Trusts and Estates

Ca. Trs. & Estates Quarterly 2018, Volume 24, Issue 3

CRYPTOCURRENCIES AND TRUSTEES’ DUTY TO INVEST PRUDENTLY: NAVIGATING FIDUCIARY DUTIES IN THE AGE OF DECENTRALIZATION1

By Adam F. Streisand* and J.D. Rees *

I. INTRODUCTION

A now-infamous Australian man mistakenly threw away a hard drive containing 1400 bitcoin.2 He bought those 1400 bitcoin for $25—total. But with the price-per-bitcoin hovering around $8,200 as of May 31, 2018, those 1400 bitcoin are worth more than $11 million. This incident demonstrates how important it is for every trustee to have some understanding of cryptocurrency. It is simply no longer acceptable to ignore it as a fad, a scam, or a play toy for geeks and day traders.

Some terms may have become familiar. Bitcoin. Cryptocurrency. Blockchain. What are they? To begin with, Bitcoin, cryptocurrency (a.k.a. "crypto"), and blockchain are not synonymous. Bitcoin is a crypto, but not all cryptos are Bitcoin. Cryptos are built upon blockchain technology, but not all blockchains are cryptos. Why does it matter? The story above illustrates the obvious: be careful what is discarded in the trash. But there is more. Much more. As crypto and blockchain technologies go mainstream—and by all accounts, they are well on their way3—fiduciaries will increasingly find it necessary to apply knowledge of new technologies and ways of investing to familiar rules governing their fiduciary duties.

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