48 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s Why is custodising crypto assets generally difficult? And why is structuring these assets into a PPLI an effective solution for this? Cryptocurrencies are not financial assets but an asset class on its own. They also lack physical substance. Therefore, they meet the definition of an intangible asset and would be recorded at acquisition cost (i.e. price paid or consideration given). Cryptocurrencies are designed to work as a decentralised medium of exchange, independent of a financial institution or any other central authority so the custody is not with a traditional arrangement of a banking institution but held by a token or key with the key holder having secure access via private passwords or biometric authentication systems. The difficulty for a cryptocurrency (and other digital assets) is that after the keyholder’s lifetime, if the assets have not been the subject of an inventory with regular updates, then it is very difficult for the executor to identify the deceased’s entire exposure to these digital assets. Digital assets can be entrusted to professional trustees, inter vivos so that the problem linked to the devolution of the keyholder’s credential is solved. However, many trustees have difficulty customising such assets due to the associated risks, directly or indirectly that they represent. By using a PPLI policy to structure the digital assets and appoint the trustee as policyholder, these risks can be mitigated. In addition, the trust can also be the beneficiary of the policy to ensure estate planning over many generations. Are there risks involved in holding crypto in PPLI? If so what are they and how can these risks be mitigated? Holding cryptocurrencies in a PPLI entails no risks that holding them directly would not also entail. However, investing in cryptocurrencies directly can be vulnerable to fraud; by holding them through a PPLI structure, the insurance company will handle the custody of the underlying assets. Switzerland is also a leader for cryptocurrencies and there are already pure play crypto banks duly authorised by our regulator FINMA and even more traditional banks are expanding their offering for crypto assets. Custodising digital assets of a policy with a duly regulated Swiss bank as custodian will further mitigate the typical risks such assets entail as it is the bank’s obligation to ensure a stateof-the-art due diligence and safe custody of them. What are the tax benefits of holding crypto within a PPLI? Once the assets are placed within the PPLI, such assets enjoy growth free from income and capital gains tax (as long as there is no partial or full surrender), thus the policy
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