Recently, a KOL in the crypto circle published an article on a self-media platform, stating that Binance has added 'emergency contact' and 'heir' functions in the updated version of its app. At the same time, this blogger mentioned that every year, people who die unexpectedly worldwide hold crypto assets worth over 1 billion USD. If not transferred to relatives and friends in time before death, they will eventually be inherited by the exchange (crypto assets stored in exchanges will remain there, while those in cold wallets will stay forever in the wallet address).
And this new feature from Binance can indeed solve the inheritance problem of crypto assets for web3 practitioners, which is a great merit.
Before formally analyzing the legal issues of inheriting crypto assets, Lawyer Liu must reiterate that this article is merely for popular science analysis and does not recommend or endorse any virtual currency or virtual currency exchange.
I. Practical Approaches to Crypto Asset Inheritance
According to Binance's official website, users can set an emergency contact in the app. If the user's account remains dormant for a long time (default is 12 months, which can be set to 2 years or 3 years, etc.), Binance will contact the user's designated emergency contact. This emergency contact may gain the right to inherit or own the user's account assets.
Users can also delete or modify emergency contacts at any time.
II. Does Chinese law support the inheritance of crypto assets?
The aforementioned practices have resolved the inheritance issue of dormant accounts in decentralized exchanges, and as a web3 legal practitioner, Lawyer Liu cannot help but consider whether this approach will encounter legal obstacles.
(1) Does virtual currency belong to property?
In Lawyer Liu's article yesterday ((Judicial Disposal of Virtual Currency, Article Published by the People's Court Daily: Can Entrust Third-party Institutions)), it mentioned that the Shenzhen Intermediate Court recognized the property attributes of virtual currency in civil and criminal law in its submission to the People's Court Daily, specifically for the following reasons:
First, in civil judgments, virtual currency is recognized as having exclusivity, controllability, and liquidity characteristics, similar to virtual currency goods, and it should be acknowledged that virtual currency has property attributes.
Second, Article 127 of China's (Civil Code) clearly states: 'If the law provides for the protection of data and network virtual currency property, it shall be implemented in accordance with its provisions', proving that China's Civil Code supports the protection of virtual property.
Third, Article 83 of the (Minutes of the National Court Financial Trial Work Conference) (Draft for Soliciting Opinions) also states that 'virtual currency possesses certain attributes of network virtual property.'
Fourth, in the field of criminal trials, the Supreme Court's case library has also clearly stated that virtual currency belongs to property in the criminal law sense and has property attributes in terms of criminal law.
In addition, according to Lawyer Liu's understanding of China's virtual currency regulatory policies, in the (Notice on Preventing Bitcoin Risks) from December 2013, China defined Bitcoin as 'a specific virtual commodity'; in the (Announcement on Preventing the Speculation Risks of Virtual Currency Transactions) from May 2021, virtual currency was defined as 'a specific virtual commodity' (see: (Summary of Regulatory Documents for the Web 3.0 Industry in Mainland China)). The scope of 'virtual commodities' has upgraded from a single Bitcoin to all types of virtual currencies.
In summary, virtual currency belongs to property.
(2) Legal Provisions on Inheritance
In China's (Civil Code) inheritance chapter, it is clearly stated that the scope of inheritance is the personal legal property left by a natural person upon death.
Since virtual currency is property under Chinese law, when legally held by citizens, it can certainly be arranged for inheritance through a will.
Common forms of wills under the (Civil Code) include: handwritten wills, commissioned wills, printed wills, audio-visual wills, oral wills, notarized wills, etc. Meanwhile, wills can be revoked or changed at any time.
Setting an emergency contact in the app and granting them the right to inherit assets does not violate China's civil law emphasis on the principle of 'autonomy of will' for citizens, so it is also valid under Chinese law.
III. Difficulties in Executing Crypto Inheritance
However, there needs to be a turning point here.
The provisions of the '9.24 Notice' issued by ten ministries on September 15, 2021, still apply, which explicitly prohibits overseas virtual currency exchanges from providing services to residents in the mainland through the internet. The ten ministries include the Supreme People's Court.
If Zhang San sets his friend Li Si as his emergency contact in a virtual currency exchange app and can inherit his assets worth 100 million, and upon Zhang San's passing, Li Si indeed inherits this 100 million; when Zhang San's son Zhang Xiao San (this name seems a bit awkward) learns of this, he sues in court requesting Li Si to return the inherited assets to Zhang Xiao San. The main argument is that virtual currency exchanges cannot operate in the mainland, hence Zhang San's actions on the exchange software are invalid due to violating China's mandatory regulations (which means the will inheritance is invalid), and Zhang San's estate should undergo statutory inheritance, to be inherited by Zhang Xiao San.
So, how should this situation be resolved? As a criminal lawyer, Lawyer Liu will no longer showcase his shallow knowledge of civil law, and interested readers can discuss this privately.
IV. Conclusion
Virtual currencies, represented by Bitcoin, have been around since 2008, but from a legal perspective, virtual currencies are still emerging phenomena or technologies (not only in China, but this is the case in the laws of various countries). Lawyer Liu believes that disputes and controversies related to criminal and civil matters concerning virtual currencies will continue to arise in the future, but we believe that some web3 entrepreneurs will continue to positively build, whether actively or passively, and the law will also continuously adapt to new technologies and the changes they bring to this world.
