The DeFi Trustee
In The Disrupted Trustee, I shared my opinion that Trustees will become pure crypto assets custodians in the DeFi context, allocating a significant part of their resources to set up operational models and infrastructure to hold and manage crypto assets.
The “DeFi Trustee” will guarantee clients with non-custodial hardware wallets and own full nodes. The “DeFi Trustee” will not only keep and manage digital assets but also verify transactions without relying on third parties.
In my opinion, to effectively manage digital assets in the new context “The DeFi Trustee” should have a guarantee provided by a well reputed institution. An idea -probably not liked by DeFi mainstream- would be that The DeFi Trustee holds a guarantee issued by a solid national bank securing all client assets in custody, offering full bankruptcy protection. This is already the case for crypto service providers such as Bitcoin Suisse.
Regarding digital assets taxation, as different tax authorities may take different approaches, The DeFi Trustee will need to take a close look to her operating markets to understand how she will be affected. For instance, in the case of US, for tax purposes the IRS treats cryptocurrencies as property, as opposed to currency. Other tax authorities are looking at them as financial assets and commodities.
The same rational applies to Compliance Reporting. As per lack of global uniform regulation rules, Compliance Reporting may become one of the most difficult challenges faced by The DeFi Trustee until a common standard agreement be achieved.
Also, The DeFi Trustee should carefully follow AML obligations and even anticipate future extra steps and requirements from authorities. Cases such as the Bitfinex hack where U.S. Department of Justice seized USD3.6 billion in cryptocurrency linked to money laundering show that, despite the anonymity provided by Blockchain, crypto assets transactions are traceable.
Taxation and compliance reporting complexities imply also an operational risk issue. It will require input and coordination from the business, legal, compliance and even sales teams. The DeFi Trustee should have an integrated team that understand the broad impacts on the business.
