This article is reprinted with permission from Mankun Blockchain Legal Services, authors: Xu Qian, Li Xinyi, copyright belongs to the original authors.
In today's world where digital assets are becoming increasingly popular, the inheritance of virtual currencies has gradually become an unavoidable legal and practical issue. When life comes to an end, what will happen to the wealth stored on the blockchain? Are they protected by law, and what challenges will arise during the inheritance process?
This article will explore the legal characterization and practical challenges of virtual currency inheritance from the perspective of lawyers, combining legal provisions and typical cases.
In October 2025, the Madras High Court in India made a landmark ruling, stating that cryptocurrencies meet the legal definition of "property" and can be owned, transferred, and held in trust. This case originated from the freezing of 3,532 XRP tokens belonging to an investor on the WazirX exchange, and the court ultimately confirmed that the asset should be protected as property. This ruling not only provides a judicial reassurance for India's digital asset market but also marks the gradual formation of the global legal system's understanding of "virtual property." In other words—virtual currencies have transformed from "digital game tokens" to "property."
In recent years, the legal view of "cryptocurrency as intangible property" has gradually emerged, outlining the evolution of the global legal system's understanding of digital asset attributes and providing a legal foothold for the inheritance of virtual currencies.
The "property attributes" of virtual currencies are being widely accepted by the global judiciary. Although the technological basis of virtual currencies is data, their characteristics of possessability, transferability, and economic value have evidently endowed them with the core features of property. Because of this attribute, there have been frequent civil and criminal cases around the world involving the ownership, infringement, and fraud related to virtual currencies, forcing legal practice to respond to this new form of property.
This convergence of judicial recognition has paved the way for the inheritance of virtual currencies. When virtual currencies are recognized as property, they naturally fall within the scope of inheritance law.
Under the Chinese legal framework, Article 127 of the Civil Code innovatively states: "Where the law provides for the protection of data and network virtual property, it shall be implemented in accordance with its provisions." This provides a legal basis for the protection of virtual property.
Additionally, Article 1122 of the Civil Code adopts a general legislative model for the definition of inheritance, defining inheritance as "the personal lawful property left by a natural person at the time of death." This breaks the limitations of the original Inheritance Law, which used a listing legislative approach, greatly expanding the scope of inheritance and making it possible to include new forms of property such as network virtual property and digital currencies as objects of inheritance.
At the regulatory level, documents such as 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 goods." From a legal perspective, this classification of "virtual goods" has effectively acknowledged their property attributes, providing a logical starting point for the inclusion of virtual currencies in the inheritance system.
In theory, there is no problem with inheritance; in practice, the issues lie in the details.
Mainstream cryptocurrencies like Bitcoin and Ethereum have enormous market values, leading to many investment portfolios containing considerable virtual wealth, which inevitably involves wealth transfer. Although the judicial practices and general legal provisions of various countries have opened up space for the inheritance of virtual currencies, the actual operation still faces multiple dilemmas.
- Proof Issues: How to prove invisible assets?
Due to the decentralized and anonymous nature of blockchain, there are certain ownership proof barriers for virtual currency assets. Bank accounts have transaction records, real estate has registrations, while the "ownership evidence" of virtual currencies is hidden in the technical layer: private keys, mnemonic phrases, exchange accounts… These are not traditional legal documents. Heirs need to provide not traditional ownership certificates, but more likely electronic data evidence related to the deceased and the virtual currency. However, is this evidence sufficient to prove property ownership, disposal intent, and inheritance qualifications? Additionally, most users did not clearly retain relevant certificates during their lifetime, leading to many digital assets ultimately disappearing in the vast data of the blockchain.
- Inheritance Mechanism: Can it operate smoothly?
The location of virtual currency storage directly determines the difficulty and process of inheritance.
At exchanges (like Binance, Coinbase): Heirs can contact customer service, submit the deceased's death certificate, will certification documents, identification, etc., and the platform will internally review and transfer the assets. However, laws differ across countries, and this process can be time-consuming, with risks of platform policy changes or closures. It is unclear whether the platform can transfer the assets. Alternatively, heirs may need to know the login password and complete various verifications to transfer assets.
In wallets, heirs must know the private key or mnemonic phrase; losing this string of alphanumeric characters is like losing the only key to a safe.
- Technical Barriers: The dilemma of private keys and security
The core challenge of virtual currency inheritance lies in its technical nature.
In the crypto world, the private key represents ownership. Without the private key, any will is merely words on paper. If the deceased did not properly inform the heirs of the private key or mnemonic phrase, the corresponding assets may be permanently lost. In 2018, Gerald Cotten, the founder of the Canadian exchange QuadrigaCX, suddenly passed away, and since he was the only one who held the private key to the cold wallet, $147 million in user funds could not be recovered. This case exposed the vulnerability of centralized storage mechanisms in inheritance issues. Additionally, a Chainalysis report indicated that about 20% of Bitcoin is permanently lost due to private key loss or the death of the holder. This represents a costly form of "digital silence."
Even if heirs possess the private key, they must have a certain level of technical operational ability. A single input error or a careless click on a phishing link could cause the assets to disappear forever. The inheritance of digital assets has never been so reliant on "technical barriers."
- Valuation and Division: Legal dilemmas brought by volatility
The prices of virtual currencies are highly volatile: today's inheritance may shrink by half tomorrow or double. Legally, which point in time should be used as the valuation standard? How to distribute fairly? For wallets containing multiple tokens, division is almost a "technical project." In most cases, liquidating first and then dividing is a more realistic approach, but this raises new questions: how to complete the liquidation under compliance?
As lawyers, our advice is—do not leave digital inheritance to fate.
Virtual currency holders should fully recognize the property attributes of virtual currencies and the trend of their legal recognition and protection. Given the uniqueness and complexity of virtual currency inheritance, holders should:
- Clearly identify the existence and quantity of virtual currency assets
The concealment of virtual assets is the first obstacle to inheritance. If heirs are unaware of the existence of assets, all inheritance planning is in vain. It is recommended that virtual currency owners record the following key information: types of assets (such as Bitcoin, Ethereum, other tokens); clearly identify the storage location of assets (such as centralized exchanges, cold wallets, self-custody hot wallets); record public key addresses; even record private keys or mnemonic phrases (but it is advised to print or handwrite them on paper, not to store them on computers or other electronic devices); for exchange accounts, record the platform name, registered email/phone number, password, etc.
- Securely and encryptedly store private keys, mnemonic phrases, and other key data
Hardware wallets are currently a relatively secure storage solution. They isolate private keys in an offline environment, greatly reducing the risk of being attacked online. Private keys/mnemonic phrases are the absolute control credentials for assets, and their security is directly equivalent to the security of the assets. Losing them means losing the assets forever, and leaking them means the assets can be stolen. Backups (such as USB drives or papers recording private keys) can be stored in multiple secure locations, such as safes.
- Develop a digital asset inheritance plan or trust arrangement
By transferring wallet ownership to a trust, virtual currencies can be incorporated into a trust structure, with designated trustees professionally managing the virtual currencies. Set up a wallet that requires 2-of-3 private keys to access. The three keys can be held by the deceased, the heir, and a lawyer or other trustee. After the inheritance begins, the other two parties can collaborate to transfer assets through verification, achieving a combination of decentralized security and legal oversight.
- Pay attention to trading platform policies and regulatory changes
If assets are on a third-party trading platform, the stability and compliance of the platform are particularly important, as policy changes or regulatory actions may freeze or even deprive access rights. It is necessary to understand and monitor the platform's operating rules and corresponding regulatory policies to respond to potential risks and changes.
In the crypto world, the real risk is often not theft but being forgotten. Only through advance planning can digital wealth continue its value and become a stable legacy.
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Original text: “Mankun Research | How to Inherit Cryptocurrency: Legal Definitions and Practical Dilemmas”
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