The governor of the Bank of England has said that crypto currencies have “no intrinsic value” and people who invest in them should be “prepared to lose all their money”.
However, Dogecoin, a cryptocurrency styled on the Shiba Inu breed of Japanese dog, has risen more than 100 times faster than Bitcoin, while Ethereum recently hit record highs. We continue to see much media hype on the crypto markets promoted by the likes of Tesla’s CEO, Elon Musk.
So, what are cryptocurrencies?
They are a type of digital currency that’s controlled independently from a central bank. The currency is supported by technology called blockchain, a public ledger that can’t be changed.
Cryptocurrencies are held in a digital wallet and can be exchanged for goods and or services in the digital sphere. They can be transferred directly from person to person without using a bank or third party. In order to access this digital wallet, users must have their cryptographic keys, known as a private key and a public key.
Millions of pounds worth of cryptocurrency has been lost because owners have died without making the appropriate provisions to allow access to the currency.
Leaving cryptocurrency in your Will isn’t the issue. Like any other asset, cryptocurrency can be part of a deceased’s person’s estate and be left in a Will to beneficiaries. However, the difficulty lies in the ability to access and transfer the currency.
Even if those dealing with a deceased person’s estate knows that the cryptocurrency exists and can see it in their wallet on the ‘blockchain’, without the key, there is no way to access it. Therefore, owners of cryptocurrency need to plan where they will leave details of their private key.
You should never leave details of your private key in your Will. Wills become a matter of public record once probate has been obtained and therefore open to theft.
Some cryptocurrency users leave specific instructions on how to access the private keys. Even if a user leaves their details with a lawyer, it still wouldn’t be simple to retrieve. Passwords are changed regularly and are also tied to a Two-Factor Authentication, this means that access to a secondary device, such as a phone, would also be needed.
There are several ways to ensure that cryptocurrency assets are accessible after your death without compromising security.
1) Purchase and store cryptocurrency at a cryptocurrency bank and have the bank manage the keys on your behalf.
2) Store your cryptocurrency online in a non-custodial multi-sig wallet and sign up for a cryptocurrency inheritance solution.
3) Hold your cryptocurrency on a hardware wallet in which you have stored a copy of the private keys for the wallet, or the 12-word seed recovery phrase for the wallet along with step-by-step instructions on how the wallet can be accessed in a safe-deposit box.
I have met with clients who hold crypto assets but with no contingency plans on death. To avoid it being lost, you need to plan ahead!
