How to inherit cryptocurrency: legal classification and practical challenges
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How to inherit cryptocurrency: legal classification and practical challenges
In theory, inheritance is fine; in practice, all the problems are in the details.
Navigating Web3 tides with focused insightsBy: Xu Qian, Li Xinyi
As digital assets become increasingly prevalent, the inheritance of virtual currency is gradually emerging as an unavoidable legal and practical issue. When life ends, what becomes of wealth stored on blockchains? Is it protected by law, and what challenges arise during inheritance?
This article explores the legal characterization and real-world challenges of virtual currency inheritance from a lawyer's perspective, combining statutory provisions with landmark cases.
A Landmark Ruling from India's Madras High Court
In October 2025, India’s Madras High Court issued a landmark ruling recognizing cryptocurrency as property under the law—capable of being owned, transferred, and held in trust. The case stemmed from the freezing of 3,532 XRP tokens belonging to an investor on the WazirX exchange. The court ultimately affirmed that these assets should be protected as property. This decision not only provided legal reassurance to India’s digital asset market but also marked a growing global recognition within legal systems of "virtual property." In other words—virtual currencies have evolved from being seen as “digital game tokens” into recognized “property.”
In recent years, the legal view of “cryptocurrency as intangible property” has increasingly gained ground, reflecting the evolution of how global legal systems perceive digital assets and providing a legal foundation for addressing virtual currency inheritance.
Legal Nature of Virtual Currency
The property status of virtual currency is now widely accepted across judicial systems worldwide. Although virtual currencies are technologically based on data, their characteristics—including possessibility, transferability, and economic value—clearly align with core features of property. Because of this classification, civil and criminal cases involving ownership disputes, infringement, fraud, and more related to virtual currencies have emerged globally, compelling legal systems to respond to this new form of asset.
This convergence in judicial understanding paves the way for the inheritance of virtual currency. Once recognized as property, virtual currency naturally falls within the scope of inheritance law.
Under China’s legal framework, Article 127 of the Civil Code innovatively states: “Where laws provide for the protection of data and virtual network property, such provisions shall apply.” This establishes a legal basis for protecting virtual property.
Additionally, Article 1122 of the Civil Code adopts an inclusive legislative approach in defining inheritable estate as “lawful personal property left by a natural person at death.” This breaks away from the previous Inheritance Law’s restrictive itemized list, greatly expanding the scope of inheritable assets and making it possible to include new forms such as virtual network property and digital currency.
On the regulatory front, documents like the “Notice on Preventing Bitcoin Risks” and the “Announcement on Preventing Risks of Virtual Currency Trading Speculation” emphasize risk prevention but also classify Bitcoin and other virtual currencies as “specific virtual commodities.” From a jurisprudential standpoint, this designation effectively acknowledges their property nature, offering a logical starting point for including virtual currencies within inheritance frameworks.
Practical Challenges in Inheriting Virtual Currency
In theory, inheritance poses no problem; in practice, all problems lie in the details.
Mainstream cryptocurrencies such as Bitcoin and Ethereum have massive market capitalizations, meaning many investment portfolios contain significant digital wealth—necessitating considerations around wealth succession. While evolving judicial perspectives and broad statutory provisions have opened the door for virtual currency inheritance, practical implementation still faces multiple hurdles.
1. Proof Challenges: How to Prove Intangible Assets?
Due to blockchain’s decentralized and anonymous nature, establishing ownership of virtual currency assets presents certain obstacles. Bank accounts have transaction records; real estate has registration documents. But evidence of ownership for virtual currency lies in technical layers: private keys, seed phrases, exchange accounts… These are not traditional legal instruments. Instead of conventional title certificates, heirs may need to present electronic data linking the deceased to the virtual currency. Yet, can such evidence sufficiently prove asset ownership, intent for disposition, and heir eligibility? Moreover, most users do not clearly preserve relevant credentials during their lifetime, causing much digital wealth to vanish into the vastness of blockchain data.
2. Inheritance Mechanisms: Can the Process Work Smoothly?
The storage location of virtual currency directly determines the difficulty and process of inheritance.
On exchanges (e.g., Binance, Coinbase): Heirs can contact customer service and submit documentation such as death certificates, probate orders, and identity proofs. After internal review, platforms may transfer assets. However, differing national laws mean this process can be lengthy, and there is risk of policy changes or platform failure. Whether platforms will allow transfers remains uncertain. Alternatively, heirs must know login passwords and complete various verifications to access funds.
In wallets: Heirs must possess the private key or seed phrase. Losing this alphanumeric sequence is equivalent to losing the only key to a safe.
3. Technical Barriers: The Dilemma Between Private Keys and Security
The fundamental challenge in inheriting virtual currency lies in its technical essence.
In the crypto world, private keys equal ownership. Without them, any will is just empty words. If the deceased did not properly disclose the private key or seed phrase to heirs, the associated assets are likely lost forever. In 2018, Gerald Cotten, founder of Canadian exchange QuadrigaCX, died unexpectedly. As the sole holder of cold wallet private keys, his death rendered $147 million in cryptocurrency inaccessible to users. This case exposed the fragility of centralized storage mechanisms regarding inheritance. Additionally, Chainalysis reports indicate that approximately 20% of all bitcoins are permanently dormant due to lost private keys or owner deaths—an extremely costly form of “digital silence.”
Even if heirs obtain the private key, they must possess sufficient technical skills. A single input error or accidental click on a phishing link could result in permanent loss. Never before has inheritance of digital assets been so dependent on technical proficiency.
4. Valuation and Division: Legal Issues Caused by Volatility
Cryptocurrency prices fluctuate wildly: today’s substantial inheritance might halve tomorrow—or double. Legally, which point in time should be used for valuation? How can fair distribution be achieved? For wallets holding multiple tokens, division becomes nearly a “technical engineering project.” In most cases, converting assets to cash before division is more practical—but this raises new questions: How can liquidation occur while remaining compliant?
Lawyer’s Advice: Estate Planning for Virtual Currency Holders
As lawyers, our advice is—don’t leave your digital legacy to fate.
Virtual currency holders should fully recognize the property nature of their holdings and the growing legal recognition and protection of such assets. Given the unique and complex nature of virtual currency inheritance, holders should:
1. Clearly Document the Existence and Amount of Virtual Currency Assets
The hidden nature of digital assets is the first barrier to inheritance. If heirs are unaware of the assets’ existence, any inheritance plan is meaningless. We recommend that virtual currency owners record key information such as: types of assets (e.g., Bitcoin, Ethereum, other tokens); specific storage locations (e.g., centralized exchanges, cold wallets, self-hosted hot wallets); public key addresses; and optionally, private keys or seed phrases (preferably printed or handwritten on paper—not stored digitally on computers or electronic devices). For exchange accounts, document platform names, registered email addresses/phone numbers, and passwords.
2. Securely and Encryptedly Store Critical Data Such as Private Keys and Seed Phrases
Hardware wallets currently offer one of the safest storage solutions, isolating private keys in offline environments and significantly reducing the risk of cyberattacks. Private keys and seed phrases represent absolute control over assets—their security equals asset security. Loss means permanent asset loss; leakage leads to theft. Backups (such as USB drives or written records) can be stored in multiple secure locations, such as safes.
3. Establish a Digital Asset Inheritance Plan or Trust Arrangement
By transferring wallet ownership to a trust, virtual currencies can be incorporated into a trust structure, allowing appointed trustees to professionally manage the assets. Set up a wallet requiring 2-of-3 private keys to authorize transactions. Distribute the three keys among the owner, heir, and a lawyer or another trusted third party. Upon initiation of inheritance, the two surviving parties can cooperate through verification to transfer assets—combining decentralized security with legal oversight.
4. Monitor Exchange Platform Policies and Regulatory Changes
If assets are held on third-party trading platforms, platform stability and compliance are crucial. Policy shifts or regulatory actions could freeze or even revoke access rights. It is essential to understand and monitor platform rules and relevant regulations to mitigate potential risks and adapt to changes.
In the world of crypto, the greatest risk is often not theft—but being forgotten. Only through proactive planning can digital wealth retain its value and become a stable part of a lasting legacy.
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