Inventory and documentation. Maintain a comprehensive list of digital assets, including wallet addresses, account credentials, private keys and backup phrases. Use encrypted storage or secure password managers to protect sensitive information.
Secure storage. Store cryptocurrency and digital tokens in hardware wallets or other forms of cold storage to mitigate hacking risk. Diversify storage among multiple trusted custodians and avoid leaving large balances on exchanges.
Regulatory compliance. Ensure that activities involving digital assets comply with securities, commodities, money-transmitter and tax laws. Funds investing in digital assets should register or claim exemptions where required and develop AML/KYC policies. Consult counsel to determine whether an asset is a security under the Howey test and whether state licensing applies.
Recordkeeping and tax reporting. Track cost basis, acquisition dates and dispositions to calculate gains and losses. The IRS treats convertible virtual currency as property, so each sale or exchange is a taxable event. Sadis’ tax practice advises on tax reporting and structuring digital-asset investments.
Estate planning. Incorporate digital assets into wills and trusts, granting fiduciaries authority to access digital wallets in compliance with RUFADAA. Provide instructions for beneficiaries on recovering private keys and managing accounts.
Insurance and risk management. Consider crime insurance and cyber-security policies to mitigate theft or hacking losses. Funds should implement policies covering private-key management, internal controls and employee training.
Related questions
How to organize digital assets? Organize assets by category (cryptocurrency, tokenized securities, NFTs, accounts). Use spreadsheets or specialized software to track holdings and associated documentation. Regularly update the inventory and designate responsible persons.
How to manage your digital assets? Follow the steps above and review management practices periodically as regulations evolve. Engage a qualified custodian or third-party administrator if necessary.
What is managing digital assets? It encompasses the processes of acquiring, storing, transferring and disposing of digital assets while ensuring legal compliance and security.
How to protect digital assets? Use multi-factor authentication on all accounts, enable withdrawal whitelists, and store private keys offline. Implement robust cyber-security policies and educate stakeholders on phishing and social-engineering risks.
How to secure your digital assets? Employ cold storage, hardware security modules and secure enclaves. Choose reputable custodians and avoid sharing private keys or seed phrases. Periodically test recovery procedures to ensure access.
How to protect digital assets in an estate? Work with estate planners to designate fiduciaries, update beneficiary designations on retirement accounts holding digital assets and provide detailed instructions for asset transfer. Document the location of private keys and passwords and ensure compliance with applicable digital-asset access laws.
How to protect digital assets after death? Ensure that your executor or trustee has explicit authority under RUFADAA to access digital accounts. Provide an inventory of assets and encryption keys. Without proper planning, heirs may be unable to recover digital wallets, resulting in loss of value.
