Since Satoshi Nakamoto released the first Bitcoin software in 2009, virtual currencies have made significant progress, passing the market's test and establishing a foothold, transforming from a niche speculative project into a popular investment project. To this day, virtual currencies are favored for their decentralization, anonymity, and global nature, leading more people to consider adding a portion of virtual currency investment to their asset allocation. However, the advantages of decentralization and anonymity can turn into disadvantages when it comes to issues like inheritance.
Matters before death — Wallets and Private Keys
To inherit virtual assets like cryptocurrency, the most important thing is to make arrangements early in life.
In the generally anonymous and decentralized virtual currency world, the wallet and its core private key are the identification of this world. Conversely, as long as the wallet and private key are entrusted, the inheritance is directly completed.
A wallet is an application for managing virtual currency. Mainstream wallets are divided into PC wallets, browser extension wallets, mobile wallets, and hardware wallets. For PC wallets, browser extension wallets, and mobile wallets, it is important to clearly convey the type of wallet application to the heirs, while hardware wallets need to be well-preserved to ensure they can be transferred to the heirs intact.
The private key is equivalent to a username and password combined for logging into the wallet. In actual use, the private key is converted into a mnemonic phrase, and when conveying it to the heirs, it is essential to ensure the accuracy of the mnemonic phrase. If there is a password, the method of using the password also needs to be conveyed.
So how should you communicate the wallet and private keys to the heirs? Inheritance is ultimately just insurance; informing the heirs in advance may prevent some avoidable losses and disputes.
1. Paper and pen transfer
You can record the type of wallet (if it is a hardware wallet, then the wallet's location), mnemonic phrase, and other information on paper and then place it in a safe, just like the commonly used paper wallets in the crypto circle. You can put the safe's password in the will or directly store that paper wallet in a bank safe to ensure that the heir can only open the safe after the inheritance.
2. Hardware preservation
You can also store the necessary information for inheritance on a USB drive or external hard drive, set a password for protection, and keep the hardware separate from the password to ensure that the heir can only access the information after the inheritance.
3. Disability switch
You can also look for disability switch applications, such as the Sarcophagus project built on Ethereum and Arweave. Specifically, you can upload necessary information for inheritance in the application, which will be encrypted and permanently stored on the network. Meanwhile, you need to set a file decryption time and designate your heirs as recipients. Before the decryption time arrives, you can choose to extend the file's storage time or terminate the service; otherwise, the file will automatically decrypt for the recipient.
The above methods each have their own advantages and corresponding risks. Please choose a method suitable for you to pass on your virtual assets.
Matters after death — Centralized platform accounts
If there was no time to leave the wallet and private keys behind during their lifetime, there is a high likelihood that the virtual assets cannot be inherited, as decentralization is the underlying characteristic of virtual currencies. However, after many years of development, centralized exchanges have also emerged in the virtual currency world, sacrificing a certain degree of decentralization and anonymity in exchange for some security and convenience. If the deceased primarily used centralized exchange accounts to manage virtual assets, the heir can inherit the virtual assets simply by knowing the account name and submitting a claim through the platform.
The inheritance processes of different platforms may not be consistent, and the required materials vary. This article takes Binance as an example to explain how to inherit virtual currency from a deceased person's account.
Previously, Binance's inheritance claim process was for the heir to register their account, inform customer service that they are the heir and need to inherit the estate, and they could directly enter the inheritance claim page through the AI customer service link.
The required materials are not complicated. In addition to the inherited Binance account information, the heir needs to provide the following three items:
1. ID documents of the heir and the deceased;
2. Death certificate of the deceased;
3. Will, notarized inheritance rights certificate, and other related legal documents proving the right to inherit.
The above three materials need to be notarized or certified by a lawyer and accompanied by an English translation.
The third material can be more troublesome because once it reaches the stage of inheritance claims, it usually means that there was no time to leave a will for handling this virtual asset. If there is no dispute regarding the inheritance issue, you can go to a notary office to obtain a certificate of inheritance rights, which generally requires the death certificate of the deceased, proof of kinship, the deceased's personnel file, property certificates, and other materials; if there is a dispute regarding the inheritance issue, it will be necessary to hire a lawyer for inheritance dispute litigation, and the final effective judgment document is also a legal document that proves the inheritance rights.
After submitting the above materials and passing Binance's review, the heir can inherit the virtual currency from the deceased's account in their own account.
Recently, Binance launched the 'Emergency Contact and Heir' feature in its app update. Specifically, users can add emergency contacts in the 'Account Security' settings of the Binance app, following the path: Home - Personal Information - Account Security - Emergency Contacts. When an account is inactive for a long time, Binance will automatically notify the emergency contact, who has the right to apply for inheritance.
Binance founder Zhao Changpeng commented on Twitter: "This is a topic people are reluctant to mention, but humans have not achieved immortality. Every platform should have a 'will function' to ensure that when users are no longer around, their assets can be distributed to designated accounts according to specified proportions."
Binance co-founder He Yi responded in the Twitter comments section that Binance users, being mostly young and strong, greatly reduce the probability of unexpected death. However, some cases without a will have indeed been dealt with, requiring a death certificate and handling disputes regarding both direct and non-direct heirs.
Lawyer Mankun's summary
Cryptocurrency is an asset with a high threshold for ownership. You may have avoided market volatility, hacker fraud, legal risks, and accumulated considerable virtual assets, but your family may know nothing about virtual currencies. In extreme cases, there could even be situations where the investor dies, and their family or heirs are unaware of the investor holding virtual assets; or they might only know that the investor was involved in virtual currency, but have no idea what wallet was used or on which platform; or they might rely on clues left by the investor to acquire virtual currency, but encounter pitfalls during the withdrawal process, resulting in disputes.
Therefore, effective communication within the family is crucial. Lawyer Mankun suggests that you hold family meetings regularly to explain the operating principles, value, and management of virtual currencies to your family. Through education and communication, not only do you leave behind a virtual asset for your family, but you also impart your investment philosophy and management skills, which is key to ensuring the smooth transmission of virtual assets.
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Authors of this article: Ye Yang, Liu Honglin
