As the financial landscape becomes increasingly digital, trustees are finding themselves at the crossroads of traditional fiduciary responsibility and emerging blockchain technology. The growth of tokenised assets and smart contracts presents exciting opportunities — but also unique legal and operational challenges. The question facing many issuers, investors, and service providers is simple: how can trustees fulfil their duties when assets live on-chain?
Digital assets can represent anything from tokenised real estate and securities to stablecoins and NFTs. These are stored and transferred on distributed ledgers, with smart contracts automating aspects of ownership, payment, and control.
However, while the technology evolves rapidly, the legal principles governing trusteeship have not. Trustees remain bound by established fiduciary duties — to act in good faith, with care, skill, and diligence, and in the best interests of beneficiaries — regardless of whether the assets are tangible or digital.
In a traditional trust, a trustee controls legal title to the assets and ensures they are administered according to the trust deed.
In a blockchain environment, these responsibilities extend to digital control — managing private keys, authorising transactions, and ensuring secure custody.
This introduces new layers of responsibility:
Key management and cybersecurity become central to asset protection.
Record-keeping obligations must reconcile on-chain transactions with off-chain legal records.
Enforceability of smart contracts must align with trust law and governing jurisdiction.
A trustee cannot simply rely on code execution; they must verify that each automated action aligns with the underlying trust deed, investor agreements, and regulatory obligations.
Smart contracts often operate autonomously, executing based on pre-set conditions. Yet, in most jurisdictions, they do not replace legal agreements.
Trustees must therefore ensure that:
The trust deed explicitly references the use of smart contracts.
Contractual terms prevail in case of a conflict between code and law.
Smart contracts are audited and validated to prevent unintended or unenforceable actions.
This requires collaboration between legal counsel, blockchain developers, and trust administrators to create a framework where the code and the law work in harmony.
Under traditional frameworks, trustees are the legal owners of trust property. But what does ownership mean when assets are cryptographic?
Courts are increasingly recognising digital assets as property, provided they can be controlled and identified. For trustees, that means ensuring:
Secure multi-signature wallets or institutional custody arrangements.
Access controls and contingency protocols to prevent loss or misuse of private keys.
Independent verification and audit trails for all on-chain movements.
A trustee who fails to maintain adequate digital custody could be in breach of their duty to safeguard trust property.
Across key jurisdictions — including the UK, EU, and offshore centres such as the Channel Islands and Cayman — regulators are starting to clarify how existing trust and securities laws apply to digital assets.
Trustees involved in tokenised or digital structures should consider:
FATF Travel Rule compliance for virtual asset transfers.
Custody regulations where they hold private keys on behalf of investors.
AML/KYC procedures adapted for digital wallets and token holders.
Jurisdictional enforceability of smart contracts and governing law clauses.
Staying compliant means continuously assessing how blockchain activities intersect with existing legal frameworks for fiduciary and regulated entities.
The future of trusteeship is likely to be hybrid — blending the efficiency of blockchain automation with the safeguards of legal oversight.
Security trustees will increasingly act as bridges between decentralised systems and regulated financial markets, ensuring that innovation is underpinned by trust, governance, and accountability.
As tokenisation accelerates, trustees that embrace this evolution — combining technological fluency with legal expertise — will play a defining role in shaping the next generation of compliant digital finance.
Conclusion
Trusteeship has always been about stewardship, confidence, and protection. Whether assets are held in a vault or on a blockchain, the trustee’s mission remains the same: to safeguard investor interests within a robust legal framework.
By integrating digital asset management and smart contract oversight into traditional trust principles, trustees ensure that technology serves — not replaces — the rule of law.
