Seven million UK investors' cryptocurrency assets are at risk; learn how to protect yours

Even when a person leaves a will specifying who they want to inherit their assets, cryptocurrency wallet regulations make it difficult to find them after they pass away

Lawyers have warned that the inherently private nature of cryptocurrencies is putting millions of pounds of assets at risk when people pass away because their loved ones no longer have access to them.

Cryptocurrency investments, such as Bitcoin, are extremely risky and speculative; you could lose all of your money or even make millions. Ownership of the alternative currency is increasing, though, in spite of the volatility.

About 12 percent of UK adults now own cryptocurrency, up from about 4 percent in 2021, according to a Financial Conduct Authority (FCA) survey conducted in late 2024. About seven million people are involved. Additionally, interest is only expected to rise as a result of new FCA regulations that permit investors to purchase cryptocurrency exchange-traded notes (crypto ETNs) starting in October.

But since cryptocurrency assets are not immediately available or even traceable using current methods when someone passes away, many UK cryptocurrency investors are unaware that their investments could be lost.

Additionally, investors cannot designate solicitors or direct beneficiaries to handle their assets after they pass away on the majority of cryptocurrency exchanges. This greatly complicates probate.

TWM Solicitors, a private wealth and family law firm, has warned that families of those cryptocurrency investors may lose access to millions of pounds of cryptocurrency assets that they would otherwise inherit from a loved one.

Crypto companies with clients in the UK will soon need to adhere to strict guidelines on operational resilience, consumer protection, and transparency, just like traditional finance companies, according to new regulations the government announced in May. However, it's unclear what this means for asset transfers.

Stuart Downey, a partner at TWM Solicitors, stated: "A financial asset search can be used to find the majority of common financial assets. It is reasonably priced and reaches hundreds of organizations.

However, to the best of my knowledge, cryptocurrency does not exist. Even if there were, it is unlikely to work for private wallets.

Will cryptocurrency be inherited?

Cryptocurrency can be owned, given as gifts, and inherited, just like real estate. However, the executor of an estate might not even be aware that crypto assets exist due to their frequently private nature.

Financial asset searches can be utilized if there is doubt regarding a person's assets, usually after death.

These make contact with organizations such as banks, building societies, investment managers, share registrars, pension providers, and insurers in order to search for assets in situations such as succession.

Cryptocurrency assets are stored on cryptocurrency exchanges and in escrow wallets, whose providerssuch as banks or portfolio managersdo not assist with probate, making it difficult for their dependents to inherit them after their owner passes away, according to TWM.

According to Downey, "even if they are named beneficiaries in a will, families are at risk of losing access to crypto assets after the original investor passing away."

To make sure cryptocurrency exchanges are incorporated into the established probate system, he demanded "urgent" reform.

He stated, "This will ensure estate administration runs smoothly as it does with pensions, savings, and investments so that donors' wishes can be fulfilled and their family and other dependents are not deprived of these assets."

How can I ensure that my cryptocurrency assets won't be lost when I pass away?

Cryptocurrencies and NFTs are examples of digital assets that are kept in digital wallets that are only accessible with private keys.

To protect the investor's assets, they are typically highly encrypted, making it very difficult for anybody else to access them except the investor or the person with the key.

According to Downey, "their cryptocurrency wallets may be effectively locked forever if the original investor passes away."

When creating their wills, cryptocurrency investors should consult a professional to make sure their executors and beneficiaries understand the value of their digital assets and, more importantly, have instructions on how to safely access them and who they should leave their assets to in the event of their death.

A hardware wallet and pin, an encrypted USB drive with seed phrases, or a "dead man's switch" service that transmits the data to the executors or beneficiary could all be used for this.

Because there aren't effective procedures in place to access cryptocurrency holdings in foreign jurisdictions after the original investor has passed away, British investors' overseas crypto assets may be particularly difficult to recover.

Downey stated: "The truth is that when it comes to granting personal representatives access, cryptocurrency exchanges fall behind traditional financial institutions.

If digital assets are assumed to be automatically inherited after death, they may be permanently lost.

According to eToro, a platform that enables investors to trade and manage over 70 cryptocurrencies in addition to stocks and exchange-traded funds (ETFs), it owes its customers a duty of confidence that goes beyond their passing.

According to the eToros website, "this means we cannot disclose information about our investors to anyone other than parties who are legally entitled to it,".

It terminates the investment account, along with any open positions and any associated services, including the eToro Money account and eToro Money crypto wallet, as soon as it has confirmation that an eToro account holder has passed away.

"We subsequently move the money to the executor or to an estate bank account in the eToro account holder's name. "We don't transfer money to the estate's beneficiaries," the website stated.

The process of transferring funds requires executors of a deceased eToro investor to create a ticket in the company's customer service center with the account details.

Documents such as these will then need to be provided by the executor.

The eToro account holder's death certificate A notarized letter from an attorney attesting to the executor of the eToro account holder's estate A notarized copy of the eToro account holder's will attesting to the executor's identity In situations where the executor is a direct relative: A document demonstrating the account holder's relationship to the executor (e.g. G. Proof of identity of the executor or contacting relation Details of an estate bank account (created in the eToro account holder's name after the bank has been informed of the death) Other cryptocurrency platforms will have their own policies regarding what happens when a customer passes away. Examples of these include marriage and birth certificates.