INTEROFFICE MEMORANDUM

TO: Christina McDonagh, Gannett Trust

FROM: John McCarthy

SUBJECT: Twenty Good Questions

DATE: October 31, 2025

1. Some have said, “there is bitcoin, then there is everything else.” What makes bitcoin distinct from other digital assets?

Bitcoin’s distinction stems from its monetary and governance design, which prioritizes long-term predictability. Bitcoin operates under a transparent and fixed monetary policy, with supply issuance governed by a predetermined schedule. Importantly, altering that policy would require broad, global consensus across a decentralized set of users, miners, developers, and node operators. This intentionally high coordination threshold has proven resistant to unilateral or discretionary change over time.

As the network has grown, that resistance has strengthened. Increased participation has led to greater decentralization, which in turn raises the cost of making controversial changes. This dynamic materially differentiates bitcoin from most other digital assets, many of which retain identifiable control points, discretionary monetary frameworks, or reliance on ongoing protocol stewardship.

From a fiduciary perspective, these structural characteristics translate into lower long-term uncertainty. While other digital assets may offer faster innovation or broader functionality, they typically introduce governance and monetary risks that allocators must underwrite.

For that reason, bitcoin increasingly stands apart not only within the digital asset universe, but across asset classes more broadly. Its distinguishing feature is not short-term performance or feature sets, but the durability and predictability of the rules under which it operates - an attribute that becomes more valuable as investment horizons lengthen.

2. Could bitcoin be replaced by a “better” technology?

That depends on how “better” is defined. Bitcoin’s primary function is not to maximize feature velocity, but to minimize long-term uncertainty for holders seeking a durable store of value. Any alternative technology seeking to replace bitcoin in that role would need to demonstrate equal or greater resistance to change. The replacement would imply a higher degree of decentralization, broader global participation, and a comparable operating history across market cycles. That is a high bar.

Bitcoin’s first-mover advantage, network effects, and track record are material, making displacement increasingly difficult over time. While competing digital assets may offer differentiated features, those features often come with governance or monetary trade-offs that are relevant for long-horizon allocators.

It is also important to distinguish between protocols and applications. Protocols tend to consolidate around dominant standards, while innovation occurs at the application layer built on top of them. In that sense, bitcoin is better understood as a base monetary protocol rather than a product competing on features. This distinction matters. The durability of bitcoin’s role is less about preventing innovation elsewhere, and more about maintaining the trust, neutrality, and coordination required for a global monetary network. To date, no alternative has demonstrated those properties at a comparable scale.

3. Who regulates digital assets?

In the U.S., digital assets are regulated through overlapping jurisdiction rather than a single regulator. Oversight depends on the activity being performed, not the asset alone.

Broadly:

• The SEC regulates digital assets that are deemed securities.

• The CFTC oversees commodities and derivatives markets, including bitcoin and bitcoin-linked derivatives.

• FinCEN enforces AML and KYC requirements.

• The IRS governs tax treatment.

• Federal and state banking and money transmission regulators oversee payments, custody, and related financial services activities.

For regulated banks and trust companies, this framework is further shaped by the institution’s primary prudential regulator. In many cases, that primary regulator provides a comprehensive supervisory regime that supersedes overlapping state requirements. For example, an OCC-chartered bank offering bitcoin-related services is generally exempt from state money transmission licensing, but instead operates under a parallel compliance and examination framework enforced directly by the OCC.

The key point is that regulatory clarity is achieved not by simplifying the asset, but by structuring the activity within an appropriately regulated entity. This is why banks and trust companies play an increasingly central role in digital asset markets: they operate within well-defined supervisory regimes that can be understood and underwritten.

4. Does blockchain offer better transparency and immutability?

Blockchain systems can offer a different form of transparency and immutability, but the distinction is important. Traditional financial systems are capable of high levels of transparency; however, that transparency is typically permissioned and revocable, provided through trusted intermediaries and subject to change by centralized authorities. Records can be amended, corrected, or obscured through administrative or legal processes.

In contrast, public blockchains, and bitcoin in particular, provides permissionless and independently verifiable transparency. Transactions are publicly observable and can be validated without reliance on a central authority. It’s not that transparency or immutability is “better,” but that it is structural rather than discretionary and this distinction can reduce certain forms of counterparty and record-keeping risk, particularly over long time horizons.

5. Does blockchain and/or cryptocurrency offer lower costs?

Costs depend on the asset, the transaction size, and the activity being evaluated including the custody, transfer, settlement, or ongoing administration. For low-value, high-frequency transactions, traditional payment rails may remain more cost-effective.

However, when comparing the storage and transfer of high-value, bearer-like assets, bitcoin can offer meaningful cost advantages. A common comparison is gold, which has historically served as a long-term store of value. Securing and transferring large quantities of physical gold involves material costs related to custody, insurance, transportation, and settlement risk. By contrast, bitcoin can be securely stored and transferred globally at relatively low marginal cost, without reliance on physical infrastructure.

6. Can digital assets be seized by governments, say for illegal activity or bankruptcy?

Governments have the legal authority to compel the transfer of assets through court orders, including digital assets. For bitcoin, control is ultimately determined by possession of the private keys. When bitcoin is held through intermediaries, such as exchanges, custodians, or regulated financial institutions, those entities can be compelled to freeze or transfer assets in accordance with legal process, similar to traditional financial accounts.

When bitcoin is held in self-custody, seizure without the cooperation of the holder is operationally more complex, as there is no centralized intermediary controlling access. That said, the legal obligations of the individual remain unchanged. Courts may still impose penalties, sanctions, or other legal consequences, regardless of the technical custody arrangement.

7. If I can send you money directly, without any intermediary, what are some top pros and some top cons?

The primary advantages of direct, peer-to-peer transfers are finality of settlement and reduced reliance on intermediaries. Transactions can be executed globally, with settlement occurring on the network without the need for correspondent banks or clearing layers.

The trade-off is an increased level of operational responsibility. Without intermediaries, users assume direct responsibility for transaction accuracy, key management, and error mitigation. Transactions are generally irreversible, and there is no built-in recourse mechanism. For institutional users, this trade-off often leads to hybrid models that preserve the settlement benefits of the network while introducing governance, controls, and oversight through regulated entities.

8. Does digitization offer fractional ownership for large assets? For example, can a large commercial building be tokenized?

Fractional ownership of large assets is not new. Structures such as REITs, funds, and securitized vehicles already provide economic fractionalization within existing legal and regulatory frameworks.

Digitization and tokenization can improve operational efficiency, transferability, and record-keeping, but they do not eliminate the need for centralized management, legal enforceability, and governance. Tokenized representations of real-world assets ultimately rely on off-chain legal rights and the entities that administer them.

Tokenization can enhance access and efficiency, but it does not remove counterparty or governance risk inherent in managed assets.

9. What are some key differences between custodial services for securities and custodial services for digital assets?

At a high level, the objectives are similar: safeguarding assets, maintaining accurate records, and operating within a regulated framework. The primary difference lies in how control is established. Traditional securities custody is account-based and relies on centralized ledgers and transfer agents. Digital asset custody, by contrast, is established through cryptographic credentials rather than account entries.

For bitcoin in particular, this distinction is significant. Bitcoin’s design includes minimizing certain long-term risks by reducing reliance on intermediaries. Introducing custody creates a degree of counterparty and operational risk but adds the benefits of institutional controls, compliance, and governance.

10. What are some fiduciary standards in digital assets?

Fiduciary standards for digital assets are grounded in the same core principles that apply to traditional assets: duty of care, duty of loyalty, prudent risk management, and adherence to governing documents.

In practice, this means that digital assets must be administered within a framework that emphasizes clear ownership and control, has robust operational controls, appropriate custody and segregation of assets and offers ongoing monitoring, reporting, and auditability.

Where digital assets differ is not in the fiduciary obligation itself, but in the operational and governance considerations required to meet that obligation. Key management, transaction authorization, and incident response are central fiduciary functions in digital asset administration.

11. Can global banks be custodians of digital assets?

Yes. Global banks and trust companies can act as custodians of digital assets, subject to appropriate supervisory frameworks. In recent years, U.S. regulators have clarified that banks may provide digital asset custody under existing law, provided they maintain prudent risk management, operational controls, and compliance frameworks. Guidance and supervisory activity from agencies such as the OCC and FDIC have shifted the discussion from questions of permissibility to questions of execution, controls, and supervision.

While digital assets like bitcoin are permissionless at the protocol level, institutional custody remains a regulated activity. As a result, banks and trust companies that offer these services do so within established frameworks making them more accessible and underwriteable for institutional allocators.

12. If an American citizen profits from digital assets, is there a tax bill?

Yes. Digital assets are generally treated as property for tax purposes, and gains or losses are subject to capital gains tax when realized. Tax treatment depends on the nature of the activity e.g. trading, long-term holding, mining, or income received in digital assets, as well as the holding period. As with other taxable assets, accurate record-keeping and reporting are essential.

13. What is Collaborative Custody and is it unique to digital assets?

Collaborative custody refers to a custody model in which control is shared among multiple independent parties, such that no single party can unilaterally move assets.

The concept itself is not new. Structures exist in traditional finance, such as dual-control arrangements, or multi-signature authorization requirements. What digital assets enable is a cryptographic implementation of these controls, where coordination among multiple key holders is enforced at the protocol level rather than through contractual or procedural safeguards alone.

For bitcoin, collaborative custody allows risk to be distributed across parties, reducing single-point-of-failure exposure while remaining customizable to governance needs. This model can align well with fiduciary oversight, segregation of duties, and internal control requirements.

14. Are there digital assets currently that are not a unit of account, i.e. a “currency”?

Yes. Many digital assets are designed to serve functions other than acting as a currency, including governance rights, access to applications, or representation of contractual claims, etc.

15. Which geography or jurisdiction do most digital assets reside currently?

The answer depends on the structure of the asset. Assets recorded on centralized ledgers generally reside within the jurisdiction of the entity maintaining that ledger. By contrast, decentralized assets like bitcoin do not physically reside anywhere. Only the keys controlling access to those assets are held by individuals or institutions in specific jurisdictions.

Ownership of bitcoin is globally distributed and not precisely measurable due to private self-custody. Broadly, however, ownership patterns appear to track global capital distribution rather than any single geography.

16. How are institutions allocating to bitcoin today?

Institutional exposure to bitcoin has increased primarily through financial instruments, such as ETFs, funds, and corporate balance-sheet holdings. These approaches provide price exposure within familiar operational and regulatory frameworks.

Direct ownership, where institutions hold private keys themselves, remains less common, reflecting the additional governance, operational, and compliance considerations involved. But this progression is typical, institutions often begin with synthetic or intermediated exposure before evaluating whether native ownership aligns with their risk tolerance, operational maturity, and fiduciary responsibilities.

17. How has bitcoin’s correlation to traditional asset classes evolved over time?

Bitcoin’s correlation with traditional asset classes has varied across market regimes. In recent years, particularly during periods of expansive monetary policy or broad risk-on conditions, bitcoin has shown higher correlation with equities.

Over longer horizons, correlation has been inconsistent. This underscores the importance of evaluating bitcoin not solely through short-term correlation metrics, but within the broader context of time horizon, portfolio role, and macroeconomic environment.

The reported correlation between bitcoin and the S&P 500 can be found here:https://newhedge.io/bitcoin/us-equities-correlation

18. Should fiduciaries view bitcoin differently from the broader category of digital assets?

Yes. From a fiduciary perspective, bitcoin presents a materially different profile than most other digital assets. Bitcoin’s design prioritizes monetary predictability, decentralization, and resistance to discretionary change.

Many other digital assets emphasize application functionality, governance flexibility, or ecosystem development, which introduce various risk factors. Bitcoin should be evaluated separately, based on its intended role as a long-term asset with distinct governance and monetary characteristics, rather than grouping it with the broader digital asset universe.

19. Is quantum computing a threat to bitcoin?

Quantum computing is a theoretical long-term consideration for many cryptographic systems, not just bitcoin. Bitcoin’s consensus mechanism and supply issuance are not directly threatened by increased computational power due to built-in difficulty adjustment (which maintains the planned supply issuance regardless of compute power directed toward bitcoin mining).

The more relevant discussion concerns cryptographic primitives used for key security. While sufficiently advanced quantum computing could, in theory, weaken certain forms of encryption, such capabilities do not currently exist at scale.

Importantly, cryptographic systems evolve. Research into quantum-resistant cryptography is ongoing, and protocol upgrades could be implemented if warranted.

20. Will the government ban bitcoin?

Governments can and do regulate activities involving bitcoin, including exchanges, custody, taxation, and reporting. Some jurisdictions have imposed restrictions or bans on certain uses. However, bitcoin itself is a decentralized protocol that does not depend on any single jurisdiction to operate. As a result, regulatory actions tend to affect access points and intermediaries, rather than the network itself.

For institutional allocators, the relevant consideration is not whether bitcoin can be prohibited in the abstract, but how regulatory frameworks shape permissible forms of ownership, custody, and use within a given jurisdiction. To date, regulatory trends in major markets have focused more on integration and supervision than outright prohibition.