What Happens to Your Cryptos When You Die?

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What we think: As more and more consumers invest in cryptos, a new problem arises: it is difficult for beneficiaries to access these assets after the death of the owner.

The challenge with cryptos: Crypto assets can be much more difficult to recover than traditional assets because of how blockchains work.

To access and move crypto funds, you need to know the private key: a random string of numbers and letters, much like a strong password. Crypto exchanges can only use private keys when they function as custodial wallets, which means they retain ownership of the private keys as opposed to non-custodial wallets, where the user keeps the private keys. Some of the bigger players in the market, like Gemini and Kraken, offer custodial wallets, while Coinbase offers both custodian and non-custodial wallets.

This means that if the deceased used a non-custodial wallet provider and did not take precautions to share their private keys before their death, the beneficiaries are out of luck. For example, in 2018, when the founder of the QuadrigaCX crypto exchange reportedly passed away, he took to the grave more than $ 140 million worth of crypto from investors because only he had access to the private keys.

What this means for the industry: We expect fintechs and incumbents who offer crypto services to present solutions to this problem.

Coinbase, for example, already describes the steps that the executor or family can take to access the deceased’s cryptos. This process is simpler for users when Coinbase holds the private keys, allowing it to transfer ownership directly.

Crypto firms that offer non-custodial wallets will likely add educational tools, educating users that they need to be proactive and take steps to avoid locking their crypto holdings forever to their beneficiaries. These actions could include sharing private keys in a will.

Finally, incumbent wealth managers will need to understand the challenges of dealing with cryptos, which they are increasingly likely to encounter as part of their retirement planning services as more consumers invest in them. the world in this emerging asset class.

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