The intrinsically private nature of cryptocurrency is putting millions of pounds of assets at risk when people die because their loved ones simply lose access to them, lawyers have warned.
Crypto assets, like Bitcoin, is a highly risky, speculative investment where you could lose all of your money – or potentially make millions. Yet despite the volatility, ownership of the alternative currency is on the rise.
According to a Financial Conduct Authority (FCA) survey in late 2024, about 12% of UK adults now own cryptocurrency, up from around 4% in 2021. That’s about seven million people. And with new FCA rules allowing investors to buy cryptocurrency exchange-traded notes (crypto ETNs) from October, interest is only set to increase.
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“However, as far as I am aware, there’s no such thing for cryptocurrency. Even if there were, it is unlikely to work for private wallets.”
Can you inherit cryptocurrency?
Cryptocurrency is similar to property in that it can be owned, gifted and inherited. But the often private nature of holding crypto assets means the executor of an estate may not even know they exist.
Typically after death, if there is uncertainty about an individual’s assets, financial asset searches can be used.
These contact institutions including banks, building societies, investment managers, share registrars, pension providers and insurers to look for assets in cases like probate.
But crypto assets are held on crypto exchanges and in escrow wallets, the providers of which don’t facilitate probate like banks or portfolio managers, hindering the transfer of crypto assets after the death of their owner to their dependents, TWM said.
“Families are at risk of losing access to crypto assets after the original investor’s death – even if they are named beneficiaries in a will,” said Downey.
He called for “urgent” reform to ensure crypto exchanges are integrated into the standard probate regime.
“This will ensure estate administration runs smoothly – as it does with pensions, savings and investments – so donors’ wishes can be fulfilled and so their family and other dependents are not deprived of these assets,” he said.
How can I make sure my crypto assets aren’t lost after I die?
Digital assets – like cryptocurrencies or NFTs – are stored in digital wallets accessible only with private keys.
They are usually highly encrypted to protect the investor’s assets, making it extremely difficult for anyone other than the individual investor, or someone in possession of the key, to access these assets.
“If the original investor passes away, their crypto wallets may be effectively locked forever,” Downey said.
Crypto investors should seek professional advice when drafting their wills to ensure their beneficiaries and executors know the value of the digital assets – and, crucially, have instructions on how to access them securely and who they should go to on death.
This could be with an encrypted USB drive with seed phrases, a hardware wallet and Pin, or a “dead man’s switch” service that sends the information to the executors or beneficiary.
Crypto assets held overseas by UK investors may be especially hard to recover, as there simply aren’t good mechanisms in place to access crypto holdings in overseas jurisdictions once the original investor has passed away.
Downey said: “The reality is that crypto exchanges lag behind legacy financial institutions in providing access for personal representatives.
“Assuming digital assets will be automatically inherited after death may result in them being lost forever.”
eToro, a platform that lets investors trade and manage more than 70 cryptocurrencies as well as stocks and ETFs, said it has a duty of confidence to its clients, even after their death.
“This means we cannot disclose information about our investors to anyone other than parties who are legally entitled to it,” eToro’s website stated.
Once it receives confirmation an eToro account holder has died, it closes the investment account, including any open positions and any services connected to it, such as the eToro Money account and eToro Money crypto wallet.
“We then transfer the funds either to an estate bank account in the name of the eToro account holder or to the executor. We do not send funds to the beneficiaries of the estate,” the website said.
Executors of a deceased eToro investor need to open a ticket in its customer service centre with the details of the account to begin the process of transferring funds.
The executor will then need to provide certain documents, including:
- The death certificate of the eToro account holder
- A notarised letter from an attorney confirming who is the executor of the eToro account holder’s estate
- A notarised copy of the eToro account holder’s will confirming who is the executor of the estate
- In cases where the executor is a direct relative: A document proving the relation to the eToro account holder (e.g. marriage certificate, birth certificate)
- Proof of identity of the executor or contacting relation
- Details of an estate bank account (set up once the bank has been notified of the death, in the eToro account holder’s name)
Other crypto platforms will have their own rules about what happens when a customer dies.
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