Article Outline (4 Minute Read):
(1) Prevalence of cryptocurrencies in Australia.
(2) Can I leave cryptocurrencies in my Will?
(3) Practical considerations for Australian cryptocurrency investors.
Australians with Cryptocurrency – Increasingly Common
The ATO estimates that as much as 500,000 to 1 Million Australians have invested in cryptocurrency. Furthermore, an ING Survey conducted last year found that as much as 70% of Australians have heard of cryptocurrency and as much as 7% of Australians own cryptocurrency.
While still a relatively new and exciting asset class for Investors, the mishaps of improperly managed cryptocurrency investments is increasingly highlighted in the media with investors dying with fortunes that their estates can never gain access to.
Can I Leave Cryptocurrencies in my Will?
There aren’t many questions in law that have a direct answer but this one is a yes. While the law is silent on succession of cryptocurrency, the law on the succession of digital property or assets such as accounts (which sometimes carry value) and the treatment of cryptocurrencies as ‘property’ is quite clear.
However, the biggest problem cryptocurrency investors will face is not theory but rather the practical aspects of cryptocurrency succession.
There are two main ways investors hold their cryptocurrency investments: self-custody or via a cryptocurrency exchange.
Investors who use this option likely hold the private keys to their cryptocurrency investments on a digital or hardware wallet in their possession. These investors need to be keen to the inherent risks of self-custody of cryptocurrency. While strategizing like a pirate and hiding your treasure where no one else might find it – the less accessible, the better can be really secure, the real problem is that ownership might end with you.
Therefore, an investor will need a plan for their estate to access their “treasure” and ensure that the plan is simple enough that an adequately informed executor with cryptocurrency knowledge can execute it.
Cryptocurrency Exchange (Or Service Provider)
Investors with cryptocurrency investments on an exchange or third party service provider need to be aware of the complex jurisdictional and contractual issues in recovering their cryptocurrency.
Even if you leave your login and password details to your estate, there is a high risk that your account will be locked for breach of the service terms of the service provider if your trusted party uses that information.
With an increasing focus on security, a login from a different IP Address or computer system other than the system the account holder originally uses will trigger a lockout by the exchange/service provider. The exchange/service provider will then require proof such as photo authentication of the original account holder to allow access to the account. A prudent exchange/service provider would never allow access into the account unless the estate of the account holder can produce proof of probate or administration.
Every cryptocurrency investor has different needs. Whether your goals are investing for the long term, asset protection or succession, there’s a unique solution for your estate.
We understand cryptocurrency, the specific problems that investors face, and the best practice to reach your goals.
Alternatively, if you are interested in which business structures are the best to hold your investments under, we can assist you with that as well.