120.08The record of secrets
  4. ¶ 2130Wills: Specific Bequests, Ademption, Forks and Abatement
    1. 2130.01The choice of gift
    2. 2130.02Volatility and the form of the gift
    3. 2130.03Ademption by extinction
    4. 2130.04Changes in the form of the asset
    5. 2130.05Drafting the specific bequest
    6. 2130.06Abatement
    7. 2130.07Distribution in kind and the valuation date
  5. ¶ 2140The Personal Representative's Powers and Duties
    1. 2140.01The duty to take control
    2. 2140.02Retention pending distribution
    3. 2140.03Marshaling assets the decedent did not disclose
    4. 2140.04Case discussion
    5. 2140.05Powers to include in the will
  6. ¶ 2150Revocable Trusts and Nonprobate Transfers
    1. 2150.01Why the revocable trust suits digital assets
    2. 2150.02Funding
    3. 2150.03The pour-over will
    4. 2150.04Transfer-on-death registration
    5. 2150.05Application to digital-asset accounts
    6. 2150.06Creditors and nonprobate transfers
    7. 2150.07Joint ownership
  7. ¶ 2160Incapacity: Powers of Attorney, Guardianship and Conservatorship
    1. 2160.01The incapacity problem
    2. 2160.02The durable power of attorney
    3. 2160.03Powers that require separate enumeration
    4. 2160.04Springing powers and the proof of incapacity
    5. 2160.05Protecting the incapacitated owner
    6. 2160.06Guardianship and conservatorship
    7. 2160.07Sales by a guardian and the ward's estate plan
  8. ¶ 2170Spouses, Minors and Beneficiaries Under Disability
    1. 2170.01The spouse's rights
    2. 2170.02Community property brought into a common-law state
    3. 2170.03Gifts to minors
    4. 2170.04The custodian's duties
    5. 2170.05Trusts for minors and young adults
    6. 2170.06Beneficiaries with disabilities
    7. 2170.07Beneficiaries without technical capacity
  9. ¶ 2180Charitable Gifts and Cross-Border Estates
    1. 2180.01Lifetime charitable gifts of digital assets
    2. 2180.02The qualified appraisal requirement
    3. 2180.03The time of the gift
    4. 2180.04Donor-advised funds and charities' acceptance policies
    5. 2180.05Testamentary charitable gifts
    6. 2180.06Cross-border estates
    7. 2180.07Forced heirship
    8. 2180.08Estate taxes across borders
  10. ¶ 2190Review Cycle, Model Provisions and Checklist
    1. 2190.01The review cycle
    2. 2190.02Testing access
    3. 2190.03Model provisions
    4. 2190.04Comments on Section 1
    5. 2190.05Comments on Section 2
    6. 2190.06Comments on Section 3

Chapter 22Key Succession: Inheritance Mechanisms and Recovery Arrangements

  1. ¶ 2201Overview
    1. 2201.01Scope of the chapter
    2. 2201.02The problem stated
    3. 2201.03Two questions in every design
    4. 2201.04Organization
    5. 2201.05Relation to other chapters
    6. 2201.06Terms used
    7. 2201.07The neutral description of techniques
  2. ¶ 2210Title Without Control: The Succession Problem
    1. 2210.01Ownership and control separate at death
    2. 2210.02Three ways succession fails
    3. 2210.03The record of loss
    4. 2210.04Why the ordinary estate process does not close the gap
    5. 2210.05The trigger problem
    6. 2210.06A working comparison
  3. ¶ 2220Sealed Storage of the Recovery Phrase
    1. 2220.01The technique
    2. 2220.02Legal character
    3. 2220.03Safe-deposit boxes and the statutes on access at death
    4. 2220.04The formal opening and the inventory
    5. 2220.05Storage with an attorney or other professional
    6. 2220.06Separating the phrase from the instructions
    7. 2220.07Passphrases and two-part storage
    8. 2220.08Home storage
  4. ¶ 2230Split Secrets and Shared Control
    1. 2230.01Two ways to share
    2. 2230.02Split secrets in succession plans
    3. 2230.03Legal character of a share-holder
    4. 2230.04Shared control with an heir, a fiduciary or a professional
    5. 2230.05Control in the Article 12 sense
    6. 2230.06Collusion and coercion
    7. 2230.07The need for a dispositive instrument
  5. ¶ 2240Time Locks and Inactivity Triggers
    1. 2240.01Absolute and relative time locks
    2. 2240.02The succession use of a time lock
    3. 2240.03Off-ledger versions
    4. 2240.04Inactivity is evidence, and imperfect evidence, of death
    5. 2240.05Choosing the period
    6. 2240.06Legal character of an inactivity transfer
  6. ¶ 2250Recovery Guardians, Key-Holding Services and Custodial Transfer-on-Death
    1. 2250.01Recovery guardians
    2. 2250.02Guardians at death
    3. 2250.03Legal character of a guardian
    4. 2250.04Key-holding and recovery services
    5. 2250.05The service's terms as the governing instrument
    6. 2250.06Custodial transfer-on-death designations
    7. 2250.07The transfer-on-death security registration statutes
    8. 2250.08What a custodial designation does not cover
  7. ¶ 2260Testamentary Formalities and Will Substitutes
    1. 2260.01Why the question matters
    2. 2260.02The test of testamentary character
    3. 2260.03The statutory answer for named instruments
    4. 2260.04Applying the statute to key succession
    5. 2260.05Outside the statute: the common-law position
    6. 2260.06The revocable trust as the secure route
    7. 2260.07Electronic wills and the harmless-error rule
  8. ¶ 2270Spouses, Creditors, Capacity and Incapacity
    1. 2270.01Validity is not immunity
    2. 2270.02The elective share: the augmented estate
    3. 2270.03Applying the augmented estate to key-succession transfers
    4. 2270.04Florida's elective estate
    5. 2270.05Community property
    6. 2270.06Creditors and nonprobate transfers
    7. 2270.07Protection for key-holders who act in good faith
    8. 2270.08Capacity and undue influence
    9. 2270.09Incapacity
    10. 2270.10Recovery from incapacity
  9. ¶ 2280Fiduciary Access, Key-Holder Liability, Lost Keys and Tax
    1. 2280.01What the fiduciary-access statute does
    2. 2280.02Online tools and the hierarchy of directions
    3. 2280.03Self-custody and the fiduciary's authority
    4. 2280.04Liability of key-holders
    5. 2280.05Security risks compared
    6. 2280.06Estates in which keys are lost
    7. 2280.07Tax at death, in outline
  10. ¶ 2290Choosing a Design: Model Provisions and Checklist
    1. 2290.01Principles of choice
    2. 2290.02Matching the design to the owner
    3. 2290.03The key-holder succession agreement
    4. 2290.04Notes on the key-holder provision
    5. 2290.05The recovery-guardian appointment
    6. 2290.06Coordinating the instruments
    7. 2290.07Checklist

Chapter 23Estate Administration, Valuation and Transfer Taxes

  1. ¶ 2301Overview
    1. 2301.01Scope of the chapter
    2. 2301.02Why digital assets change the administration
    3. 2301.03The personal representative's duties
    4. 2301.04The tax framework
    5. 2301.05Amounts for 2026
    6. 2301.06The absence of decided cases
    7. 2301.07Order of the chapter
  2. ¶ 2310Locating and Marshaling Digital Assets
    1. 2310.01The duty to find
    2. 2310.02Records and devices
    3. 2310.03Platform accounts
    4. 2310.04Information returns as evidence
    5. 2310.05The ledger
    6. 2310.06Concealed or withheld assets
    7. 2310.07Specialist assistance
  3. ¶ 2320Securing Assets on Appointment: Estate Wallets, Insurance and Bond
    1. 2320.01Control as the first act of administration
    2. 2320.02Authority before transfer
    3. 2320.03Designing the estate's custody
    4. 2320.04The transfer and its record
    5. 2320.05Transfers are not dispositions
    6. 2320.06Wrapped, bridged and staked positions
    7. 2320.07Insurance
    8. 2320.08Bond
  4. ¶ 2330The Duty to Sell or Hold Volatile Assets
    1. 2330.01The question
    2. 2330.02The statutory standard
    3. 2330.03The administration horizon
    4. 2330.04The decedent's own holding
    5. 2330.05A decision process
    6. 2330.06Consent and court instructions
    7. 2330.07Stablecoins and the estate's cash
  5. ¶ 2340Inventory, Appraisal and the Form of Administration
    1. 2340.01The inventory requirement
    2. 2340.02Describing digital assets with reasonable detail
    3. 2340.03Date-of-death value for the inventory
    4. 2340.04Appraisers
    5. 2340.05Supervised and unsupervised administration
    6. 2340.06Choosing the form for a digital-asset estate
    7. 2340.07Accountings
    8. 2340.08Community property
  6. ¶ 2350Federal Estate Tax: Fair Market Value and Evidence of Price
    1. 2350.01The standard
    2. 2350.02The unit of property
    3. 2350.03Time of death
    4. 2350.04Choosing the market
    5. 2350.05Where the markets diverge
    6. 2350.06Stablecoins
    7. 2350.07Nonfungible tokens
    8. 2350.08Tokens without a market
    9. 2350.09Reporting
  7. ¶ 2360Alternate Valuation, Discounts, Locked and Staked Tokens
    1. 2360.01Alternate valuation
    2. 2360.02Why the election matters for digital assets
    3. 2360.03Sales during the six months
    4. 2360.04Included and excluded property
    5. 2360.05Interests affected by lapse of time
    6. 2360.06Blockage
    7. 2360.07Restrictions and lockups
    8. 2360.08Staked and deposited tokens
    9. 2360.09Appraisals for estate tax purposes
  8. ¶ 2370Gift and GST Tax, Basis, Income in Respect of a Decedent and the Fiduciary Return
    1. 2370.01Lifetime gifts of tokens
    2. 2370.02Exclusions and exemptions
    3. 2370.03Basis of property acquired from a decedent
    4. 2370.04Basis consistency
    5. 2370.05Income in respect of a decedent
    6. 2370.06Staking rewards across the date of death
    7. 2370.07The estate's income tax return
    8. 2370.08Distributions in kind and the estate's gain
  9. ¶ 2380Lost Keys, Losses During Administration and State Death Taxes
    1. 2380.01Keys lost before death
    2. 2380.02Recovery after the return is filed
    3. 2380.03Losses during administration: the estate tax deduction
    4. 2380.04The same loss for income tax purposes
    5. 2380.05Declines in value and worthless tokens
    6. 2380.06Claims against failed platforms
    7. 2380.07State estate and inheritance taxes
    8. 2380.08The executor's personal exposure for tax
  10. ¶ 2390Closing the Estate, Distribution in Kind and Checklist
    1. 2390.01The default rule of distribution in kind
    2. 2390.02Valuation at distribution
    3. 2390.03Proposals for distribution
    4. 2390.04Mechanics of transfer
    5. 2390.05Closing
    6. 2390.06After closing
    7. 2390.07Checklist

Part VII: Creditors, Enforcement and Recovery

Chapter 24Creditor Remedies against Digital Assets

  1. ¶ 2401Overview
    1. 2401.01Scope of the chapter
    2. 2401.02The enforcement problem
    3. 2401.03Characterization comes first
    4. 2401.04The sources of law
    5. 2401.05Relation to other chapters
    6. 2401.06Plan of the chapter
  2. ¶ 2410Finding the Assets: Post-Judgment Discovery and Tracing Evidence
    1. 2410.01The right to discovery
    2. 2410.02Questions directed to the debtor
    3. 2410.03Subpoenas to platforms
    4. 2410.04Blockchain analysis as evidence
    5. 2410.05The weight of tracing evidence
    6. 2410.06Proof of control by signed message
    7. 2410.07Third parties who hold keys
    8. 2410.08Foreign platforms and records
  3. ¶ 2420Execution and Levy on Intangibles
    1. 2420.01The writ of execution
    2. 2420.02What the officer can seize
    3. 2420.03The sweep
    4. 2420.04Restraining notices and liens
    5. 2420.05The interest the levy reaches
    6. 2420.06Article 12 and the purchaser at an execution sale
    7. 2420.07Valuation and sale
    8. 2420.08Where the levy fails
  4. ¶ 2430Exchanges and Custodians as Garnishees
    1. 2430.01The platform as garnishee
    2. 2430.02The characterization of the account matters
    3. 2430.03Exchange balances and the Internal Revenue Service
    4. 2430.04Reported decisions
    5. 2430.05Assets held outside the state
    6. 2430.06The platform's compliance practice
    7. 2430.07Stablecoin issuers and other third parties
    8. 2430.08The garnishee's protection
  5. ¶ 2440Turnover Orders against Self-Custodied Assets
    1. 2440.01The turnover order
    2. 2440.02New York
    3. 2440.03Texas
    4. 2440.04California and federal courts
    5. 2440.05The showing required
    6. 2440.06The form of the order
    7. 2440.07Assets held with others
    8. 2440.08Assets held through entities and trusts
    9. 2440.09Delivery in kind or conversion
  6. ¶ 2450Contempt, Impossibility and the Fifth Amendment
    1. 2450.01Civil contempt as the enforcement mechanism
    2. 2450.02Inability to comply
    3. 2450.03The lost-key defense
    4. 2450.04Self-created impossibility
    5. 2450.05Affordable Media
    6. 2450.06The Fifth Amendment in civil enforcement
    7. 2450.07Act of production and the foregone conclusion
    8. 2450.08Compelled decryption cases
    9. 2450.09Applying the cases to turnover of digital assets
    10. 2450.10Duration and release
  7. ¶ 2460Receivers over Digital Assets
    1. 2460.01Why a receiver
    2. 2460.02Authority to appoint
    3. 2460.03Where is the property for § 754
    4. 2460.04Regulatory receiverships
    5. 2460.05The receiver's custody standard
    6. 2460.06Receivers over entities
    7. 2460.07Receivers and third parties
  8. ¶ 2470Prejudgment Remedies: Attachment and Freezing Orders
    1. 2470.01The need for speed
    2. 2470.02Attachment under state law
    3. 2470.03Due process
    4. 2470.04Equitable claims to specific property
    5. 2470.05The judgment creditor after judgment
    6. 2470.06Bond and damages for wrongful restraint
    7. 2470.07Interaction with platform freezes
  9. ¶ 2480Charging Orders, Exemptions, Family Support and Federal Tax Levies
    1. 2480.01Interests in entities
    2. 2480.02The charging order and its exclusivity
    3. 2480.03Pressure on the manager
    4. 2480.04Exemptions
    5. 2480.05Family support obligations
    6. 2480.06The federal tax lien
    7. 2480.07Administrative levy
    8. 2480.08The Service's practice for digital assets
    9. 2480.09Priority between the Service and private creditors
  10. ¶ 2490Sequencing and Checklist
    1. 2490.01Matching the remedy to the holding
    2. 2490.02A sequence for enforcement
    3. 2490.03Coordination with criminal and regulatory proceedings

Chapter 25Tracing, Freezing Orders and Cross-Border Recovery

  1. ¶ 2501Overview
    1. 2501.01Scope of the chapter
    2. 2501.02The relation to other chapters
    3. 2501.03Why recovery is possible at all
    4. 2501.04Why recovery is difficult
    5. 2501.05Plan of the chapter
    6. 2501.06Terminology
  2. ¶ 2510The Recovery Problem: Speed, Pseudonymity and the Last Hop
    1. 2510.01The typical patterns
    2. 2510.02The movement of assets after the wrong
    3. 2510.03The last hop
    4. 2510.04The exchange as the point of recovery
    5. 2510.05Time
    6. 2510.06Parallel tracks
  3. ¶ 2520Tracing as Evidence: Blockchain Analytics in Court
    1. 2520.01Two questions
    2. 2520.02What blockchain analytics does
    3. 2520.03The limits of the inference
    4. 2520.04Expert evidence in England
    5. 2520.05Expert evidence in the United States
    6. 2520.06The interlocutory standard
    7. 2520.07What the report should contain
  4. ¶ 2530Tracing as Law: Following, Tracing, Mixed Funds and Substitution
    1. 2530.01Following and tracing distinguished
    2. 2530.02The constructive trust over stolen or fraudulently obtained assets
    3. 2530.03Common-law and equitable tracing
    4. 2530.04Following a token
    5. 2530.05Rules for mixed funds
    6. 2530.06The choice among allocation methods
    7. 2530.07Substitution without chronological order
    8. 2530.08Swaps, bridges and mixers
    9. 2530.09Omnibus wallets at exchanges
  5. ¶ 2540Proprietary Injunctions, Freezing Orders and Final Relief in England
    1. 2540.01The two interim injunctions
    2. 2540.02AA v Persons Unknown: significance
    3. 2540.03AA v Persons Unknown: facts
    4. 2540.04AA v Persons Unknown: proceedings
    5. 2540.05AA v Persons Unknown: holding
    6. 2540.06AA v Persons Unknown: lessons
    7. 2540.07The worldwide freezing order
    8. 2540.08Full and frank disclosure and the position of exchanges
    9. 2540.09Final relief: summary judgment and delivery up
    10. 2540.10Delivery up in kind or value
  6. ¶ 2550Information Orders: Bankers Trust, Norwich Pharmacal and Gateway 25
    1. 2550.01Why information comes first
    2. 2550.02The Norwich Pharmacal jurisdiction
    3. 2550.03The Bankers Trust jurisdiction
    4. 2550.04The problem of foreign respondents before 2022
    5. 2550.05Gateway 25
    6. 2550.06LMN v Bitflyer Holdings Inc: significance
    7. 2550.07LMN v Bitflyer: facts
    8. 2550.08LMN v Bitflyer: proceedings
    9. 2550.09LMN v Bitflyer: holding
    10. 2550.10LMN v Bitflyer: lessons
  7. ¶ 2560Singapore, Hong Kong, the Offshore Courts and Service on Persons Unknown
    1. 2560.01The common-law pattern
    2. 2560.02Singapore
    3. 2560.03Hong Kong
    4. 2560.04The British Virgin Islands
    5. 2560.05The Cayman Islands
    6. 2560.06Service on persons unknown
    7. 2560.07Service by token
    8. 2560.08Persons unknown as defendants
  8. ¶ 2570United States Tools: Asset Freezes, Expedited Discovery, Alternative Service and Section 1782
    1. 2570.01The federal pattern
    2. 2570.02The Grupo Mexicano limit
    3. 2570.03Jacobo v. Doe: significance
    4. 2570.04Jacobo v. Doe: facts
    5. 2570.05Jacobo v. Doe: proceedings
    6. 2570.06Jacobo v. Doe: holding
    7. 2570.07Jacobo v. Doe: lessons
    8. 2570.08Alternative service by token
    9. 2570.09From freeze to final judgment
    10. 2570.10Expedited discovery from exchanges
    11. 2570.11Section 1782
  9. ¶ 2580Issuer Freezes, Forfeiture, Remission and Recognition of Foreign Orders
    1. 2580.01Issuer freezes
    2. 2580.02The GENIUS Act
    3. 2580.03The use of the GENIUS Act in recovery
    4. 2580.04Seizure and forfeiture by the state
    5. 2580.05Remission and restoration
    6. 2580.06The 2016 exchange hack: a case study
    7. 2580.07Recognition of foreign freezing orders
  10. ¶ 2590A Recovery Playbook and Checklist
    1. 2590.01The first forty-eight hours
    2. 2590.02Choosing the forum
    3. 2590.03The first application
    4. 2590.04After the information arrives
    5. 2590.05Ending the case
    6. 2590.06Costs and proportionality

Chapter 26Voidable Transfers and Asset Protection

  1. ¶ 2601Overview
    1. 2601.01Scope of the chapter
    2. 2601.02What is different about digital assets
    3. 2601.03The planner's starting point
    4. 2601.04Relation to other chapters and to the companion volume
    5. 2601.05Terms
  2. ¶ 2610The Uniform Voidable Transactions Act and Digital Assets
    1. 2610.01The statute
    2. 2610.02Asset
    3. 2610.03Transfer
    4. 2610.04When a transfer is made
    5. 2610.05Claim and creditor
    6. 2610.06Insiders
  3. ¶ 2620Actual Intent and the Badges of Fraud
    1. 2620.01The test
    2. 2620.02The badges
    3. 2620.03The badges applied to digital assets
    4. 2620.04Timing
    5. 2620.05Concealment, mixing and privacy tools
    6. 2620.06Retained control through keys
    7. 2620.07Statements in chats and forums
    8. 2620.08An illustration from the bankruptcy courts
  4. ¶ 2630Constructive Fraud, Value and Volatility
    1. 2630.01The grounds without intent
    2. 2630.02Reasonably equivalent value
    3. 2630.03Solvency with volatile assets
    4. 2630.04The unreasonably small assets and inability-to-pay tests
    5. 2630.05Measuring recovery when values change
  5. ¶ 2640Remedies, Transferees and Time Limits
    1. 2640.01The creditor's remedies
    2. 2640.02Provisional relief against tokens
    3. 2640.03The good-faith transferee
    4. 2640.04Judgment against transferees
    5. 2640.05Intermediaries and exchanges
    6. 2640.06Time limits
    7. 2640.07Governing law
    8. 2640.08Discovery and the public ledger
  6. ¶ 2650Bankruptcy
    1. 2650.01Why bankruptcy matters to planning
    2. 2650.02Section 548
    3. 2650.03Section 544(b)
    4. 2650.04Section 548(e): the ten-year rule for self-settled trusts
    5. 2650.05Recovery and discharge
    6. 2650.06Disclosure in the schedules
    7. 2650.07Case discussion
  7. ¶ 2660Domestic Asset Protection Trusts Holding Digital Assets
    1. 2660.01The statutes
    2. 2660.02Who holds the keys
    3. 2660.03The conflict-of-laws problem
    4. 2660.04Case discussion
    5. 2660.05Exclusive-jurisdiction provisions
    6. 2660.06Case discussion
    7. 2660.07Notice and discovery periods
  8. ¶ 2670Offshore Trusts
    1. 2670.01The approach
    2. 2670.02The Cook Islands
    3. 2670.03Nevis
    4. 2670.04Belize
    5. 2670.05Where the keys are
    6. 2670.06Duress and flight provisions
  9. ¶ 2680Keys, Contempt, Charging Orders and Exemptions
    1. 2680.01The court's reach over the person
    2. 2680.02Case discussion
    3. 2680.03Case discussion
    4. 2680.04Self-created impossibility and keys
    5. 2680.05The Fifth Amendment and coercive confinement
    6. 2680.06The design that answers both risks
    7. 2680.07Limited liability companies and the charging order
    8. 2680.08Exemptions
  10. ¶ 2690Criminal Exposure, Planning Sequence and Checklist
    1. 2690.01Criminal statutes
    2. 2690.02Civil exposure of others
    3. 2690.03Planning sequence
    4. 2690.04A model funding statement
    5. 2690.05Checklist

Part VIII: Insolvency

Chapter 27Digital Assets in Bankruptcy: Property of the Estate and Customer Claims

  1. ¶ 2701Overview
    1. 2701.01Scope of the chapter
    2. 2701.02Relationship to other chapters
    3. 2701.03The two questions that decide most cases
    4. 2701.04What is distinctive about digital assets
    5. 2701.05The individual debtor
    6. 2701.06Terminology
    7. 2701.07Organization
  2. ¶ 2710Property of the Estate: Section 541 and the State-Law Baseline
    1. 2710.01The statutory text
    2. 2710.02Bare legal title
    3. 2710.03State law decides the interest
    4. 2710.04Case discussion
    5. 2710.05Hosted and self-custodied assets of the debtor
    6. 2710.06Keys, records and control
    7. 2710.07Property held by the debtor for others
    8. 2710.08The burden of identification
    9. 2710.09Comment on the federal interest
  3. ¶ 2720Customer Assets Held by a Failed Platform
    1. 2720.01The program-by-program method
    2. 2720.02Yield accounts: title transferred
    3. 2720.03Collateral: title transferred
    4. 2720.04Case discussion
    5. 2720.05Custody accounts: title retained
    6. 2720.06Omnibus wallets and commingling
    7. 2720.07Fiat held in bank accounts for customers
    8. 2720.08Rehypothecation rights
    9. 2720.09Shortfalls among excluded assets
    10. 2720.10Settlement of ownership disputes in the plan
  4. ¶ 2730Statutory Protections: Article 8, Custody Statutes and the GENIUS Act
    1. 2730.01Why statutes matter
    2. 2730.02Article 8: the entitlement holder's pro rata property interest
    3. 2730.03The Article 8 route for tokens
    4. 2730.04The secured creditor with control
    5. 2730.05Article 12 does not protect customers in the custodian's insolvency
    6. 2730.06State custody statutes
    7. 2730.07The GENIUS Act: holders of payment stablecoins
    8. 2730.08The Code amendments
    9. 2730.09Who may be a debtor
    10. 2730.10Custodians of reserves and stablecoins
    11. 2730.11Effective date
    12. 2730.12Stablecoins are not SIPA securities
  5. ¶ 2740Stockbroker, Commodity Broker and SIPA Status
    1. 2740.01Why status matters
    2. 2740.02The stockbroker definition
    3. 2740.03The Code's definition of security and tokens
    4. 2740.04Application to platforms
    5. 2740.05The commodity broker definition
    6. 2740.06SIPA
    7. 2740.07The CFTC and SEC frameworks under consideration
  6. ¶ 2750The Automatic Stay, Freezes, Setoff and Executory Contracts
    1. 2750.01The stay at filing
    2. 2750.02The prepetition pause
    3. 2750.03Case discussion
    4. 2750.04Recovering non-estate assets
    5. 2750.05Freezes by an exchange holding a debtor's assets
    6. 2750.06Case discussion
    7. 2750.07Setoff of mutual debts
    8. 2750.08Safe harbors for financial contracts
    9. 2750.09Stablecoin redemptions
    10. 2750.10Executory contracts
  7. ¶ 2760Customer Claims: Proofs of Claim, Allowance, Classification and Trading
    1. 2760.01Scheduled claims
    2. 2760.02Bar dates
    3. 2760.03What the claim is for
    4. 2760.04Program and entity
    5. 2760.05Case discussion
    6. 2760.06Classification
    7. 2760.07Compliance holds on distributions
    8. 2760.08Case discussion
    9. 2760.09Claims trading
    10. 2760.10Computation disputes
  8. ¶ 2770The Individual Debtor Who Holds Digital Assets
    1. 2770.01The disclosure problem
    2. 2770.02Schedules
    3. 2770.03Cooperation and surrender
    4. 2770.04Turnover
    5. 2770.05The grounds for denial of discharge
    6. 2770.06Case discussion
    7. 2770.07A contrasting result
    8. 2770.08Exemptions
    9. 2770.09Chapter 13
    10. 2770.10Tax reporting as evidence
  9. ¶ 2780Cross-Border Cases and Reform Proposals
    1. 2780.01Platforms abroad, assets in the United States
    2. 2780.02Recognition
    3. 2780.03The territorial limit and tokens
    4. 2780.04Case discussion
    5. 2780.05Parallel proceedings
    6. 2780.06Reform: the GENIUS Act
    7. 2780.07Reform: the House-passed market-structure bill
    8. 2780.08Effect of the proposal
  10. ¶ 2790Practice Checklist
    1. 2790.01Use of the checklist
    2. 2790.02Part A: the customer
    3. 2790.03Part B: the platform
    4. 2790.04Part C: the individual debtor

Chapter 28Exchange and Lender Failures: Celsius, FTX and Their Predecessors

  1. ¶ 2801Overview
    1. 2801.01Scope of the chapter
    2. 2801.02Sources
    3. 2801.03Three generations of failure
    4. 2801.04The recurring question
    5. 2801.05The second recurring question
    6. 2801.06Plan of the chapter
  2. ¶ 2810The Early Failures: Mt. Gox, QuadrigaCX and Cryptopia
    1. 2810.01Common features
    2. 2810.02Case discussion: Mt. Gox (Tokyo District Court, bankruptcy 2014, civil rehabilitation from 2018)
    3. 2810.03Case discussion: QuadrigaCX (Ontario Securities Commission staff review, 2020)
    4. 2810.04Cryptopia
  3. ¶ 2820The 2022 Contagion: Three Arrows Capital and Voyager
    1. 2820.01The chain of exposure
    2. 2820.02Three Arrows Capital: the liquidation
    3. 2820.03Three Arrows Capital: recognition abroad
    4. 2820.04Three Arrows Capital: claims and distributions
    5. 2820.05Voyager: the business and the filing
    6. 2820.06Case discussion: In re Voyager Digital Holdings, Inc., No. 22-10943 (MEW) (Bankr. S.D.N.Y. 2022–2023) (Wiles, J.)
  4. ¶ 2830Celsius
    1. 2830.01Why Celsius matters
    2. 2830.02The business and the pause
    3. 2830.03Case discussion: In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023) (Earn)
    4. 2830.04Custody and Withhold
    5. 2830.05Which entity owed customers
    6. 2830.06The CEL token and retail borrower collateral
    7. 2830.07Confirmation and the change of path
    8. 2830.08Distributions
    9. 2830.09Recoveries from customers who withdrew
    10. 2830.10The criminal case
  5. ¶ 2840BlockFi, Genesis and Gemini Earn
    1. 2840.01BlockFi: the filing
    2. 2840.02BlockFi: wallet and interest accounts
    3. 2840.03BlockFi: borrower claims
    4. 2840.04BlockFi: the plan
    5. 2840.05Genesis and Gemini Earn: the business
    6. 2840.06Genesis: the losses and the pause
    7. 2840.07Gemini's collateral
    8. 2840.08Case discussion: In re Genesis Global Holdco, LLC, No. 23-10063 (SHL) (Bankr. S.D.N.Y. May 17, 2024) (Lane, C.J.)
  6. ¶ 2850FTX: Collapse, Control Failures and the Bahamas
    1. 2850.01The group and the collapse
    2. 2850.02The first days
    3. 2850.03The control failures
    4. 2850.04Key management
    5. 2850.05The Bahamian liquidation
    6. 2850.06The global settlement with the Bahamian liquidators
    7. 2850.07The customer-property question
  7. ¶ 2860FTX: The Plan, Distributions and the Criminal Case
    1. 2860.01The path to a plan
    2. 2860.02Case discussion: In re FTX Trading Ltd., No. 22-11068 (JTD), Findings of Fact, Conclusions of Law and Order Confirming the Second Amended Joint Chapter 11 Plan, ECF No. 26404 (Bankr. D. Del. Oct. 8, 2024)
    3. 2860.03Effective date and distributions
    4. 2860.04Customers outside the distribution system
    5. 2860.05The criminal case
  8. ¶ 2870Prime Core and Later Failures
    1. 2870.01A chartered custodian fails
    2. 2870.02Case discussion: In re Prime Core Technologies Inc., No. 23-11161 (JKS), Opinion (Bankr. D. Del. July 18, 2025)
    3. 2870.03Cross-border restructuring by scheme: the 2024 exchange hack
    4. 2870.04What changed after 2022
  9. ¶ 2880The Failures Compared
    1. 2880.01The comparison
    2. 2880.02Ownership follows the documents and the records
    3. 2880.03Measurement decides who receives post-petition appreciation
    4. 2880.04Forum and recognition
    5. 2880.05The mechanics of distribution
  10. ¶ 2890Lessons for Counsel and Checklist
    1. 2890.01For counsel drafting custody terms
    2. 2890.02For lenders to platforms and funds
    3. 2890.03For fiduciaries
    4. 2890.04For customers after a failure
    5. 2890.05Checklist
    6. 2890.06Cross-references

Chapter 29Valuation Dates, Distributions in Kind and Avoidance Actions

  1. ¶ 2901Overview
    1. 2901.01Scope of the chapter
    2. 2901.02Why these questions arise together
    3. 2901.03The statutory anchor
    4. 2901.04Recovery of avoided transfers
    5. 2901.05Distribution in kind
    6. 2901.06Plan of the chapter
  2. ¶ 2910Section 502(b) and the Petition-Date Rule
    1. 2910.01The text
    2. 2910.02What a token claim is
    3. 2910.03Conversion of a claim for tokens
    4. 2910.04The rule before the Code
    5. 2910.05Contingent and unliquidated claims
    6. 2910.06Stablecoins
    7. 2910.07The objection requirement
    8. 2910.08Interest after the petition
  3. ¶ 2920The FTX Estimation Ruling and the Celsius Conversion Rules
    1. 2920.01Two cases, one rule
    2. 2920.02The FTX estimation motion
    3. 2920.03Scope of the FTX ruling
    4. 2920.04The confirmation order
    5. 2920.05The Celsius rule
    6. 2920.06Withdrawal preference exposure valued at transfer
    7. 2920.07The pricing date for distributions
  4. ¶ 2930Appreciation after the Petition, Swaps and Repurchase Agreements, and Judgment-Currency Analogies
    1. 2930.01The appreciation argument
    2. 2930.02Claims to an equitable remedy
    3. 2930.03Solvent estates
    4. 2930.04Swaps, repurchase agreements and securities contracts
    5. 2930.05Judgment-currency cases as analogy
    6. 2930.06What the analogy shows
  5. ¶ 2940Comparative Treatment: Japan, England and Wales, Hong Kong and New Zealand
    1. 2940.01Why comparison matters
    2. 2940.02Japan: Mt. Gox
    3. 2940.03England and Wales: debts in foreign currency
    4. 2940.04Tokens under the English rules
    5. 2940.05British Virgin Islands: conversion by sanction
    6. 2940.06Hong Kong: Gatecoin
    7. 2940.07New Zealand: Cryptopia
  6. ¶ 2950Distributions in Kind: Plan Provisions and Mechanics
    1. 2950.01Authority
    2. 2950.02Why plans differ
    3. 2950.03The FTX plan: cash
    4. 2950.04The Celsius plan: cryptocurrency through distribution agents
    5. 2950.05The corporate-creditor dispute
    6. 2950.06Withholding and reporting
    7. 2950.07Mt. Gox and Gatecoin compared
  7. ¶ 2960Preferences against Customers
    1. 2960.01The problem
    2. 2960.02Was the withdrawal a transfer of the debtor's property?
    3. 2960.03Antecedent debt, insolvency and the chapter 7 comparison
    4. 2960.04The defenses of § 547(c)
    5. 2960.05The Celsius settlement program
    6. 2960.06Recovery under § 550: the damages opinion
    7. 2960.07The FTX customer preference settlement
  8. ¶ 2970The Section 546(e) Safe Harbor and Crypto Platforms
    1. 2970.01The text
    2. 2970.02Two requirements
    3. 2970.03Qualifying participants
    4. 2970.04Qualifying transactions
    5. 2970.05The decisions so far
    6. 2970.06Related safe harbors
  9. ¶ 2980Fraudulent Transfers, Insiders, Investees, Donees and Litigation Trusts
    1. 2980.01The statutory tools
    2. 2980.02Targets in a crypto failure
    3. 2980.03Actual intent
    4. 2980.04Constructive fraud: insolvency and value
    5. 2980.05Transferee status
    6. 2980.06Insiders
    7. 2980.07Counterparties and other estates
    8. 2980.08Donees
    9. 2980.09Litigation trusts and post-confirmation standing
  10. ¶ 2990Checklist for Creditors and Counsel
    1. 2990.01Using the checklist
    2. 2990.02Records
    3. 2990.03Conclusion

Part IX: Tax and Information Reporting

Chapter 30Federal Income Taxation of Digital Assets

  1. ¶ 3001Overview
    1. 3001.01Scope of the chapter
    2. 3001.02The governing rule
    3. 3001.03The sources of authority
    4. 3001.04What the guidance does not decide
    5. 3001.05Terminology
    6. 3001.06The law stated
  2. ¶ 3010Property Treatment and the Sources of Guidance
    1. 3010.01Notice 2014-21
    2. 3010.02Notice 2023-34
    3. 3010.03Fair market value
    4. 3010.04Realization events
    5. 3010.05Events that are not realizations
    6. 3010.06Transaction costs
  3. ¶ 3020Character, Holding Period, Dealers and Traders
    1. 3020.01The capital asset definition
    2. 3020.02Holding period
    3. 3020.03Dealers
    4. 3020.04Traders
    5. 3020.05The collectibles rate
    6. 3020.06Self-employment and investment income
  4. ¶ 3030Basis and Lot Identification
    1. 3030.01Basis
    2. 3030.02The problem of fungible units
    3. 3030.03The statutory account-by-account rule
    4. 3030.04Units outside a broker's custody
    5. 3030.05Units in a broker's custody
    6. 3030.06A choice of units is not a method of accounting
    7. 3030.07Relief for 2025
    8. 3030.08The transition safe harbor
  5. ¶ 3040Dispositions: Exchanges, Wash Sales, Lending, Stablecoins and NFTs
    1. 3040.01No like-kind exchanges
    2. 3040.02Wash sales
    3. 3040.03Lending
    4. 3040.04Collateral and liquidation
    5. 3040.05Stablecoins
    6. 3040.06Payments for goods and services
    7. 3040.07NFTs and the collectibles rate
  6. ¶ 3050Income from Mining, Staking, Forks and Airdrops
    1. 3050.01The unifying principle
    2. 3050.02Mining
    3. 3050.03Staking: Rev. Rul. 2023-14
    4. 3050.04Staking by funds and trusts
    5. 3050.05Hard forks: Rev. Rul. 2019-24
    6. 3050.06The 2017 bitcoin fork
    7. 3050.07Other airdrops
    8. 3050.08Slashing and lost rewards
  7. ¶ 3060Losses: Decline in Value, Worthlessness, Abandonment, Theft and Scams
    1. 3060.01The framework
    2. 3060.02Decline in value
    3. 3060.03Worthlessness
    4. 3060.04Abandonment
    5. 3060.05The practical answer: sell
    6. 3060.06Theft and scams
    7. 3060.07Hacks, lost keys and failed platforms
  8. ¶ 3070Compensation, Gifts, Charity, Entities, Trusts and Estates
    1. 3070.01Compensation
    2. 3070.02Restricted tokens and § 83
    3. 3070.03Gifts
    4. 3070.04Charitable contributions
    5. 3070.05Partnerships and LLCs
    6. 3070.06Corporations
    7. 3070.07Grantor trusts and exchange-traded products
    8. 3070.08Private trusts and estates
  9. ¶ 3080Foreign Aspects, the Return Question and Enforcement
    1. 3080.01Foreign persons
    2. 3080.02No foreign currency treatment
    3. 3080.03Foreign entities and funds
    4. 3080.04The return question
    5. 3080.05Information returns
    6. 3080.06The John Doe summons
    7. 3080.07Penalties and disclosure
  10. ¶ 3090Planning and Checklist
    1. 3090.01Records come first
    2. 3090.02Identification strategy
    3. 3090.03Loss harvesting
    4. 3090.04Staking and airdrops
    5. 3090.05Gifts, charity and death
    6. 3090.06Entities and trusts
    7. 3090.07Correcting past years

Chapter 31Broker Reporting: Section 6045 and Form 1099-DA

  1. ¶ 3101Overview
    1. 3101.01Scope of the chapter
    2. 3101.02Why reporting matters
    3. 3101.03The three layers of the regime
    4. 3101.04The timetable
    5. 3101.05Who is affected
    6. 3101.06Terminology
    7. 3101.07Organization
  2. ¶ 3110The 2021 Statute
    1. 3110.01Section 6045 before 2021
    2. 3110.02The 2021 amendments
    3. 3110.03Effective date and the rule of construction
    4. 3110.04The applicable date and the regulations
    5. 3110.05Section 6045A
    6. 3110.06Section 6050I
    7. 3110.07What the statute leaves to regulation
  3. ¶ 3120Who Is a Broker
    1. 3120.01The general definition
    2. 3120.02"Effect."
    3. 3120.03Persons who are brokers
    4. 3120.04Persons who are not brokers
    5. 3120.05The digital asset middleman
    6. 3120.06U.S. and foreign brokers
  4. ¶ 3130What Is Reported and When
    1. 3130.01Reportable sales
    2. 3130.02Required information
    3. 3130.03Gross proceeds
    4. 3130.04Basis reporting and covered securities
    5. 3130.05Acquisition information and lot relief
    6. 3130.06Filing and furnishing dates
  5. ¶ 3140Stablecoins, Nonfungible Tokens, Payment Processors and Real Estate
    1. 3140.01Why special rules
    2. 3140.02Qualifying stablecoins
    3. 3140.03The optional method for stablecoins
    4. 3140.04Specified nonfungible tokens
    5. 3140.05Processors of digital asset payments
    6. 3140.06Real estate
  6. ¶ 3150The Decentralized-Finance Broker Rule and Its Nullification
    1. 3150.01The gap T.D. 10000 left
    2. 3150.02T.D. 10021
    3. 3150.03The objection
    4. 3150.04The Congressional Review Act resolution
    5. 3150.05Effect on future rulemaking
    6. 3150.06What remains reportable
  7. ¶ 3160Transition Relief
    1. 3160.01The role of the notices
    2. 3160.02Notice 2024-56: penalty relief for 2025
    3. 3160.03Backup withholding postponed
    4. 3160.04Relief for 2027
    5. 3160.05Notice 2024-57: transactions not yet reportable
    6. 3160.06Revenue Procedure 2024-28: allocating basis to wallets
    7. 3160.07Notice 2025-7: identifying units at a broker in 2025
  8. ¶ 3170Form 1099-DA, Transfer Statements, Backup Withholding and Foreign Customers
    1. 3170.01The form
    2. 3170.02Reading box 9
    3. 3170.03Gross or net proceeds
    4. 3170.04Electronic furnishing
    5. 3170.05Transfer statements under section 6045A(a)
    6. 3170.06Returns under section 6045A(d)
    7. 3170.07Backup withholding
    8. 3170.08Documentation of customers
    9. 3170.09Preexisting foreign accounts
  9. ¶ 3180Section 6050I, Penalties, International and State Reporting
    1. 3180.01Section 6050I and digital assets
    2. 3180.02The Service's deferral
    3. 3180.03The underlying obligation remains
    4. 3180.04Penalties for failure to file
    5. 3180.05Waiver and relief
    6. 3180.06The Crypto-Asset Reporting Framework
    7. 3180.07State reporting
  10. ¶ 3190Consequences for Taxpayers and Checklists
    1. 3190.01The taxpayer's position
    2. 3190.02Sources of difference
    3. 3190.03Wallet-by-wallet basis
    4. 3190.04Lots split across forms
    5. 3190.05Fiduciaries and entities
    6. 3190.06Correcting a broker's form

Chapter 32International Reporting: CARF, DAC8, FATCA, FBAR and Form 8938

  1. ¶ 3201Overview
    1. 3201.01Scope of the chapter
    2. 3201.02Relation to other chapters
    3. 3201.03Why the subject matters
    4. 3201.04Three questions
    5. 3201.05The self-custody gap
    6. 3201.06Terminology
    7. 3201.07Status of the law
  2. ¶ 3210The Architecture of Cross-Border Reporting
    1. 3210.01Two models
    2. 3210.02The automatic exchange standard
    3. 3210.03Why the CRS left a gap
    4. 3210.04Transaction reporting and balance reporting
    5. 3210.05The United States position
    6. 3210.06Reciprocity
    7. 3210.07Table
    8. 3210.08The direction of travel
  3. ¶ 3220CARF: Scope, Service Providers and Nexus
    1. 3220.01The instrument
    2. 3220.02Crypto-Asset
    3. 3220.03Relevant Crypto-Asset
    4. 3220.04Reporting Crypto-Asset Service Provider
    5. 3220.05RCASPs and VASPs
    6. 3220.06Decentralized platforms
    7. 3220.07Nexus
    8. 3220.08Nexus without tax residence
    9. 3220.09Who is the Crypto-Asset User
  4. ¶ 3230CARF: Due Diligence, Reporting and Exchange
    1. 3230.01Self-certification at the center
    2. 3230.02Preexisting and new users
    3. 3230.03Reliance on CRS and FATCA documentation
    4. 3230.04Entity users and controlling persons
    5. 3230.05What is reported about the user
    6. 3230.06What is reported about transactions
    7. 3230.07Transfers to unhosted wallets
    8. 3230.08Valuation and currency
    9. 3230.09Reporting period and exchange
    10. 3230.10The commitment list
    11. 3230.11Jurisdictions not on the list
  5. ¶ 3240The Amended CRS, DAC8 and the UK Regulations
    1. 3240.01Why the CRS was amended
    2. 3240.02E-money and central bank digital currencies
    3. 3240.03Stablecoins and e-money tokens
    4. 3240.04Indirect exposure
    5. 3240.05DAC8: adoption and timing
    6. 3240.06DAC8 and MiCA
    7. 3240.07Transposition
    8. 3240.08The United Kingdom regulations
    9. 3240.09Crown dependencies and overseas territories
  6. ¶ 3250FATCA and Digital Assets
    1. 3250.01The structure of chapter 4
    2. 3250.02Foreign financial institution
    3. 3250.03Custodial account and financial asset
    4. 3250.04Applying the definitions to tokens
    5. 3250.05Investment entities that trade tokens
    6. 3250.06Practical position of a United States customer
    7. 3250.07Tokenized deposits and e-money
  7. ¶ 3260The FBAR and Bittner
    1. 3260.01The statute and the rule
    2. 3260.02Reportable accounts
    3. 3260.03FinCEN Notice 2020-2
    4. 3260.04Unhosted wallets
    5. 3260.05Mixed accounts
    6. 3260.06Threshold, timing and records
    7. 3260.07The penalty structure
    8. 3260.08Case discussion
    9. 3260.09Signature authority and fiduciaries
  8. ¶ 3270Form 8938 and Other Information Returns
    1. 3270.01Section 6038D
    2. 3270.02Specified foreign financial asset
    3. 3270.03Tokens on a foreign platform
    4. 3270.04Thresholds
    5. 3270.05Self-custodied tokens
    6. 3270.06Form 8938 penalties
    7. 3270.07Foreign trusts and foreign gifts
    8. 3270.08Foreign entities
    9. 3270.09The Form 1040 question
  9. ¶ 3280Penalties and Voluntary Disclosure
    1. 3280.01Layers of exposure
    2. 3280.02The limitations period stays open
    3. 3280.03Willfulness
    4. 3280.04Resolution paths
    5. 3280.05The voluntary disclosure practice
    6. 3280.06The proposed revision
    7. 3280.07Timing against the exchange calendar
    8. 3280.08Penalties on the reporting side
  10. ¶ 3290Compliance Mapping and Checklist
    1. 3290.01The map
    2. 3290.02Consistency across regimes
    3. 3290.03Trusts and entities
    4. 3290.04Records
    5. 3290.05Checklist
    6. 3290.06Conclusion

Part X: Anti-Money Laundering, Sanctions and the Travel Rule

Chapter 33AML Obligations of Virtual Asset Service Providers

  1. ¶ 3301Overview
    1. 3301.01Scope of the chapter
    2. 3301.02Why the subject matters to private practitioners
    3. 3301.03The organizing distinction
    4. 3301.04The record of enforcement
    5. 3301.05Plan of the chapter
  2. ¶ 3310The Bank Secrecy Act Framework: Money Services Businesses and Money Transmitters
    1. 3310.01The statute and its regulations
    2. 3310.02The definition of a money services business
    3. 3310.03The definition of a money transmitter
    4. 3310.04Facts and circumstances, and the limitations
    5. 3310.05The 2013 guidance
    6. 3310.06Administrative rulings, 2014–2015
    7. 3310.07The obligations that follow from status
    8. 3310.08Registration in detail
    9. 3310.09Civil and criminal penalties
  3. ¶ 3320FinCEN's 2019 Guidance Applied to Business Models
    1. 3320.01Status and purpose of the guidance
    2. 3320.02The four criteria for intermediaries
    3. 3320.03Hosted wallets
    4. 3320.04Unhosted wallets
    5. 3320.05Multiple-signature wallets
    6. 3320.06Peer-to-peer exchangers and kiosks
    7. 3320.07Decentralized applications and developers
    8. 3320.08Mixers and anonymizing software
    9. 3320.09Anonymity-enhanced currencies
    10. 3320.10Trading platforms and exchanges
    11. 3320.11Miners, validators and payment processors
  4. ¶ 3330Program, Reporting and Recordkeeping Obligations in Practice
    1. 3330.01A risk-based regime
    2. 3330.02The program rule
    3. 3330.03Customer identification and due diligence
    4. 3330.04Transaction monitoring and blockchain analytics
    5. 3330.05Suspicious activity reports
    6. 3330.06Confidentiality and retention
    7. 3330.07Currency transaction reports
    8. 3330.08Recordkeeping
    9. 3330.09Agents, affiliates and foreign-located businesses
  5. ¶ 3340Unhosted Wallets, Mixing and Section 311: Proposals and Withdrawals
    1. 3340.01Two proposals and their fate
    2. 3340.02The unhosted-wallet proposal
    3. 3340.03Withdrawal of the unhosted-wallet proposal
    4. 3340.04Section 311 and its special measures
    5. 3340.05The mixing proposal
    6. 3340.06Withdrawal of the mixing proposal
    7. 3340.07Actions against particular foreign exchanges
    8. 3340.08Payment-stablecoin issuers
  6. ¶ 3350Section 1960 and the Developer Prosecutions
    1. 3350.01The statute
    2. 3350.02The three prongs
    3. 3350.03Digital assets as "funds."
    4. 3350.04The mixer cases before 2023
    5. 3350.05Case discussion
    6. 3350.06The Samourai Wallet prosecution
    7. 3350.07The Department of Justice position after 2025
  7. ¶ 3360Enforcement against Exchanges: BitMEX and Binance
    1. 3360.01Common features
    2. 3360.02Case discussion
    3. 3360.03Case discussion
    4. 3360.04Monitorships after a pardon
  8. ¶ 3370Offshore Exchange Pleas, the 2025 Policy Change and the Enforcement Record Compared
    1. 3370.01KuCoin
    2. 3370.02OKX
    3. 3370.03The memorandum of April 7, 2025
    4. 3370.04The charging directive
    5. 3370.05Effect of the memorandum
    6. 3370.06Pardons
  9. ¶ 3380State Licensing, International Standards, the EU Regime and De-Risking
    1. 3380.01State money transmission laws
    2. 3380.02The Financial Action Task Force standards
    3. 3380.03Implementation reports
    4. 3380.04The European Union
    5. 3380.05Other jurisdictions
    6. 3380.06Bank de-risking
  10. ¶ 3390Designing the Compliance Program
    1. 3390.01Start with status
    2. 3390.02The risk assessment
    3. 3390.03Governance
    4. 3390.04Customer due diligence and monitoring
    5. 3390.05Reporting, records and law enforcement
    6. 3390.06Training and independent review
    7. 3390.07Remediation and self-disclosure
    8. 3390.08Checklist

Chapter 34The Travel Rule and Sanctions Compliance

  1. ¶ 3401Overview
    1. 3401.01Scope of the chapter
    2. 3401.02Why the two regimes are treated together
    3. 3401.03The difficulty peculiar to digital assets
    4. 3401.04The present state of the law
    5. 3401.05Organization
    6. 3401.06Terminology
    7. 3401.07Who should read this chapter
  2. ¶ 3410The United States Funds Travel Rule Applied to Digital Assets
    1. 3410.01The two rules in § 1010.410
    2. 3410.02The information that must travel
    3. 3410.03Application to convertible virtual currency
    4. 3410.04Timing and the separate message
    5. 3410.05Pseudonyms and anonymity-enhanced assets
    6. 3410.06Who is covered
    7. 3410.07The threshold
    8. 3410.08The 2020 proposal to lower the threshold
    9. 3410.09Enforcement exposure
  3. ¶ 3420The FATF Standard, Counterparty Due Diligence and the Sunrise Problem
    1. 3420.01The FATF and its recommendations
    2. 3420.02Recommendation 15 and the extension to virtual assets
    3. 3420.03The June 2025 revision of Recommendation 16
    4. 3420.04The threshold under the FATF standard
    5. 3420.05Counterparty identification
    6. 3420.06Counterparty due diligence
    7. 3420.07The sunrise problem
    8. 3420.08Data protection
  4. ¶ 3430The European Union, the United Kingdom, Singapore and Hong Kong
    1. 3430.01The European Union: the recast Transfer of Funds Regulation
    2. 3430.02Content of the European rule
    3. 3430.03Self-hosted addresses under the European rule
    4. 3430.04The United Kingdom: Part 7A of the 2017 Regulations
    5. 3430.05The United Kingdom: information and threshold
    6. 3430.06The United Kingdom: missing information and intermediaries
    7. 3430.07The United Kingdom: unhosted wallets
    8. 3430.08Singapore and Hong Kong
  5. ¶ 3440Unhosted Wallets, Withdrawn U.S. Proposals and Messaging
    1. 3440.01The unhosted wallet under United States law
    2. 3440.02The 2020 unhosted-wallet proposal
    3. 3440.03Withdrawal of the unhosted-wallet proposal
    4. 3440.04The foreign approach compared
    5. 3440.05Proof of control of an unhosted wallet
    6. 3440.06Messaging arrangements
    7. 3440.07Choosing an arrangement
  6. ¶ 3450The Sanctions Framework: IEEPA, OFAC, Strict Liability, the 50 Percent Rule and Listed Addresses
    1. 3450.01Statutory basis
    2. 3450.02Two kinds of prohibition
    3. 3450.03Who must comply
    4. 3450.04Strict liability
    5. 3450.05Penalties and the Enforcement Guidelines
    6. 3450.06The 50 percent rule
    7. 3450.07Listed digital-currency addresses
    8. 3450.08Unlisted addresses linked to listed ones
    9. 3450.09How virtual currency is blocked
    10. 3450.10Licenses
  7. ¶ 3460Tornado Cash: Designation, Van Loon, Coin Center and Delisting
    1. 3460.01Why the Tornado Cash matter matters
    2. 3460.02The designations
    3. 3460.03Case discussion
    4. 3460.04Coin Center v. Yellen
    5. 3460.05The delisting
    6. 3460.06What remains open
  8. ¶ 3470Mixers and Exchanges Designated; Blocking and Reporting; Stablecoins; European and British Sanctions
    1. 3470.01Operated mixers
    2. 3470.02Exchanges serving sanctioned actors
    3. 3470.03Garantex and Grinex
    4. 3470.04Blocking obligations for tokens
    5. 3470.05Reporting blocked property
    6. 3470.06Recordkeeping
    7. 3470.07Blocking versus rejecting
    8. 3470.08Stablecoin issuers
    9. 3470.09The European Union
    10. 3470.10The United Kingdom
  9. ¶ 3480OFAC Enforcement against Digital-Asset Firms
    1. 3480.01The record
    2. 3480.02Case discussion
    3. 3480.03The geolocation cases: BitGo, BitPay, Kraken and ShapeShift
    4. 3480.04Non-custodial providers: BitGo and Exodus
    5. 3480.05Binance
  10. ¶ 3490A Combined Compliance Program and Checklist
    1. 3490.01The five components
    2. 3490.02Management commitment and timing
    3. 3490.03Risk assessment
    4. 3490.04Screening
    5. 3490.05Geolocation and the VPN problem
    6. 3490.06Blockchain analytics
    7. 3490.07Travel rule operations
    8. 3490.08Escalation and the block-or-reject decision
    9. 3490.09Testing, auditing and training
    10. 3490.10Fiduciaries and other holders

Part XI: The Regulatory Perimeter

Chapter 35Securities Regulation: Howey, Token Offerings and Trading Platforms

  1. ¶ 3501Overview
    1. 3501.01Scope of the chapter
    2. 3501.02Why the question matters
    3. 3501.03The structure of the analysis
    4. 3501.04Two eras of authority
    5. 3501.05The limits of the 2026 Interpretation
    6. 3501.06Terminology
    7. 3501.07Organization of the chapter
  2. ¶ 3510The Definition of Security and the Howey Test
    1. 3510.01The statutory definition
    2. 3510.02Enumerated instruments in token form
    3. 3510.03Howey: the facts
    4. 3510.04Howey: the holding
    5. 3510.05The elements
    6. 3510.06Investment of money
    7. 3510.07Common enterprise
    8. 3510.08Expectation of profits from the efforts of others
    9. 3510.09The scheme as the security
  3. ¶ 3520The DAO Report, Telegram and Kik
    1. 3520.01The DAO Report
    2. 3520.02The 2019 Framework and its replacement
    3. 3520.03The SAFT structure
    4. 3520.04Case discussion
    5. 3520.05Case discussion
  4. ¶ 3530LBRY, Consumptive Use and Fair Notice
    1. 3530.01A token sold without an ICO
    2. 3530.02Case discussion
    3. 3530.03Consumptive use after Forman
    4. 3530.04Fair notice and vagueness
    5. 3530.05Non-fungible tokens
  5. ¶ 3540Ripple and the Manner of Sale
    1. 3540.01Significance
    2. 3540.02Case discussion
    3. 3540.03The later course of the case
    4. 3540.04The reception of Ripple
    5. 3540.05The 2026 Interpretation and Ripple
  6. ¶ 3550Terraform, Coinbase and Binance: Secondary Markets and Ecosystems
    1. 3550.01The question after Ripple
    2. 3550.02Case discussion
    3. 3550.03Case discussion
    4. 3550.04Case discussion
  7. ¶ 3560The 2025–2026 Shift and the 2026 Interpretation
    1. 3560.01The Crypto Task Force
    2. 3560.02Staff statements
    3. 3560.03Project Crypto
    4. 3560.04The 2026 Interpretation: legal character
    5. 3560.05The five categories
    6. 3560.06Reconciling the categories with the cases
    7. 3560.07When a non-security asset becomes subject to an investment contract
    8. 3560.08Secondary trading and separation
    9. 3560.09Airdrops, wrapping, mining and staking
  8. ¶ 3570Offering Token Securities: Exemptions and Regulation Crypto Assets
    1. 3570.01Registration
    2. 3570.02Private placements under section 4(a)(2) and Regulation D
    3. 3570.03Offshore offerings under Regulation S
    4. 3570.04Regulation A and Regulation Crowdfunding
    5. 3570.05Integration
    6. 3570.06Regulation Crypto Assets: overview
    7. 3570.07The two exemptions
    8. 3570.08The investment contract safe harbor
    9. 3570.09Preemption
  9. ¶ 3580Trading Platforms and Secondary-Market Liability
    1. 3580.01The Exchange Act categories
    2. 3580.02The platform holdings in Coinbase and Binance
    3. 3580.03Platforms after the 2026 Interpretation
    4. 3580.04Tokenized securities venues
    5. 3580.05Section 12(a)(1)
    6. 3580.06Case discussion
    7. 3580.07Other private claims
    8. 3580.08State securities laws
  10. ¶ 3590Analysis Sequence, Drafting Points and Checklist
    1. 3590.01A sequence for analysis
    2. 3590.02Drafting points for issuers
    3. 3590.03Drafting points for investors and platforms
    4. 3590.04Fiduciaries and holders
    5. 3590.05Conclusion

Chapter 36Commodities, Derivatives and Market-Structure Legislation

  1. ¶ 3601Overview
    1. 3601.01Scope of the chapter
    2. 3601.02The central question
    3. 3601.03Sources of law
    4. 3601.04The law stated as of November 2026
    5. 3601.05The status of legislation
    6. 3601.06Relationship to other chapters
    7. 3601.07Plan of the chapter
  2. ¶ 3610The Statutory Definition of "Commodity" and Digital Assets
    1. 3610.01The text
    2. 3610.02The "dealt in" clause
    3. 3610.03The Commission's position: Coinflip (2015)
    4. 3610.04The first judicial holding: McDonnell (2018)
    5. 3610.05The categorical approach: My Big Coin (2018)
    6. 3610.06Case discussion
    7. 3610.07Ether and stablecoins
    8. 3610.08The GENIUS Act exclusion
    9. 3610.09The joint taxonomy of March 2026
    10. 3610.10Effect of the taxonomy on the statutory definition
  3. ¶ 3620Anti-Fraud and Anti-Manipulation Authority over Spot Markets
    1. 3620.01The limit of the Commission's spot-market power
    2. 3620.02Section 6(c)(1) and Regulation 180.1
    3. 3620.03Fraud without manipulation
    4. 3620.04Case discussion
    5. 3620.05Manipulation in token markets
    6. 3620.06Persons who may be liable
  4. ¶ 3630Retail Commodity Transactions and Actual Delivery
    1. 3630.01The Zelener problem
    2. 3630.02Section 2(c)(2)(D)
    3. 3630.03The breadth of "offered."
    4. 3630.04Actual delivery in the courts
    5. 3630.05Case discussion
    6. 3630.06The 2020 virtual currency guidance and its withdrawal
    7. 3630.07Fully paid positions held on an exchange's books
    8. 3630.08Governance and staking rights
  5. ¶ 3640Derivatives on Digital Assets and Offshore Platforms
    1. 3640.01The full regulatory framework
    2. 3640.02Listed futures on tokens
    3. 3640.03Options
    4. 3640.04Perpetual contracts
    5. 3640.05Offshore platforms and U.S. customers
    6. 3640.06BitMEX
    7. 3640.07Binance
  6. ¶ 3650Decentralized Protocols and DAOs
    1. 3650.01The question
    2. 3650.02The 2023 orders
    3. 3650.03Case discussion
    4. 3650.04ZeroEx and front ends
    5. 3650.05Deridex
    6. 3650.06Ooki DAO
    7. 3650.07The 2026 change of approach to developers
  7. ¶ 3660The 2025–2026 Agency Program
    1. 3660.01The executive order and the working group report
    2. 3660.02The Crypto Sprint
    3. 3660.03Listed spot crypto trading
    4. 3660.04Withdrawal of the 2020 guidance
    5. 3660.05Tokenized collateral
    6. 3660.06Joint work with the Securities and Exchange Commission
    7. 3660.07Staff actions and perpetuals
    8. 3660.08The October 2026 advance notice
    9. 3660.09Event contracts
    10. 3660.10The legal force of the program
  8. ¶ 3670Market-Structure Legislation
    1. 3670.01The gap the bills address
    2. 3670.02FIT21
    3. 3670.03The CLARITY Act in the House
    4. 3670.04Digital commodity
    5. 3670.05Investment contract assets and mature blockchain systems
    6. 3670.06Intermediaries at the Commission
    7. 3670.07The Senate Banking Committee substitute
    8. 3670.08The Senate Agriculture Committee bill
    9. 3670.09Status as of November 2026
  9. ¶ 3680Allocation between the SEC and the CFTC
    1. 3680.01Present law
    2. 3680.02Concurrent authority
    3. 3680.03Products that cross the line
    4. 3680.04The House bill's allocation
  10. ¶ 3690Practice and Checklist
    1. 3690.01Exchanges and brokers
    2. 3690.02Offshore venues
    3. 3690.03Developers and DAOs
    4. 3690.04Fiduciaries and institutional holders
    5. 3690.05Conclusion

Chapter 37Stablecoins and State Regulation

  1. ¶ 3701Overview
    1. 3701.01Scope of the chapter
    2. 3701.02Why stablecoins receive their own statute
    3. 3701.03The structure of the Act
    4. 3701.04The effective date and the state of the rules
    5. 3701.05Relation to other chapters
  2. ¶ 3710What a Payment Stablecoin Is
    1. 3710.01The definition
    2. 3710.02The four elements
    3. 3710.03The exclusions
    4. 3710.04Tokens outside the definition
    5. 3710.05Issuer and digital asset service provider
    6. 3710.06Lawful order
  3. ¶ 3720Who May Issue and Who May Offer
    1. 3720.01The issuance prohibition
    2. 3720.02The offer-and-sale prohibition
    3. 3720.03Extraterritorial reach
    4. 3720.04Transactions outside section 3
    5. 3720.05Safe harbors
    6. 3720.06Treatment of non-permitted stablecoins
    7. 3720.07Marketing and insured status
    8. 3720.08Persons who may not serve
  4. ¶ 3730Reserves, Redemption, Disclosure and the Yield Prohibition
    1. 3730.01One-to-one reserves
    2. 3730.02Segregation and the Comptroller's rule
    3. 3730.03No rehypothecation
    4. 3730.04Redemption policy
    5. 3730.05Runs
    6. 3730.06Monthly disclosure and certification
    7. 3730.07The yield prohibition
    8. 3730.08Comparison with the New York guidance
  5. ¶ 3740Activities, Capital and Conduct Limits
    1. 3740.01The activities limit
    2. 3740.02Capital and operational backstop
    3. 3740.03Tying
    4. 3740.04Names and marketing
    5. 3740.05Public companies and foreign commercial firms
    6. 3740.06Access to the Federal Reserve
  6. ¶ 3750Federal, State and Foreign Issuers
    1. 3750.01Three routes to permission
    2. 3750.02Federal applications
    3. 3750.03The state option
    4. 3750.04The substantial-similarity principles
    5. 3750.05Crossing $10 billion
    6. 3750.06State supervision and federal backstop authority
    7. 3750.07Host-state law
    8. 3750.08Foreign issuers
  7. ¶ 3760Lawful Orders, Custody, Insolvency and Securities Status
    1. 3760.01Issuers as financial institutions
    2. 3760.02The capability to comply with lawful orders
    3. 3760.03Foreign issuers that do not comply
    4. 3760.04Custody of reserves, stablecoins and keys
    5. 3760.05Insolvency
    6. 3760.06Not a security or a commodity
    7. 3760.07Other provisions
  8. ¶ 3770Before the Act: Enforcement Against Issuers
    1. 3770.01Why the earlier cases matter
    2. 3770.02Case discussion: the tether reserve findings
    3. 3770.03Case discussion: an algorithmic stablecoin
    4. 3770.04Case discussion: a distribution relationship
  9. ¶ 3780State Regulation
    1. 3780.01Two layers of state law
    2. 3780.02Money transmission
    3. 3780.03New York: the BitLicense
    4. 3780.04New York: the 2022 stablecoin guidance
    5. 3780.05California: the Digital Financial Assets Law
    6. 3780.06Wyoming
    7. 3780.07Texas and Florida
    8. 3780.08State law after the Act
  10. ¶ 3790Planning and Checklists
    1. 3790.01Advising an issuer
    2. 3790.02Advising a holder or intermediary
    3. 3790.03Drafting account terms
    4. 3790.04Checklist for issuers
    5. 3790.05Checklist for holders and intermediaries
    6. 3790.06Conclusion

Chapter 38The European Union: MiCA and the Transfer of Funds Regulation

  1. ¶ 3801Overview
    1. 3801.01Scope of the chapter
    2. 3801.02Why a United States practitioner needs the European regime
    3. 3801.03Form of the legislation
    4. 3801.04The layers of rules
    5. 3801.05Sources
    6. 3801.06Organization
  2. ¶ 3810Architecture, Scope and Exclusions
    1. 3810.01The plan of the regulation
    2. 3810.02Persons within scope
    3. 3810.03Persons excluded
    4. 3810.04Assets excluded: instruments already regulated
    5. 3810.05Assets excluded: unique and non-fungible crypto-assets
    6. 3810.06Activities outside MiCA: decentralised services
    7. 3810.07Crypto-assets with no identifiable issuer
    8. 3810.08Activities outside MiCA: lending and borrowing
    9. 3810.09Persons and activities within scope: a summary
  3. ¶ 3820The Three Categories and Classification
    1. 3820.01The definition of crypto-asset
    2. 3820.02E-money tokens
    3. 3820.03Asset-referenced tokens
    4. 3820.04Other crypto-assets
    5. 3820.05The classification process
    6. 3820.06Crypto-asset or financial instrument: the ESMA guidelines
    7. 3820.07Hybrid tokens
    8. 3820.08Classification and the United States analysis
    9. 3820.09Reclassification
  4. ¶ 3830Other Crypto-Assets: White Papers, Offers and Admission to Trading
    1. 3830.01The disclosure model
    2. 3830.02Offer to the public
    3. 3830.03Exempt offers
    4. 3830.04Offers outside Title II altogether
    5. 3830.05Admission to trading
    6. 3830.06Content of the white paper
    7. 3830.07Notification
    8. 3830.08The retail right of withdrawal
    9. 3830.09Civil liability for the white paper
    10. 3830.10Assets admitted before the regulation applied
  5. ¶ 3840Asset-Referenced Tokens
    1. 3840.01Authorisation required
    2. 3840.02The authorisation process
    3. 3840.03Own funds
    4. 3840.04The reserve of assets
    5. 3840.05Segregation and national law
    6. 3840.06The right of redemption
    7. 3840.07The prohibition of interest
    8. 3840.08The cap on use as a means of exchange
    9. 3840.09Recovery and redemption plans
    10. 3840.10Significant asset-referenced tokens
  6. ¶ 3850E-Money Tokens and Significant Tokens
    1. 3850.01Who may issue
    2. 3850.02E-money tokens are electronic money
    3. 3850.03Issuance and redemption at par
    4. 3850.04The prohibition of interest
    5. 3850.05Safeguarding and investment of funds received
    6. 3850.06White paper and recovery planning
    7. 3850.07Tokens referencing a non-Union currency
    8. 3850.08Significant e-money tokens
    9. 3850.09The first significant e-money token
    10. 3850.10Multi-issuance
  7. ¶ 3860Crypto-Asset Service Providers: Authorisation, Capital and Passport
    1. 3860.01The ten services
    2. 3860.02Custody defined by control of the means of access
    3. 3860.03Authorisation required
    4. 3860.04The application and its timetable
    5. 3860.05Existing financial entities
    6. 3860.06Capital
    7. 3860.07Conduct and organisation
    8. 3860.08The passport
    9. 3860.09Supervisory convergence: the Malta peer review
    10. 3860.10Significant providers
  8. ¶ 3870Custody, Client Assets, Trading Platforms and Market Abuse
    1. 3870.01The general safekeeping duty
    2. 3870.02Client funds
    3. 3870.03Use of client assets and lending
    4. 3870.04The custody agreement
    5. 3870.05Segregation
    6. 3870.06Forks, airdrops and corporate events
    7. 3870.07Liability for loss
    8. 3870.08Sub-custody
    9. 3870.09Trading platforms
    10. 3870.10Market abuse
  9. ¶ 3880Transition, Third-Country Firms, the Transfer of Funds Regulation and the United Kingdom
    1. 3880.01The transitional regime
    2. 3880.02The national periods
    3. 3880.03The end of the transition
    4. 3880.04Reverse solicitation
    5. 3880.05The Transfer of Funds Regulation: scope
    6. 3880.06Information on originator and beneficiary
    7. 3880.07Self-hosted addresses
    8. 3880.08Anti-money laundering and tax reporting
    9. 3880.09The United Kingdom
  10. ¶ 3890Planning, Drafting and Checklist
    1. 3890.01Three recurring situations
    2. 3890.02Choosing a European custodian
    3. 3890.03Model custody provision
    4. 3890.04Token projects
    5. 3890.05Providers outside the Union
    6. 3890.06Conclusion

Chapter 39The Gulf and the Offshore Financial Centers

  1. ¶ 3901Overview
    1. 3901.01Scope of the chapter
    2. 3901.02Why these jurisdictions
    3. 3901.03Regulatory law and private law
    4. 3901.04The state of the sources
    5. 3901.05Relationship to other chapters
    6. 3901.06Terminology
    7. 3901.07Plan of the chapter
  2. ¶ 3910The United Arab Emirates: A Layered System
    1. 3910.01Three levels of authority
    2. 3910.02The financial free zones
    3. 3910.03The federal virtual-asset framework
    4. 3910.04The Central Bank and payment tokens
    5. 3910.05Federal Decree-Law No. 6 of 2025
    6. 3910.06Which regulator governs
    7. 3910.07Overlap and choice of zone
  3. ¶ 3920Dubai: The Virtual Assets Regulatory Authority
    1. 3920.01The statute
    2. 3920.02The Regulations and the rulebooks
    3. 3920.03The general prohibition
    4. 3920.04The licensed activities
    5. 3920.05Prohibited assets
    6. 3920.06Marketing
    7. 3920.07Enforcement and fines
    8. 3920.08Private law in Dubai outside the DIFC
  4. ¶ 3930Abu Dhabi Global Market
    1. 3930.01The zone and its law
    2. 3930.02The regulator and the framework
    3. 3930.03Accepted virtual assets and the 2025 amendments
    4. 3930.04Fiat-referenced tokens
    5. 3930.05Staking
    6. 3930.06DLT foundations
    7. 3930.07The ADGM Courts
  5. ¶ 3940Dubai International Financial Centre
    1. 3940.01Two bodies of law
    2. 3940.02The DFSA crypto token regime
    3. 3940.03The Digital Assets Law: enactment
    4. 3940.04Characterization
    5. 3940.05Definition, control and title
    6. 3940.06Comparison with Article 12 of the Uniform Commercial Code
    7. 3940.07Case discussion
    8. 3940.08Effect on custody in the DIFC
  6. ¶ 3950Bahrain and Saudi Arabia
    1. 3950.01Bahrain
    2. 3950.02The Bahraini stablecoin module
    3. 3950.03Bahrain compared with the UAE
    4. 3950.04Saudi Arabia
    5. 3950.05The Gulf as a market
  7. ¶ 3960The Cayman Islands
    1. 3960.01Role of the jurisdiction
    2. 3960.02The second phase
    3. 3960.03CIMA's rules and guidance
    4. 3960.04Funds
    5. 3960.05Private law and insolvency
    6. 3960.06Foundation companies and STAR trusts
  8. ¶ 3970The British Virgin Islands, Bermuda and The Bahamas
    1. 3970.01The British Virgin Islands: the statute
    2. 3970.02The British Virgin Islands and the FATF
    3. 3970.03The British Virgin Islands courts
    4. 3970.04Bermuda: the statutes
    5. 3970.05Bermuda: custody and recent developments
    6. 3970.06The Bahamas: the statute
    7. 3970.07The Bahamas and FTX
  9. ¶ 3980Gibraltar, the Crown Dependencies and the Courts of the Offshore Centres
    1. 3980.01Gibraltar: a principles-based regime
    2. 3980.02The regulatory principles
    3. 3980.03Gibraltar's private law
    4. 3980.04The Crown Dependencies
    5. 3980.05The offshore courts and digital assets
    6. 3980.06Choosing a forum clause
  10. ¶ 3990Choosing a Jurisdiction
    1. 3990.01The question to be answered
    2. 3990.02Licensing burden and scope
    3. 3990.03Custody and client assets
    4. 3990.04Courts and insolvency
    5. 3990.05International standing
    6. 3990.06Tax
    7. 3990.07A worked choice
    8. 3990.08Conclusion

Chapter 40Asia-Pacific: Singapore, Hong Kong and the Philippines

  1. ¶ 4001Overview
    1. 4001.01Scope of the chapter
    2. 4001.02Why these jurisdictions
    3. 4001.03Relation to other chapters
    4. 4001.04Common features
    5. 4001.05Points of difference
    6. 4001.06Method and sources
    7. 4001.07Organization
  2. ¶ 4010Singapore: The Payment Services Act and Digital Payment Token Services
    1. 4010.01The statute
    2. 4010.02The definition of digital payment token
    3. 4010.03The 2024 expansion of scope
    4. 4010.04MAS's 2023 decision on investor protection
    5. 4010.05The consumer-protection guidelines
    6. 4010.06Segregation and the trust account
    7. 4010.07Retail restrictions on use of assets
    8. 4010.08Consumer access measures
    9. 4010.09Anti-money-laundering obligations
  3. ¶ 4020Singapore: Digital Token Service Providers, Stablecoins and the Courts
    1. 4020.01The gap the 2022 Act closed
    2. 4020.02Commencement and scope
    3. 4020.03Practical effect
    4. 4020.04The 2023 stablecoin framework
    5. 4020.05The 2026 consultation
    6. 4020.06Project Guardian
    7. 4020.07The courts and property
    8. 4020.08Case discussion: Re Zipmex Co Ltd and other matters [2024] SGHC 6
    9. 4020.09The WazirX scheme
  4. ¶ 4030Hong Kong: Licensing of Virtual Asset Trading Platforms
    1. 4030.01Two routes into regulation
    2. 4030.02The licensing requirement
    3. 4030.03Transitional arrangements
    4. 4030.04The licensed platforms
    5. 4030.05Retail access
    6. 4030.06Custody and segregation
    7. 4030.07Anti-money-laundering obligations
    8. 4030.08Over-the-counter dealing and custody services
  5. ¶ 4040Hong Kong: Stablecoins, the 2025 Roadmap, Staking, Funds and JPEX
    1. 4040.01The Stablecoins Ordinance
    2. 4040.02Licensing requirements
    3. 4040.03The first licences
    4. 4040.04The ASPIRe roadmap
    5. 4040.05Staking
    6. 4040.06Exchange-traded funds
    7. 4040.07Case discussion: JPEX
    8. 4040.08Re Gatecoin and the private-law position
  6. ¶ 4050The Philippines: The Bangko Sentral and Virtual Asset Service Providers
    1. 4050.01The division of authority
    2. 4050.02Circular No. 1108
    3. 4050.03Policy and legal basis
    4. 4050.04Definitions
    5. 4050.05Certificate of Authority and capital
    6. 4050.06Custody and reserves
    7. 4050.07Disclosure and consumer protection
    8. 4050.08The unbroken chain
    9. 4050.09Customer due diligence and transfers
    10. 4050.10The moratorium on new licences
  7. ¶ 4060The Philippines: The SEC's Crypto-Asset Service Provider Rules
    1. 4060.01The 2025 circulars
    2. 4060.02Legal basis
    3. 4060.03Registration requirements
    4. 4060.04Relationship with the BSP regime
    5. 4060.05Offshore platforms
    6. 4060.06Consequences for users
    7. 4060.07Offerings
  8. ¶ 4070The Philippines: Anti-Money Laundering, the FATF and Tax
    1. 4070.01The Anti-Money Laundering Act
    2. 4070.02Obligations of VASPs
    3. 4070.03The FATF grey list
    4. 4070.04Mutual evaluation and virtual assets
    5. 4070.05The Crypto-Asset Reporting Framework
    6. 4070.06Income tax
    7. 4070.07Documentary stamp tax and other taxes
  9. ¶ 4080Japan, Korea and Australia Compared
    1. 4080.01Purpose
    2. 4080.02Japan: the Payment Services Act regime
    3. 4080.03Japan: the 2026 reclassification
    4. 4080.04Korea
    5. 4080.05Australia
    6. 4080.06Comparison
  10. ¶ 4090Choosing an Asia-Pacific Base; Checklist
    1. 4090.01The questions
    2. 4090.02Customers and residence
    3. 4090.03Availability of a licence
    4. 4090.04Protection of assets
    5. 4090.05Stablecoins
    6. 4090.06Family holdings
    7. 4090.07Checklist
    8. 4090.08Conclusion

Appendices

Appendix AGlossary of Technical and Legal Terms

  1. ¶ A01Introduction
    1. A01.01Scope of the glossary
    2. A01.02How the entries are framed
    3. A01.03Terms with more than one meaning
    4. A01.04Arrangement
  2. ¶ A10Numerals, A and B
  3. ¶ A20C
  4. ¶ A30D and E
  5. ¶ A40F to K
  6. ¶ A50L and M
  7. ¶ A60N and O
  8. ¶ A70P and Q
  9. ¶ A80R and S
  10. ¶ A90T to Z

Appendix BSelected Statutory Texts: UCC Article 12, RUFADAA and the Wyoming DAO Supplement

  1. ¶ B01Introduction
    1. B01.01Purpose of the appendix
    2. B01.02Why enacted texts are used
    3. B01.03Form of the texts
    4. B01.04Currency
    5. B01.05Contents of the appendix
  2. ¶ B10Uniform Commercial Code Article 12 (Delaware)
    1. B10.01Source
    2. B10.02Numbering
    3. B10.03Where the text is discussed
    4. B10.04Text
  3. ¶ B20Related Provisions of Articles 1 and 9 (Delaware)
    1. B20.01Source
    2. B20.02Numbering
    3. B20.03Excerpts
    4. B20.04Where the text is discussed
    5. B20.05Text
  4. ¶ B30Revised Uniform Fiduciary Access to Digital Assets Act (Florida)
    1. B30.01Source
    2. B30.02Why the Florida enactment is used
    3. B30.03Corresponding sections
    4. B30.04Where the text is discussed
    5. B30.05Text
  5. ¶ B40Wyoming Decentralized Autonomous Organization Supplement
    1. B40.01Source
    2. B40.02Relation to other statutes
    3. B40.03Where the text is discussed
    4. B40.04Text
  6. ¶ B50Wyoming Digital-Asset Statute
    1. B50.01Source
    2. B50.02Relation to Article 12
    3. B50.03Where the text is discussed
    4. B50.04Text

Appendix CModel Trust Provisions for Digital Assets

  1. ¶ C01Introduction and Use
    1. C01.01Purpose
    2. C01.02Sources in the chapters
    3. C01.03Two configurations
    4. C01.04Governing law
    5. C01.05Conventions
    6. C01.06What the instrument should not contain
    7. C01.07Coordination with other instruments
    8. C01.08Order of the articles
  2. ¶ C10Definitions
    1. C10.01Function of the definitions
    2. C10.02The asset definition
    3. C10.03The control definitions
    4. C10.04Model Article 1
    5. C10.05Notes on Article 1
  3. ¶ C20Powers over Digital Assets, Staking and Lending
    1. C20.01Why express powers are needed
    2. C20.02Structure
    3. C20.03Model Article 2
    4. C20.04Notes on Article 2
    5. C20.05Model Article 3
    6. C20.06Notes on Article 3
  4. ¶ C30Retention and Diversification Relief
    1. C30.01The problem the article addresses
    2. C30.02Elements of an effective clause
    3. C30.03Model Article 4
    4. C30.04Notes on Article 4
    5. C30.05Statutory support
  5. ¶ C40Custody, Key Material and the Key Record
    1. C40.01The duty the articles implement
    2. C40.02Two articles
    3. C40.03Model Article 5
    4. C40.04Notes on Article 5
    5. C40.05Model Article 6
    6. C40.06Notes on Article 6
  6. ¶ C50Trust Directors and the Directed Trustee
    1. C50.01Why two directors
    2. C50.02The director's standard
    3. C50.03Model Article 7
    4. C50.04Notes on Article 7
    5. C50.05Model Article 8
    6. C50.06Notes on Article 8
  7. ¶ C60Successor Key-Holders and Recovery
    1. C60.01The succession problem inside a trust
    2. C60.02Model Article 9
    3. C60.03Notes on Article 9
    4. C60.04Recovery arrangements
    5. C60.05Model Article 10
    6. C60.06Notes on Article 10
  8. ¶ C70Consent to Disclosure and Fiduciary Access
    1. C70.01What the fiduciary-access statute requires
    2. C70.02Why a trust needs the consent even for assets of value
    3. C70.03Model Article 11
    4. C70.04Notes on Article 11
  9. ¶ C80Valuation, Receipts, Reports and Tax Records
    1. C80.01Why the instrument must fix a valuation method
    2. C80.02Model Article 12
    3. C80.03Notes on Article 12
    4. C80.04Receipts
    5. C80.05Model Article 13
    6. C80.06Notes on Article 13
    7. C80.07Model Article 14
    8. C80.08Notes on Article 14
    9. C80.09Model Article 15
    10. C80.10Notes on Article 15
  10. ¶ C90Liability, Exculpation, Indemnity, Insurance and Checklist
    1. C90.01Function of the liability article
    2. C90.02Limits on exculpation
    3. C90.03Model Article 16
    4. C90.04Notes on Article 16
    5. C90.05Model Article 17
    6. C90.06Notes on Article 17
    7. C90.07The Schedules
    8. C90.08Departures from chapter wording
    9. C90.09Checklist

Appendix DModel Entity Provisions: LLC Operating Agreements and DAO LLC Articles

  1. ¶ D01Introduction and Use
    1. D01.01Purpose
    2. D01.02The instruments
    3. D01.03Conventions
    4. D01.04Base agreements
    5. D01.05Matters not addressed
  2. ¶ D10The Token-Holding LLC: Definitions, Assets and Wallets
    1. D10.01Use
    2. D10.02The choices made
    3. D10.03Definitions
    4. D10.04Assets and wallets
  3. ¶ D20The Key Arrangement, Signing Approvals and Pledges
    1. D20.01Two kinds of authority
    2. D20.02Key arrangement and approvals
    3. D20.03The approval matrix
    4. D20.04Pledges and control
  4. ¶ D30Key Secrecy and Members' Information Rights
    1. D30.01The tension
    2. D30.02The statutory basis
  5. ¶ D40The Manager's Standard of Conduct
    1. D40.01Volatile assets and the default duties
    2. D40.02The power to modify
    3. D40.03The key-management policy
  6. ¶ D50Successor Signers and Transfers of Interests
    1. D50.01Continuity
    2. D50.02Interests move; keys stay
  7. ¶ D60Wyoming DAO LLC: Articles of Organization
    1. D60.01Use
    2. D60.02Required contents
    3. D60.03The statement of management
    4. D60.04Identifiers, authority and upgrades
  8. ¶ D70Wyoming DAO LLC: The Operating Agreement, the Code and the Duty to Amend
    1. D70.01Three instruments
    2. D70.02Precedence and conformity
    3. D70.03Upgrades are complete only on amendment
    4. D70.04Membership and duties
    5. D70.05Information and withdrawal
  9. ¶ D80The Marshall Islands DAO LLC and the Utah DAO
    1. D80.01A different order of precedence
    2. D80.02Utah
  10. ¶ D90Foundations and Purpose Trusts; Drafting Checklist
    1. D90.01Token-holder resolutions
    2. D90.02The treasury and its key holders
    3. D90.03Drafting checklist
    4. D90.04Using the provisions together

Appendix ECustody Agreements: Due-Diligence and Negotiation Checklists

  1. ¶ E01Introduction
    1. E01.01Purpose of the appendix
    2. E01.02Who the checklists serve
    3. E01.03The two questions behind every item
    4. E01.04The lesson of the 2022 failures
    5. E01.05Currency of the law
    6. E01.06Organization
    7. E01.07Conventions
  2. ¶ E10Choosing a Custody Model
    1. E10.01The models
    2. E10.02The holder's own obligations come first
    3. E10.03No model removes every risk
    4. E10.04Using more than one model
  3. ¶ E20Custodian Due Diligence
    1. E20.01The purpose of diligence
    2. E20.02Charter and regulatory status
    3. E20.03Financial condition, controls and audits
    4. E20.04Wallet architecture, records and key management
    5. E20.05Insurance, proof of reserves and representations
    6. E20.06Compliance posture
  4. ¶ E30Negotiating the Custody Agreement
    1. E30.01The deciding instrument
    2. E30.02Layered characterization
    3. E30.03Consumer terms
    4. E30.04Contract formation and amendment
    5. E30.05Provisions to resist
    6. E30.06Payment stablecoins held for customers
    7. E30.07Using the model provisions
  5. ¶ E40Tri-Party Control Agreements for Lenders
    1. E40.01Why the control agreement matters
    2. E40.02The legal route
    3. E40.03Self-hosted collateral
    4. E40.04File as well as control
  6. ¶ E50The Fiduciary Overlay
    1. E50.01What changes when the customer is a fiduciary
    2. E50.02The choice of custodian is itself a fiduciary decision
    3. E50.03Delegation and its limits
    4. E50.04Exculpation in the custody agreement
    5. E50.05Estates
  7. ¶ E60Monitoring and Periodic Review
    1. E60.01Diligence continues after selection
    2. E60.02Triggering events
    3. E60.03Preference exposure
  8. ¶ E70Red Flags from the Platform Failures
    1. E70.01Purpose
    2. E70.02Terms and records
    3. E70.03Keys and controls
    4. E70.04After a failure

Appendix FDigital-Asset Inventory and Succession Memorandum Forms

  1. ¶ F01Introduction
    1. F01.01Purpose of the forms
    2. F01.02Relationship to the chapters
    3. F01.03Relationship to Appendix C
    4. F01.04Conventions
    5. F01.05Adapting the forms
  2. ¶ F10Client Intake Questionnaire
    1. F10.01Function
    2. F10.02What the questionnaire does not ask
    3. F10.03Completion notes
  3. ¶ F20Digital-Asset Inventory
    1. F20.01Function
    2. F20.02Structure
    3. F20.03Completing the route column
    4. F20.04Public addresses and values
    5. F20.05Converting the inventory into a trust Key Record
  4. ¶ F30Letter of Instruction and Succession Memorandum
    1. F30.01Function
    2. F30.02Why the letter disclaims testamentary effect
    3. F30.03Completion notes
    4. F30.04Storage and copies
  5. ¶ F40Key-Holder Acknowledgment and Succession Agreement
    1. F40.01Function
    2. F40.02What the form does and does not do
    3. F40.03Completion notes
  6. ¶ F50Recovery-Guardian Appointment
    1. F50.01Function
    2. F50.02Limits of the form
    3. F50.03Completion notes
  7. ¶ F60Fiduciary Disclosure Request to a Custodian
    1. F60.01Function
    2. F60.02The two requests distinguished
    3. F60.03Completion notes
  8. ¶ F70First Thirty Days: Fiduciary Action Checklist
    1. F70.01Function
    2. F70.02Completion notes
  9. ¶ F80Periodic Review Log
    1. F80.01Function
    2. F80.02Events that call for a review
    3. F80.03Testing the route
  10. ¶ F90Security: What Never to Write in These Forms
    1. F90.01The rule
    2. F90.02Why the lawyer's file is included
    3. F90.03Hints and partial information
    4. F90.04Instruments that become public
    5. F90.05Electronic copies
    6. F90.06Checklist

Appendix GComparative Jurisdiction Tables

  1. ¶ G01Introduction
    1. G01.01Purpose of the tables
    2. G01.02Currency and qualifiers
    3. G01.03Arrangement
  2. ¶ G10Characterization of Digital Assets as Property
    1. G10.01The question compared
  3. ¶ G20Governing Law and Situs
    1. G20.01The three approaches
  4. ¶ G30Article 12 Enactment
    1. G30.01Selected enactments
  5. ¶ G40Directed Trusts and Diversification Relief
    1. G40.01Directed-trust statutes
    2. G40.02Retention and the duty to diversify
  6. ¶ G50Self-Settled and Offshore Trusts
    1. G50.01Domestic asset protection trusts
  7. ¶ G60Foundations, Purpose Trusts and DAO Wrappers
    1. G60.01Ownerless vehicles
  8. ¶ G70Customer Assets in Major Insolvencies
    1. G70.01Outcomes compared
  9. ¶ G80Tax and Information Reporting
    1. G80.01Broker reporting and cross-border regimes
  10. ¶ G90Anti-Money-Laundering Rules and the Regulatory Regimes
    1. G90.01The travel rule
    2. G90.02Anti-money-laundering regimes
    3. G90.03Selected state regimes
    4. G90.04Principal regimes compared