In early 2019, Gerald Cotton, the C.E.O. of a Canadian digital exchange called Quadriga CX, unexpectantly passed away. At the time of his death, Quadriga CX held almost 200 million in crypto assets for various clients. The problem was that Gerald Cotton, who was very concerned about security and privacy, did not leave any digital or hard copies of his passwords and did not share them with anyone else. As a result, the 200 million in crypto was not easily available to retrieve, which led to lawsuits. Whether a person invests in cryptocurrency as a personal investment or as part of a business portfolio, it is important to have contingency plans to handle the cryptocurrency once the owner passes away.
What Is Cryptocurrency?
Cryptocurrency (a.k.a. crypto) is a digital asset that works using a technology called the blockchain. The blockchain is a decentralized ledger that is accessed through multiple computers and servers around the world. These cryptos are given a monetary value, much like stocks or commodities which people can buy or sell on the market or trade with each other for goods or services.
What Is The Appeal Of Cryptocurrency?
The appeal of cryptos is the belief that it is more secured than other forms of currency and transactions. The other appeal is the belief that it allows for more anonymous purchases or transactions and bypasses central banks. Lastly, many people are attracted to the volatility of the currency where they can make a quick profit due to the sudden appreciation or depreciation of a specific currency.
Are Cryptocurrencies Legal?
It depends where you live. In the United States, cryptocurrency is legal. In places like China, however, cryptos are banned and illegal. The problem is that although crypto may be legal, it is not necessarily regulated. As such, if you lose money in a crypto scam or hack, there are few options to recover your losses.
How Is Cryptocurrency Secure?
To trade into cryptocurrency, a person must first open up an electronic waller which is a unique sixteen-digit digital address. To open the wallet, a person must be able to provide a “KYC,” which stands for know your client. A KYC is a government-issued photo I.D. When a person opens a wallet, they are usually given a set of digital phrases that they must place to access the wallet for future transactions.
What Happens If A Person Dies With Cryptocurrency Assets?
If a person dies with crypto assets, then crypto will be estate property. The courts will first look to see if the deceased had a will that dictated what should happen to the crypto. They will, first and foremost, follow those instructions. If the person had a will but did not include the crypto assets, then the court will try and figure out, based on the distribution of other assets in the will, what the deceased intended. If this is not possible or there is no will, then the courts look to intestate property laws to distribute the assets.
The ownership of the crypto will be estate property. However, obtaining crypto is a different issue. If the deceased did not leave their e-wallet address and passwords or passphrase available for someone to find and use, then it will become difficult, if not impossible, to access the crypto assets.
How Can A Crypto Owner Prepare For Death?
Protecting crypto assets after death is a very simple process. A crypto owner should take the following steps to protect their assets:
- Keep a detailed list of all crypto assets and e-wallets they are located in and how to access them.
- Store the information in a secured location such as a bank safe deposit box or with a lawyer.
- Include the assets as part of the last will.
Contact Dowd Law
If you have questions about your crypto assets and how to plan for them in your estate, contact Dowd Law. We will make sure to include your crypto assets within your will and keep the locations and passwords of your crypto assets in the highest confidential regard.