Crypto Assets
Trust structures with crypto assets

Leo Trust is a pioneer in planning and implementing trust structures which incorporate crypto assets. In this interview, Dimitar Jauch, CEO of Leo Trust, talks about the advantages, risks, and costs of such structures. He also answers questions about the complexity and adaptability of these structures – and covers data security, estate planning, speed to market as well as philanthropy.

December 14, 2021

I have a range of interests in the crypto world: mining, bot trading, NFT, own cryptocurrency etc. Now I want to unite my crypto assets under one roof and fully exploit their potential. Is Leo Trust the right place for me?

Dimitar Jauch: Absolutely. Leo Trust is a market leader in the planning, formation, and management of both corporations and trusts. We offer a multidisciplinary, dynamic team consisting of trust specialists, tax experts, lawyers, asset managers, and wealth planners. This is combined with 40 years of experience as a financial service provider. During the past 10 years, we have branched out into crypto asset-based services. But to know exactly what you need, we must learn more about you.

Gladly, but what exactly?

Every client’s situation is new for us and, accordingly, we start from scratch. This is the only way to construct the perfect, bespoke solution for that client. But to come back to your question, we undertake detailed discussions with the client to identify that client’s exact requirements, ideas, and wishes.

OK. Speed to market, discretion, scalability, security, cost, and philanthropy are all important to me. And my structure must be adaptable going forward.

(Laughs) Is that all? Well, the more information you can provide, the better. This includes not only hard facts, but also information about your personal preferences. Each of your requirements is important, and the perfect solution will combine all of your requirements.

Well, I am Swiss, have no direct descendants, and can count on a loyal crypto community. Tokens already exist and are widely held. My family and I are the shareholders of a company. This company offers various services and is remunerated for these services in tokens. However, I would prefer not to hold these shares directly. Can a trust structure help with this?  

Trusts are an excellent means of holding different assets, including crypto assets. A trust is a fiduciary relationship usually recorded in a document known as a trust deed or instrument. In a trust, assets are transferred from an owner (the settlor), to a trustee, and held for the benefit of a third party (the beneficiary). There may also be an enforcer or protector involved with the trust, depending on the jurisdiction.  The enforcer/protector supervises the trustee, to ensure the trust deed/instrument is complied with. Using a trust means that you would no long hold the shares in the company but would be able to benefit from them. It also provides a degree of confidentiality.

Crypto assets are considered a «black box» by many and each country has its own laws regarding them. How do I know today what will be legal tomorrow?

As I said, we have been involved in the crypto world for many years now. We have genuine experience in areas such as crypto currencies advisory, crypto asset management, and crypto assets forming part of a person’s estate. These services are used by private as well as institutional investors, and family offices. In other words, we have long believed in crypto assets, and our experienced in-house compliance team monitors a wide range of jurisdictions for issues relevant to crypto assets. We follow global events closely, including actual and proposed legislative changes. Also, as dynamic as the crypto world is, new laws are not introduced overnight.

And how do trust structures operate in terms of scalability and speed to market?

One structure could be: underlying Liechtenstein special purpose vehicles, then a holding company domiciled in the British Virgin Islands (BVI), with the shares in the holding company held by a Jersey-law trust with a Swiss trustee. The Principality of Liechtenstein, BVI, Jersey – these are all crypto-friendly jurisdictions. At present, crypto assets are unregulated in each of these jurisdictions. This means we don't have to go through any tough licensing procedures, meaning you don't lose time in starting your business. The ideas you mentioned earlier can be integrated into this structure. There is considerable flexibility as in each of these jurisdictions, company formation and liquidation can be done in a matter of days. As I briefly mentioned earlier, we are closely monitoring events in countless jurisdictions. We know when and where we need to react, or rather, act, if changes are imminent.

How does «non-regulated» fit with my need for security?

Non-regulated does not equate to wild west lawlessness. In the BVI, for example, we must comply with SIBA (Securities and Investment Business Act), with FATCA (Foreign Account Tax Compliance Act), and with FMSA (Financing and Money Services Act). There are regulatory requirements, such as BOSS (Beneficial Ownership Secure Search System Act), to add to that. The list could easily go on – not to mention our in-house due diligence.

Your proposal includes multiple jurisdictions. Does it have to have more than one?

Each jurisdiction has its own advantages. Jersey, as well as Liechtenstein and BVI, to stay with our proposal, are «pro cryptos», as indicated. Further advantages of these jurisdictions are efficient company formation, as well as low formation and administration costs.

Cost is a good keyword – what can I expect?

Every solution is different. A reliable, general cost estimate is not possible. We attach great importance to transparency, including the transparency of our costs. However, to give you a general idea, we recently developed and implemented a similar solution with initial costs of around 60,000 Swiss francs. In addition, there were annual maintenance fees of around 20,000 Swiss francs and a further 10,000 Swiss francs p.a. payable in relation to the enforcer. But please note, the cost framework varies from solution to solution.

That seems expensive to me!

You want security, discretion, flexibility – to name just a few of your requirements. From the moment the contract is signed, Leo Trust deals with everything required. We represent you in foreign jurisdictions, go through all necessary approval procedures, negotiate contracts, establish companies, appoint appropriate company officers, and ensure these officers understand all their responsibilities. Last but not least, we undertake responsibility for the tax optimization and relevant tax filings of the structure. As you might expect, this can be extremely complicated.

Security, discretion, flexibility – how exactly does this solution pay off?

To pick up where I left off, the tax situation gives you a certain degree of planning and financial security. If such a structure were implemented at present, tax would only be payable on distributions from the trust. The proposed structure also offers a certain degree of confidentiality as you are not named as a shareholder of the SPV. A further option is to have a Swiss lawyer as the enforcer of the Jersey purpose trust. This means that the trust benefits from Swiss legal certainty and from Switzerland’s other advantages as a «safe haven». The fact that many project companies can be established or liquidated under the parent holding company increases entrepreneurial freedom and offers flexibility. Speaking of entrepreneurial freedom, this crypto-trust structure allows you to operate across your existing markets and branch out into new ones. You can position yourself nationally or internationally and attract attention from all kinds of potential stakeholders.

And how do you fulfill my philanthropic aims?

The purpose of the Jersey trust is to establish and develop your crypto ecosystem. However, it may have a further, charitable purpose. As you say, you have no direct descendants and you value charity. One of the purposes of the trust can be to benefit a charitable foundation, for example, the Leo Future Foundation. This Swiss foundation for children focuses on a wide variety of charitable projects in the areas of education, scholarships, health, research, etc. In this way, you have settled part of your estate and are doing something laudable by giving a certain part of your wealth to a charitable institution.

How do you ensure that the purpose is met?

Once the assets have been transferred to the trust, the trust instrument is authoritative. In its function as trustee, Leo Trustees LLC must manage the transferred crypto assets appropriately. Trust law requires that the provisions of the trust instrument are complied with. This is reinforced by the protector – or, as in our Jersey trust solution, the enforcer, who would be a Swiss lawyer.

And what about data security?

Leo Trust Switzerland is a Swiss financial service provider headquartered in Zürich. Although we have a global presence, the data is located here in Zurich, and we have – generally said – data sovereignty. Swiss legislation is exemplary in this regard, and this is one way in which Switzerland lives up to its role as a safe haven.

What makes me different from a typical trust client?

(Laughs) Nothing. But let me explain. Our clients couldn't be more different, and they are scattered all over the world. One client is a top athlete and has a trust structure for his income, for example, from sports and advertising contracts. Another has an art collection and a fleet of vintage cars – and an appropriate solution for these assets. A third owns real estate and securities portfolios. But what unites the «normal» trust client, and the crypto trust client is forward-looking wealth planning. That's exactly what our services are made for.

Speaking of looking ahead, I might also want to start a family in the future. How does that affect the proposal?

As I said, trust structures are flexible and can be adapted. This also applies to your proposal, which can adapt to fit legal and regulatory circumstances. It can also adapt to changes in your personal circumstances. And here you can see how important it is that we understand every aspect of your personal requirements.

_

This article is aimed at providing a general overview and summary of the issue. It is non-binding, and does not and should not be taken to constitute legal advice.

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