Why crypto asset inheritance is overlooked and is hard to tackle
Cryptocurrencies are decentralized digital assets with no mandated legislative authority to regulate them. As per an estimate, 4 million Bitcoin surpassing around $120 billion in monetary value have been out of circulation either because the asset was lost or the owner died without leaving a crypto asset plan. The digital world loses millions of dollars and a significant chunk of super-limited cryptocurrencies via the absence of a contingency plan after death.
A recent survey by Cremation Institute concludes that 89% of the participants are worried about the transfer of their crypto assets post their death. Surprisingly, no respondent ticked “not at all concerned” about the transfer mechanism. Despite the majority of members concerned about passing their assets, only a handful craft an inheritance plan for themselves. What makes crypto asset inheritance an impermeable world?
Challenges in crypto assets inheritance
Unlike your physical or fiat assets, cryptocurrencies lack stringent government regulations. Most domestic laws don’t consider crypto assets as a ‘property’ for transfer and inheritance mechanisms. It becomes difficult for crypto holders to opt for estate planning after such tight scrutiny.
One such example is Matthew Moody’s tragic and untimely death. He was one of the earliest Bitcoin miners, however, his untimely death meant he had no future plans for the protection and inheritance of his millions-worth crypto assets. His father, Michael, though recovered information about his son’s crypto wallet, wasn’t able to access any of his son’s wallets. The mined crypto assets would have been stored in multiple wallets. Michael would need to know all of those to access his son’s mined cryptocurrency. That’s how crypto’s decentralized nature causes havoc if you are unprepared and lack an inheritance plan.
Usually, when someone dies, they leave a will behind to dictate the distribution of assets. However, the self custody nature of cryptocurrency makes it difficult to be listed in a will. Once probated, wills become a matter of public record. Users just cannot mention their passwords, access keys, or seed phrases on a paper sheet.
Moreover, the asset transfer or claiming process is highly complex. As per the terms of conventional estate planning, your fiduciary should be able to access your digital assets and online accounts. The mechanism also requires you to appoint a special trustee to manage your digital assets. Given the self custody nature of crypto assets and the probability of security breaches, the process has garnered enough skepticism.
Under estate planning, an individual creating a will can safely leave his details of assets to his/her lawyer. However, that’s not the case with crypto assets. There’s a potent threat of identity theft associated with simply transferring your crypto credentials to a third party.
Another challenge with traditional estate planning in the crypto world is wholesome technicalities that most regulatory authorities or trustees aren’t prepared for. Opting for conventional estate planning will require you to regularly update your crypto credentials, passwords, and two-factor authentication. This could be equally problematic for users and can create unnecessary hassle in operating crypto wallets.
There comes Safient into the picture. The platform uses decentralized storage, smart contracts, and cryptography techniques to build a protocol that helps to store, recover, inherit crypto assets and other confidential information in a purely trustless manner. You can secure all your crypto portfolios on the platforms hassle-free.
Global laws dictating crypto asset inheritance mechanism
United Kingdom: In a revolutionary move, the UK now considers crypto assets as ‘property’ and is planning to craft a detailed legislature on inheritance mechanisms for crypto holders.
Singapore: Cryptocurrency trading is legal and backed by financial authorities. The liberal laws allow investors to opt for digital inheritance planning after legal authentication and license approval.
Canada: Canada and legalized crypto exchange thus paving a way for hassle-free crypto transfers and inheritance plans.
Other countries that have regulated crypto assets include the Philippines, Germany, Australia, Switzerland, Netherlands, and South Korea. This is the necessary step in paving the way for a legalized inheritance planning for crypto assets.
USA, South Africa, and Brazil are looking forward to proposing a regulatory mechanism for cryptocurrencies and in turn, their inheritance mechanism. While countries like China, Algeria, and some middle-east countries have planted a blanket ban on crypto transfers.
Even with a properly structured regulation around crypto assets, at the core of crypto assets, it comes with a single ownership system. The tight self custody makes it impossible for your heirs to access your assets following any tragic event. It is stressful to see millions of limited crypto coins simply getting abandoned because their holders didn’t see their deaths coming and have a chance to craft an inheritance plan for themselves.
We at Safient understand the needs of our consumers and envision creating a digitized, trustless, secure and yet convenient cryptocurrency inheritance plan using decentralized storage, smart contracts, and cryptography techniques. Safient’s safe also stores critical information in encrypted form to access and recover the assets and thus bridging the gap between the holders and the heirs in a safe way. We have made great progress so far to prove the prototype and we are close to delivering the first usable version to the public. Until then, you can follow our progress through Twitter and Discord. Check out https://safient.io for more details.
A few more resources to learn more about Safient:
Resources and roadmap: https://resources.safient.io