What is Cryptocurrency?
Cryptocurrency is a digital payment system that allows you to hold the currency in a digital wallet. It is an intangible asset unlike cash, so there is no physical hard-copy asset. The digital wallet is a web-based or hardware-based system.
The digital wallet may be accessed by the use of a key that is specific to you. There is a public key and a private key.
The public key allows people to send currency to you, and so is public for anyone to be able to know.
The private key is your login and password for the wallet and so is only known by you. This allows you to access the wallet and move funds. This must therefore be kept private and confidential.
The digital wallet should be treated the same as a regular wallet; and as in real life, a wallet must be kept secure.
How is cryptocurrency different to other assets in a will?
Like any other asset, cryptocurrency can be part of a deceased’s estate (money, property and possessions) and be left in a will to beneficiaries. However, stating who cryptocurrency should be left to is the easy part. The hard part is having the ability to access and transfer it.
Unlike property, for example, where physical access can be as simple as signing some papers and the turn of a key, it’s not possible to access cryptocurrency without holding the private key, which, as stated earlier, should be kept as secret as possible.
Millions of pounds worth of cryptocurrency has been lost forever because owners have died without leaving a contingency plan. According to a 2020 study by the Cremation Institute, nearly 90 per cent of all cryptocurrency owners are worried about what will happen to their crypto when they die, but rarely do they make provisions for ensuring it is not lost forever.
Can someone access a cryptocurrency wallet without the private key?
Even if a beneficiary is explicitly named in the will as being entitled to someone’s cryptocurrency, it’s simply not possible for them or a personal representative to access a digital wallet without holding the private keys. Even if you know the crypto exists and you can see that it is sitting in a wallet on the blockchain, without the keys there is no way to access it. Therefore, owners of cryptocurrency should always have a contingency plan in the event of their death.
Ways to ensure that beneficiaries have access to a digital wallet
To ensure that any cryptocurrency assets are accessible by loved ones and that this does not compromise the safety or security of those assets, a client could include the cryptocurrency in their will and create a separate cryptocurrency access guide or digital inventory for the beneficiaries.
To be effective, the access guide needs to be updated regularly and stored securely. It needs to include all passwords to access computing devices, all usernames for online accounts and private keys.
Security of such access guide or inventory is paramount. There are online password manager sites which can help. It is recommended also storing an access guide with the Will to be held securely, such as BTWCs Document Safe Custody option.
If a person dies without leaving a digital inventory but the executors are aware of crypto assets, then the executors could arrange for an expert to search any computing devices for any cryptocurrency wallets and account details.
What if I lose capacity and I am unable to update the access guide?
In the event of loss of mental capacity, a Lasting Power of Attorney (“LPA”) could be put in place. The client could consider including explicit authority for the attorney to deal with any crypto assets.