Report: Cryptocurrency tycoons seek offshore wealth structures, trustees hesitate

Cryptocurrency tycoons seek offshore trusts to pass on their wealth, but trustees are still deterred by risk

Wealthy cryptocurrency investors and entrepreneurs are increasingly seeking to use offshore trusts for estate planning and tax optimization. However, due to price fluctuations, custody risks and concerns about funding sources, trust trustees have always been cautious about accepting digital assets.

Cryptocurrency wealth shifts to estate planning

As the huge gains from cryptocurrencies create a new group of wealthy holders, the investor base facing such decisions is expanding. According to data from the British Revenue and Customs (HMRC) quoted by the Financial Times, British taxpayers sold £ 13.8 billion worth of cryptocurrency in the year to April 2025. Among them, the vast majority of disposal behaviors are completed by men under the age of 45.

During this period, nearly 250 taxpayers recorded capital gains of more than £ 1 million. More recent data shows that in the 2024-25 tax year, 17,600 taxpayers declared £ 1.38 billion in taxable cryptocurrency gains, of which 240 investors had a single gain of more than £ 1 million, totaling £ 717 million.

Tax authorities are intensifying their review of this area. According to data provided by accounting firm UHY Hacker Young, approximately 81,000 warning letters were sent to cryptocurrency investors suspected of underpaying taxes last year.

Challenges and Needs of Traditional Trust Structures

Lawyers and trust advisers say they are receiving an increasing number of requests from people who have accumulated wealth through cryptocurrency transactions, token investments and digital asset businesses, who want to transfer some of their wealth into traditional trust structures. Trusts can separate assets from personal property and are often used by wealthy families to transfer wealth between generations. Depending on the structure and jurisdiction, trusts help reduce the burden of inheritance taxes.

However, the difficulty faced by crypto holders is that it is difficult to find trustees willing to accept these assets. Charlie Tee, a partner at law firm Withers, told the Financial Times that he has met few trustees who are comfortable holding cryptocurrencies. Some customers choose to sell their tokens before depositing their funds in the trust, but trustees often remain vigilant even if digital assets have been converted into legal tender.

Meanwhile, Ronald Graham, a partner at Winston Taylor, pointed out that young members of wealthy families are increasingly demanding that trust assets be invested in cryptocurrencies. Some trust companies balk at such requests because the trustee has a responsibility to protect assets on behalf of current and future beneficiaries.

Private key conundrum in probate planning

Estate planning poses unique problems because ownership of cryptocurrencies depends on access to private keys. Unlike traditional accounts, assets in self-managed wallets may become inaccessible if the owner dies and leaves no viable way for heirs to recover the wallet.

Therefore, cryptographic estate planning requires not only legal documents used to transfer ownership, but also covers wallet access, private key management, and instructions for beneficiaries. David Schwartz, co-founder of XRP Ledger, proposed a solution to a similar problem in August this year, proposing an inheritance setting involving duplicate Bitcoin hardware wallets: hand over the wallet to two trusted relatives, while providing the shared password separately to the trusted friend., for disclosure after the owner's death.

Trust responsibilities and risks faced by trustees

For professional trustees, asset access is only part of the problem. The trustee has a fiduciary responsibility to the beneficiary and is expected to preserve the trust assets for a long time. Their responsibilities are not limited to the person who created the trust, but also extend to children, grandchildren and even unborn beneficiaries.

Claire Randall, partner at Farrer Co, said that trustees who accept cryptocurrency-related wealth need to identify the source of funds for purchasing assets and ensure that it is not related to criminal activity. Tracing this history becomes more complex when funds flow through wallets, exchanges and other digital asset services, especially when transactions occur outside regulated financial institutions.

Price fluctuations in cryptocurrencies raise another concern. If a trustee accepts a concentrated cryptocurrency position, whose value later falls sharply, it may face doubts from beneficiaries, especially if the trust was established with the intention of preserving wealth across generations.

The shadow of the FTX collapse and progress in compliance technology

Past crypto failures have made trust companies more cautious about assuming liability for digital assets. Tee cited the collapse of FTX and the possibility of investors losing access to wallets as examples, pointing to risks that concern trustees. FTX filed for bankruptcy in November 2022, and its liquidity crisis exposed issues related to client assets and its relationship with Alameda Research. The collapse prompted investors and institutions to reassess how cryptocurrencies are stored and who ultimately controls those assets.

The failure has increased attention to mechanisms such as independent custody, wallet ownership, and proof of reserves. The reserve certification system can provide evidence of positions held on the exchange chain, but it cannot by itself establish all over-the-counter liabilities or guarantee the company's solvency. Trustees must consider different sets of responsibilities because they are legally responsible for investment and custody decisions made on behalf of beneficiaries.

Although some professional trust companies have begun marketing services for digital assets and compliance technology has made it easier to investigate the history of cryptocurrency transactions, core issues remain. Andrew Horbury, CEO of Cavenwell Group, pointed out that screening tools can track transactions and help trustees establish how to obtain cryptocurrencies. Such inspections can review transaction history and compare it to the value of assets proposed for inclusion in the trust, providing providers with another way to assess the sources of customers 'crypto wealth.

Trustees use this information when conducting wealth source and anti-money laundering checks, but traditional trust companies are still weighing whether they are ready to accept cryptocurrencies directly. Some providers prefer to accept cash generated from the sale of cryptocurrencies rather than holding tokens in trusts; others are cautious about funds that require years of digital asset trading records to determine the source.

The core issue for trustees remains their responsibilities to beneficiaries. Even if the origin of the cryptocurrency can be verified and custody arranged, the trustee will still need to decide whether holding such assets with sharp price fluctuations is consistent with its obligation to preserve the trust's wealth over the long term.