Crypto estate planning emerges as a key challenge

By Milan Rojan

A new study has highlighted a potential $5.4 billion in self-custodied cryptocurrency assets at risk of being lost because many investors have not made adequate inheritance arrangements.

The findings have revealed that a significant proportion of UK crypto holders have stored their digital assets in hardware or software wallets without ensuring they can be accessed by beneficiaries after their death. According to the study, this has created a growing challenge for the digital asset industry as cryptocurrency becomes a larger part of personal wealth.

The estimated $5.4 billion at risk has been based on a study showing that almost a quarter of a million UK adults aged between 35 and 50 hold self-custodied crypto in wallets that cannot be passed on through a will. With average holdings of $22,000 per investor, the value of potentially inaccessible assets has reached billions of dollars.

Unlike traditional bank accounts, self-custodied cryptocurrency wallets have no built-in mechanism allowing executors to recover assets after an owner’s death. Access typically depends on information such as wallet devices, seed phrases, PINs and recovery instructions, which may not be available to beneficiaries.

The research has found that investors believe, on average, 38% of their crypto holdings would become inaccessible if they died unexpectedly, while 32% said at least half of their portfolio would be at risk. More than half (57%) reported knowing someone whose family had been unable to access inherited cryptocurrency, and 72% said they had experienced or witnessed a crypto access issue, including lost seed phrases, forgotten passwords or device failures.

More than half (52%) of respondents said they had made no provision for cryptocurrency in their estate plans. Among those who believed they had prepared adequately, 72% had not recently tested their arrangements, while fewer than half (49%) said their next of kin could locate everything needed to access their digital assets without assistance.

Jeremy Verba, CEO of CoinCover, said: “The $5.4 billion figure is a wake-up call. Loss due to inaccessible wallets is largely preventable, but unlike traditional financial accounts there is no password reset or institution that can restore a lost private key.”

He added that as cryptocurrency becomes a more significant component of personal estates, the industry will need more robust recovery and inheritance solutions to prevent digital assets from becoming permanently inaccessible.